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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2009
 or
 o
    
    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.
 OHIO
    
    34-1469491(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)
 307 North Defiance StreetArchbold, Ohio
    
    43502(Address of principal
    
    (Zip Code)Executive offices)
 Registrants telephone number, including area code (419) 446-2501
  Name of each exchange onTitle of each class
    
    which registeredNone
    
    None
  Common shares without par value
  o þ
 o þ
 þ o
 o o
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



FARMERS & MERCHANTS BANCORP, INC.
 Form 10-K Items
    
    PAGEItem 1. Business
    
    3-8Item 1a. Risk Factors
    
    9-11Item 1b. Unresolved Staff Comments
    
    11Item 2. Properties
    
    12Item 3. Legal Proceedings
    
    12Item 4. Market for Registrants Common Equity and Related Stockholder Matters
    
    13-15Item 5. Selected Financial Data
    
    16Item 6. Management Discussion and Analysis of Financial Condition and Results
of Operations
    
    17-36Item 6a. Quantitative and Qualitative Disclosures About Market Risk
    
    36-37Item 7. Financial Statements and Supplementary Data
    
    38-66Item 8. Disagreements on Accounting and Financial Disclosure
    
    66Item 8a. Controls and Procedures
    
    67-68Item 8b. Other Information
    
    68Item 9. Directors and Executive Officers of the Registrant
    
    69-70Item 10. Executive Compensation
    
    70Item 11. Security Ownership of Certain Beneficial Owners and Management
    
    71Item 12. Certain Relationships and Related Transactions
    
    71Item 13. Principal Accountant Fees and Services
    
    71Item 14. Exhibits, Financial Schedules and Reports on Form 8-K
    
    72-73Signatures & Certifications
    
    74Total Pages:
    
    79EX-21EX-31.1EX-31.2EX-32.1EX-32.2
 Statements contained in this portion of the Companys annual report may be forward-looking
statements, as that term is defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may be identified by the use of such words as intend, believe,
expect, anticipate, should, planned, estimated, and potential. Such forward-looking
statements are based on current expectations, but may differ materially from those currently
anticipated due to a number of factors, which include, but are not limited to, factors discussed in
documents filed by the Company with the Securities and Exchange Commission from time to time.
Other factors which could have a material adverse effect on the operations of the Company and its
subsidiaries which include, but are not limited to, changes in interest rates, general economic
conditions, legislative and regulatory changes, monetary and fiscal policies of the U.S.
Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and
composition of the loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the Banks market area, changes in relevant
accounting principles and guidelines and other factors over which management has no control. The
forward-looking statements are made as of the date of this report, and the Company assumes no
obligation to update the forward-looking statements or to update the reasons why actual results
could differ from those projected in the forward-looking statements.




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PART 1.
 
 ITEM 1. BUSINESS:
 General
    Nature Of Activities
     3




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Supervision and Regulation
 General
   Regulatory Agencies
   4




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Holding Company Activities
     Affiliate Transactions
  5




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Interstate Banking and Branching
  Control Acquisitions
  Liability for Banking Subsidiaries
  Regulatory Capital Requirements
  6




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FDICIA
  Dividend Restrictions
  Deposit Insurance Assessments
   Depositor Preference Statute
  Government Monetary Policy
  7




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Capital Purchase Program
  Additional Regulation
  Future Legislation
  Available Information:
   8




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ITEM 1A. RISK FACTORS
 Significant Competition from an Array of Financial Service Providers
  Credit Risk
  Susceptibility to Changes in Regulation
  Interest Rate Risk
  9




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Attraction and Retention of Key Personnel
     10




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Dividend Payout Restrictions
  Anti-Takeover Provisions
  Operational Risks
  Limited Trading Market
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  11




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ITEM 2. PROPERTIES
     Office
    
    LocationArchbold, Ohio
    
    1313 S Defiance StreetWauseon, Ohio
    
    1130 N Shoop Avenue119 N Fulton StreetStryker, Ohio
    
    300 S Defiance StreetWest Unity, Ohio
    
    200 W Jackson StreetBryan, Ohio
    
    929 E High Street1000 S Main StreetDelta, Ohio
    
    101 Main StreetMontpelier, Ohio
    
    1150 E Main StreetNapoleon, Ohio
    
    2255 Scott StreetSwanton, Ohio
    
    7 Turtle Creek CircleDefiance, Ohio
    
    1175 Hotel DrivePerrysburg, Ohio
    
    7001 Lighthouse WayButler, Indiana
    
    200 S BroadwayAuburn, Indiana
    
    403 Erie PassAngola, Indiana
    
    2310 N Wayne Street
  
 ITEM 3. LEGAL PROCEEDINGS
  12




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PART II.
 
 ITEM 4. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
   Stock Prices2009 - quarter
    
    Quarter
    
    Low
    
    High1st
    
    $
    17.60
    
    
    $
    20.002nd
    
    
    17.55
    
    
    
    20.503rd
    
    
    19.25
    
    
    
    20.994th
    
    
    15.20
    
    
    
    19.00
 2008 - quarter
    
    Quarter
    
    Low
    
    High1st
    
    $
    18.00
    
    
    $
    20.252nd
    
    
    19.05
    
    
    
    22.803rd
    
    
    20.05
    
    
    
    22.254th
    
    
    19.00
    
    
    
    21.35
     
 13




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2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009FMAO
    
    $
    100.00
    
    
    $
    80.00
    
    
    $
    81.65
    
    
    $
    76.40
    
    
    $
    77.90
    
    
    $
    67.60NASDAQ-COMPOSITE
    
    $
    100.00
    
    
    $
    102.09
    
    
    $
    112.64
    
    
    $
    124.61
    
    
    $
    75.02
    
    
    $
    108.82NASDAQ-BANK INDEX
    
    $
    100.00
    
    
    $
    98.02
    
    
    $
    111.40
    
    
    $
    89.54
    
    
    $
    70.55
    
    
    $
    58.97
  1st Quarter
    
    2nd Quarter
    
    3rd Quarter
    
    4th Quarter
    
    Total2009
    
    $
    .18
    
    
    $
    .18
    
    
    $
    .18
    
    
    $
    .18
    
    
    $
    .722008
    
    $
    .16
    
    
    $
    .16
    
    
    $
    .18
    
    
    $
    .18
    
    
    $
    .68
   14




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ISSUER PURCHASES OF EQUITY SECURITIES
 Total Number ofShares Purchased as
    
    
    Remaining ShareTotal Number of
    
    
    Average Price Paid
    
    
    Part of Publicly
    
    
    RepurchasePeriod
    
    Shares Purchased
    
    
    per Share
    
    
    Announced Programs
    
    
    Authorization10/1/2009 to
10/31/2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    196,09311/1/2009 to
11/30/2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    196,09312/1/2009 to
12/31/2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    196,093Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    196,093
 
 (1)
    
    On January 16, 2009, the Company announced the authorization by its Board of
Directors for the Companys repurchase, either on the open market, or in privately
negotiated transactions, of up to 225,000 shares of its outstanding common stock
commencing on January 16, 2009 and ending December 31, 2009. Reclassification
  15




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##### Table of Contents



ITEM 5.
    
    SELECTED FINANCIAL DATA
 SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
 Summary of Consolidated Statement of Income  UNAUDITED
 (In Thousands, except share data)2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Summary of Income:Interest income
    
    $
    41,114
    
    
    $
    43,824
    
    
    $
    45,424
    
    
    $
    42,269
    
    
    $
    38,101Interest expense
    
    
    13,220
    
    
    
    18,101
    
    
    
    21,722
    
    
    
    18,535
    
    
    
    13,539Net Interest Income
    
    
    27,894
    
    
    
    25,723
    
    
    
    23,702
    
    
    
    23,734
    
    
    
    24,562Provision for loan loss
    
    
    3,558
    
    
    
    1,787
    
    
    
    871
    
    
    
    525
    
    
    
    (425
    )Net interest income after
provision for loan loss
    
    
    24,336
    
    
    
    23,936
    
    
    
    22,831
    
    
    
    23,209
    
    
    
    24,987Other income (expense), net
    
    
    (15,256
    )
    
    
    (14,763
    )
    
    
    (12,269
    )
    
    
    (11,966
    )
    
    
    (13,209
    )Net income before
income taxes
    
    
    9,080
    
    
    
    9,173
    
    
    
    10,562
    
    
    
    11,243
    
    
    
    11,778Income taxes
    
    
    2,475
    
    
    
    2,450
    
    
    
    2,828
    
    
    
    3,107
    
    
    
    3,202Net income
    
    $
    6,605
    
    
    $
    6,723
    
    
    $
    7,734
    
    
    $
    8,136
    
    
    $
    8,576Per Share of Common Stock:Earnings per common share
outstanding *Net income
    
    $
    1.39
    
    
    $
    1.39
    
    
    $
    1.52
    
    
    $
    1.57
    
    
    $
    1.65Dividends
    
    $
    0.720
    
    
    $
    0.680
    
    
    $
    0.640
    
    
    $
    0.575
    
    
    $
    0.500Weighted average number
of shares outstanding
    
    
    4,741,392
    
    
    
    4,846,310
    
    
    
    5,097,636
    
    
    
    5,186,329
    
    
    
    5,198,728
 
 *
    
    Based on weighted average number of shares outstanding (In Thousands)2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Total assets
    
    $
    853,860
    
    
    $
    805,729
    
    
    $
    803,974
    
    
    $
    737,096
    
    
    $
    720,945Loans
    
    
    563,911
    
    
    
    562,336
    
    
    
    523,474
    
    
    
    498,580
    
    
    
    458,704Total Deposits
    
    
    676,444
    
    
    
    615,732
    
    
    
    634,593
    
    
    
    585,409
    
    
    
    576,297Stockholders equity
    
    
    93,584
    
    
    
    90,547
    
    
    
    89,375
    
    
    
    87,732
    
    
    
    82,588Key RatiosReturn on average equity
    
    
    7.19
    %
    
    
    7.51
    %
    
    
    8.71
    %
    
    
    9.64
    %
    
    
    10.62
    %Return on average assets
    
    
    0.80
    %
    
    
    0.84
    %
    
    
    1.06
    %
    
    
    1.14
    %
    
    
    1.22
    %Loans to deposits
    
    
    83.36
    %
    
    
    91.33
    %
    
    
    82.49
    %
    
    
    85.17
    %
    
    
    79.65
    %Capital to assets
    
    
    10.96
    %
    
    
    11.24
    %
    
    
    11.12
    %
    
    
    11.90
    %
    
    
    11.46
    %Dividend payout
    
    
    51.66
    %
    
    
    48.77
    %
    
    
    42.00
    %
    
    
    36.63
    %
    
    
    30.31
    %
 16




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ITEM 6.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 Critical Accounting Policy and Estimates
       17




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2009 in Review
     Material Changes in Results of Operations
   18




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19




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20




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Net Interest Income
    21




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22




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2009(In Thousands)Average
    
    
    Interest/Balance
    
    
    Dividends
    
    
    Yield/RateASSETSInterest Earning Assets:Loans (1)
    
    $
    558,869
    
    
    $
    33,585
    
    
    
    6.04
    %Taxable investment securities
    
    
    146,872
    
    
    
    5,798
    
    
    
    3.95
    %Tax exempt investment securities
    
    
    46,736
    
    
    
    1,686
    
    
    
    5.47
    %Interest bearing deposits
    
    
    
    
    
    
    
    
    
    
    0.00
    %Federal funds sold
    
    
    11,937
    
    
    
    45
    
    
    
    0.38
    %Total Interest Earning Assets
    
    
    764,414
    
    
    $
    41,114
    
    
    
    5.52
    %Non-Interest Earning Assets:Cash and cash equivalents
    
    
    19,209Other assets
    
    
    39,007Total Assets
    
    $
    822,630LIABILITIES AND SHAREHOLDERS EQUITYInterest Bearing Liabilities:Savings deposits
    
    $
    257,345
    
    
    $
    1,755
    
    
    
    0.68
    %Other time deposits
    
    
    317,619
    
    
    
    9,252
    
    
    
    2.91
    %Other borrowed money
    
    
    38,498
    
    
    
    1,727
    
    
    
    4.49
    %Federal funds purchased and securities sold under agreement to repurchase
    
    
    45,920
    
    
    
    486
    
    
    
    1.06
    %Total Interest Bearing Liabilities
    
    
    659,382
    
    
    $
    13,220
    
    
    
    2.00
    %Non-Interest Bearing Liabilities:Non-interest bearing demand deposits
    
    
    57,630Other
    
    
    13,778Total Liabilities
    
    
    730,790Shareholders Equity
    
    
    91,840Total Liabilities and Shareholders Equity
    
    $
    822,630Interest/Dividend income/yield
    
    
    
    
    
    $
    41,114
    
    
    
    5.52
    %Interest Expense / yield
    
    
    
    
    
    
    13,220
    
    
    
    2.00
    %Net Interest Spread
    
    
    
    
    
    $
    27,894
    
    
    
    3.51
    %Net Interest Margin
    
    
    
    
    
    
    
    
    
    
    3.79
    %
 23




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2008(In Thousands)Average
    
    
    Interest/Balance
    
    
    Dividends
    
    
    Yield/RateASSETSInterest Earning Assets:Loans (1)
    
    $
    544,310
    
    
    $
    34,994
    
    
    
    6.46
    %Taxable investment securities
    
    
    146,877
    
    
    
    6,963
    
    
    
    4.74
    %Tax exempt investment securities
    
    
    42,361
    
    
    
    1,594
    
    
    
    5.70
    %Interest bearing deposits
    
    
    
    
    
    
    
    
    
    
    0.00
    %Federal funds sold
    
    
    9,423
    
    
    
    273
    
    
    
    2.90
    %Total Interest Earning Assets
    
    
    742,971
    
    
    $
    43,824
    
    
    
    6.03
    %Non-Interest Earning Assets:Cash and cash equivalents
    
    
    19,399Other assets
    
    
    35,317Total Assets
    
    $
    797,687LIABILITIES AND SHAREHOLDERS EQUITYInterest Bearing Liabilities:Savings deposits
    
    $
    240,880
    
    
    $
    2,760
    
    
    
    1.15
    %Other time deposits
    
    
    314,005
    
    
    
    12,467
    
    
    
    3.97
    %Other borrowed money
    
    
    38,110
    
    
    
    1,747
    
    
    
    4.58
    %Federal funds purchased and securitiessold under agreement to repurchase
    
    
    49,014
    
    
    
    1,127
    
    
    
    2.30
    %Total Interest Bearing Liabilities
    
    
    642,009
    
    
    $
    18,101
    
    
    
    2.82
    %Non-Interest Bearing Liabilities:Non-interest bearing demand deposits
    
    
    53,208Other
    
    
    12,928Total Liabilities
    
    
    708,145Shareholders Equity
    
    
    89,542Total Liabilities andShareholders Equity
    
    $
    797,687Interest/Dividend income/yield
    
    
    
    
    
    $
    43,824
    
    
    
    6.03
    %Interest Expense / yield
    
    
    
    
    
    
    18,101
    
    
    
    2.82
    %Net Interest Spread
    
    
    
    
    
    $
    25,723
    
    
    
    3.21
    %Net Interest Margin
    
    
    
    
    
    
    
    
    
    
    3.60
    %
 24




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2007(In Thousands)Average
    
    
    Interest/Balance
    
    
    Dividends
    
    
    Yield/RateASSETSInterest Earning Assets:Loans (1)
    
    $
    502,815
    
    
    $
    37,429
    
    
    
    7.48
    %Taxable investment securities
    
    
    132,047
    
    
    
    6,181
    
    
    
    4.68
    %Tax exempt investment securities
    
    
    40,433
    
    
    
    1,533
    
    
    
    5.74
    %Interest bearing deposits
    
    
    286
    
    
    
    17
    
    
    
    5.94
    %Federal funds sold
    
    
    5,658
    
    
    
    264
    
    
    
    4.67
    %Total Interest Earning Assets
    
    
    681,239
    
    
    $
    45,424
    
    
    
    6.81
    %Non-Interest Earning Assets:Cash and cash equivalents
    
    
    17,318Other assets
    
    
    29,684Total Assets
    
    $
    728,241LIABILITIES AND SHAREHOLDERS EQUITYInterest Bearing Liabilities:Savings deposits
    
    $
    193,539
    
    
    $
    3,978
    
    
    
    2.06
    %Other time deposits
    
    
    312,515
    
    
    
    14,424
    
    
    
    4.62
    %Other borrowed money
    
    
    28,233
    
    
    
    1,317
    
    
    
    4.66
    %Federal funds purchased and securitiessold under agreement to repurchase
    
    
    41,549
    
    
    
    2,003
    
    
    
    4.82
    %Total Interest Bearing Liabilities
    
    
    575,836
    
    
    $
    21,722
    
    
    
    3.77
    %Non-Interest Bearing Liabilities:Non-interest bearing demand deposits
    
    
    44,553Other
    
    
    19,029Total Liabilities
    
    
    639,418Shareholders Equity
    
    
    88,823Total Liabilities and
Shareholders Equity
    
    $
    728,241Interest/Dividend income/yield
    
    
    
    
    
    $
    45,424
    
    
    
    6.81
    %Interest Expense / yield
    
    
    
    
    
    
    21,722
    
    
    
    3.77
    %Net Interest Spread
    
    
    
    
    
    $
    23,702
    
    
    
    3.04
    %Net Interest Margin
    
    
    
    
    
    
    
    
    
    
    3.62
    %
 
 (1)
    
    For purposes of these computations, non-accruing loans are included in the daily
average outstanding loan amounts. 25




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2009 vs 2008(In Thousands)Net
    
    
    Due to Change inInterest Earned On:
    
    Change
    
    
    Volume
    
    
    RateLoans
    
    $
    (1,409
    )
    
    $
    941
    
    
    $
    (2,350
    )Taxable investment securities
    
    
    (1,165
    )
    
    
    
    
    
    
    (1,165
    )Tax-exempt investment securities
    
    
    92
    
    
    
    249
    
    
    
    (157
    )Interest bearing deposits
    
    
    
    
    
    
    
    
    
    
    Federal funds sold
    
    
    (228
    )
    
    
    73
    
    
    
    (301
    )Total Interest Earning Assets
    
    $
    (2,710
    )
    
    $
    1,263
    
    
    $
    (3,973
    )Interest Paid On:Savings deposits
    
    $
    (1,005
    )
    
    $
    189
    
    
    $
    (1,194
    )Other time deposits
    
    
    (3,215
    )
    
    
    143
    
    
    
    (3,358
    )Other borrowed money
    
    
    (20
    )
    
    
    18
    
    
    
    (38
    )Federal funds purchased and
securties sold under agreement to
repurchase
    
    
    (641
    )
    
    
    (71
    )
    
    
    (570
    )Total Interest Bearing Liabilities
    
    $
    (4,881
    )
    
    $
    279
    
    
    $
    (5,160
    )
 2008 vs 2007(In Thousands)Net
    
    
    Due to Change inInterest Earned On:
    
    Change
    
    
    Volume
    
    
    RateLoans
    
    $
    (2,435
    )
    
    $
    3,104
    
    
    $
    (5,539
    )Taxable investment securities
    
    
    782
    
    
    
    694
    
    
    
    88Tax-exempt investment securities
    
    
    61
    
    
    
    111
    
    
    
    (50
    )Interest bearing deposits
    
    
    (17
    )
    
    
    (17
    )
    
    
    Federal funds sold
    
    
    9
    
    
    
    176
    
    
    
    (167
    )Total Interest Earning Assets
    
    $
    (1,600
    )
    
    $
    4,068
    
    
    $
    (5,668
    )Interest Paid On:Savings deposits
    
    $
    (1,218
    )
    
    $
    973
    
    
    $
    (2,191
    )Other time deposits
    
    
    (1,957
    )
    
    
    69
    
    
    
    (2,026
    )Other borrowed money
    
    
    430
    
    
    
    460
    
    
    
    (30
    )Federal funds purchased and
securties sold under agreement to
repurchase
    
    
    (876
    )
    
    
    360
    
    
    
    (1,236
    )Total Interest Bearing Liabilities
    
    $
    (3,621
    )
    
    $
    1,862
    
    
    $
    (5,483
    )
 26




---



##### Table of Contents



Allowance for Credit Losses
   Non-interest Income
  Non-interest Expense
   27




---



##### Table of Contents



Federal Income Taxes
  Financial Condition
  Securities
  (In Thousands)2009
    
    
    2008
    
    
    2007U.S. Treasury
    
    $
    5,219
    
    
    $
    
    
    
    $
    U.S. Government agency
    
    
    104,676
    
    
    
    82,675
    
    
    
    104,737Mortgage-backed securities
    
    
    36,848
    
    
    
    51,826
    
    
    
    39,367State and local governments
    
    
    60,538
    
    
    
    43,160
    
    
    
    41,467$
    207,281
    
    
    $
    177,661
    
    
    $
    185,571
  Maturities(Amounts in Thousands)After One YearWithin One Year
    
    
    Within Five YearsAmount
    
    
    Yield
    
    
    Amount
    
    
    YieldU.S. Treasury
    
    $
    
    
    
    
    0.00
    %

    
    $
    5,219
    
    
    
    1.26
    %U.S. Government agency
    
    
    31,037
    
    
    
    2.90
    %
    
    
    63,947
    
    
    
    3.05
    %Mortgage-backed securities
    
    
    4,846
    
    
    
    3.77
    %
    
    
    32,002
    
    
    
    4.91
    %State and local governments
    
    
    15,095
    
    
    
    3.93
    %
    
    
    18,578
    
    
    
    3.40
    %Taxable state and local governments
    
    
    
    
    
    
    0.00
    %
    
    
    2,089
    
    
    
    3.50
    %
 28




---



##### Table of Contents



Maturities(Amounts in Thousands)After Five YearsWithin Ten Years
    
    
    After Ten YearsAmount
    
    
    Yield
    
    
    Amount
    
    
    YieldU.S. Treasury
    
    $
    
    
    
    
    0.00
    %
    
    $
    
    
    
    
    0.00
    %U.S. Government agency
    
    
    9,692
    
    
    
    5.33
    %
    
    
    
    
    
    
    0.00
    %Mortgage-backed securities
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %State and local governments
    
    
    22,281
    
    
    
    3.67
    %
    
    
    2,495
    
    
    
    3.78
    %Taxable state and local governments
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
  Loan Portfolio
  st
 (In Thousands)2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Loans:Commercial Real Estate
    
    $
    214,849
    
    
    $
    226,761
    
    
    $
    181,340
    
    
    $
    162,363
    
    
    $
    113,283Agricultural Real Estate
    
    
    41,045
    
    
    
    48,607
    
    
    
    45,518
    
    
    
    49,564
    
    
    
    50,777Consumer Real Estate
    
    
    98,599
    
    
    
    89,773
    
    
    
    102,660
    
    
    
    86,688
    
    
    
    115,831Commercial/industrial
    
    
    120,543
    
    
    
    112,526
    
    
    
    104,188
    
    
    
    101,788
    
    
    
    81,893Agricultural
    
    
    59,813
    
    
    
    56,322
    
    
    
    58,809
    
    
    
    69,301
    
    
    
    61,502Consumer
    
    
    32,581
    
    
    
    26,469
    
    
    
    27,796
    
    
    
    27,388
    
    
    
    31,935Industrial Development Bonds
    
    
    2,552
    
    
    
    7,572
    
    
    
    9,289
    
    
    
    7,335
    
    
    
    9,237Total Loans
    
    $
    569,982
    
    
    $
    568,030
    
    
    $
    529,600
    
    
    $
    504,427
    
    
    $
    464,458
 29




---



##### Table of Contents



Maturities (In Thousands)After OneWithin
    
    
    Year Within
    
    
    AfterOne Year
    
    
    Five Years
    
    
    Five Years
    
    
    TotalCommercial Real Estate
    
    $
    12,811
    
    
    $
    157,856
    
    
    $
    44,182
    
    
    $
    214,849Agricultural Real Estate
    
    
    1,410
    
    
    
    14,450
    
    
    
    25,185
    
    
    $
    41,045Consumer Real Estate
    
    
    8,035
    
    
    
    23,915
    
    
    
    66,649
    
    
    $
    98,599Commercial and Industrial Loans
    
    
    78,939
    
    
    
    32,898
    
    
    
    8,706
    
    
    $
    120,543Agricultural
    
    
    43,253
    
    
    
    13,861
    
    
    
    2,699
    
    
    $
    59,813Consumer, Master Card and Overdrafts
    
    
    5,882
    
    
    
    19,741
    
    
    
    6,958
    
    
    $
    32,581Industrial Development Bonds
    
    
    862
    
    
    
    639
    
    
    
    1,051
    
    
    $
    2,552
  (In Thousands)Fixed
    
    
    VariableRate
    
    
    RateCommercial Real Estate
    
    $
    26,398
    
    
    $
    175,640Agricultural Real Estate
    
    
    4,337
    
    
    
    35,298Consumer Real Estate
    
    
    20,069
    
    
    
    70,495Commercial and Industrial
    
    
    15,924
    
    
    
    25,680Agricultural
    
    
    9,508
    
    
    
    7,052Consumer, Overdrafts and other loans
    
    
    26,696
    
    
    
    3Industrial Development Bonds
    
    
    1,690
    
    
    
    
  (In Thousands)2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Non-accrual loans
    
    $
    14,054
    
    
    $
    13,575
    
    
    $
    4,918
    
    
    $
    4,254
    
    
    $
    4,663Accruing loans past due 90 days or more
    
    
    69
    
    
    
    2,524
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    14,123
    
    
    $
    16,099
    
    
    $
    4,918
    
    
    $
    4,254
    
    
    $
    4,663
   30




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##### Table of Contents



31




---



##### Table of Contents



(In Thousands)2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Loans
    
    $
    569,982
    
    
    $
    568,030
    
    
    $
    529,600
    
    
    $
    504,427
    
    
    $
    464,488Daily average of outstanding loans
    
    $
    559,261
    
    
    $
    544,859
    
    
    $
    503,296
    
    
    $
    484,663
    
    
    $
    469,326Allowance for Loan Losses-Jan. 1
    
    $
    5,496
    
    
    $
    5,922
    
    
    $
    5,594
    
    
    $
    5,388
    
    
    $
    6,814Loans Charged off:Commercial Real Estate
    
    
    
    
    
    
    
    
    
    
    376
    
    
    
    214
    
    
    
    82Agricultural Real Estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer Real Estate
    
    
    452
    
    
    
    194
    
    
    
    252
    
    
    
    167
    
    
    
    347Commercial and Industrial
    
    
    2,235
    
    
    
    71
    
    
    
    538
    
    
    
    282
    
    
    
    933Agricultural
    
    
    230
    
    
    
    1,912
    
    
    
    42
    
    
    
    
    
    
    
    12Consumer & Other Loans
    
    
    371
    
    
    
    384
    
    
    
    368
    
    
    
    322
    
    
    
    7223,288
    
    
    
    2,561
    
    
    
    1,576
    
    
    
    985
    
    
    
    2,096Loan Recoveries:Commercial Real Estate
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    2
    
    
    
    Agricultural Real Estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    214
    
    
    
    20Consumer Real Estate
    
    
    11
    
    
    
    87
    
    
    
    5
    
    
    
    24
    
    
    
    52Commercial and Industrial
    
    
    72
    
    
    
    78
    
    
    
    359
    
    
    
    
    
    
    
    580Agricultural
    
    
    6
    
    
    
    4
    
    
    
    103
    
    
    
    74
    
    
    
    31Consumer & Other Loans
    
    
    153
    
    
    
    179
    
    
    
    240
    
    
    
    352
    
    
    
    412242
    
    
    
    348
    
    
    
    732
    
    
    
    666
    
    
    
    1,095Net Charge Offs
    
    
    3,047
    
    
    
    2,213
    
    
    
    844
    
    
    
    319
    
    
    
    1,001Provision for loan loss
    
    
    3,558
    
    
    
    1,787
    
    
    
    871
    
    
    
    525
    
    
    
    (425
    )Acquisition allowance for loan loss
    
    
    
    
    
    
    
    
    
    
    301
    
    
    
    
    
    
    
    Allowance for Loan & Lease Losses  Dec
    
    $
    6,008
    
    
    $
    5,496
    
    
    $
    5,922
    
    
    $
    5,594
    
    
    $
    5,388Allowance for Unfunded Loan Commitments
& Letters of Credit Dec 31
    
    $
    227
    
    
    $
    226
    
    
    $
    156
    
    
    $
    168
    
    
    $
    841Total Allowance for Credit Losses  Dec 31
    
    $
    6,235
    
    
    $
    5,722
    
    
    $
    6,078
    
    
    $
    5,762
    
    
    $
    6,229Ratio of net charge-offs to averageLoans outstanding
    
    
    0.54
    %
    
    
    0.41
    %
    
    
    0.17
    %
    
    
    0.07
    %
    
    
    0.21
    %
 32




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##### Table of Contents



2009
    
    
    
    
    
    
    2008
    
    
    
    
    
    
    2007
    
    
    
    
    
    
    2006
    
    
    
    
    
    
    2005Amount
    
    
    
    
    
    
    Amount
    
    
    
    
    
    
    Amount
    
    
    
    
    
    
    Amount
    
    
    
    
    
    
    Amount(000s)
    
    
    %
    
    
    (000s)
    
    
    %
    
    
    (000s)
    
    
    %
    
    
    (000s)
    
    
    %
    
    
    (000s)
    
    
    %Balance at End of Period Applicable To:Commercial Real Estate
    
    $
    1,810
    
    
    
    37.69
    %
    
    $
    1,810
    
    
    
    39.92
    %
    
    $
    1,358
    
    
    
    34.24
    %
    
    $
    1,221
    
    
    
    32.19
    %
    
    $
    756
    
    
    
    24.39
    %Agricultural Real Estate
    
    
    120
    
    
    
    7.20
    %
    
    
    130
    
    
    
    8.56
    %
    
    
    117
    
    
    
    8.60
    %
    
    
    162
    
    
    
    9.82
    %
    
    
    88
    
    
    
    10.93
    %Consumer Real Estate
    
    
    439
    
    
    
    17.30
    %
    
    
    386
    
    
    
    15.80
    %
    
    
    381
    
    
    
    19.39
    %
    
    
    288
    
    
    
    17.19
    %
    
    
    719
    
    
    
    24.95
    %Commercial & Industrial
    
    
    2,494
    
    
    
    21.14
    %
    
    
    2,278
    
    
    
    19.81
    %
    
    
    1,859
    
    
    
    19.67
    %
    
    
    2,721
    
    
    
    20.18
    %
    
    
    2,246
    
    
    
    17.63
    %Agricultural
    
    
    647
    
    
    
    10.49
    %
    
    
    413
    
    
    
    9.92
    %
    
    
    1,676
    
    
    
    11.10
    %
    
    
    250
    
    
    
    13.74
    %
    
    
    275
    
    
    
    13.24
    %Consumer, Overdrafts and other loans
    
    
    498
    
    
    
    5.72
    %
    
    
    479
    
    
    
    5.99
    %
    
    
    531
    
    
    
    7.00
    %
    
    
    634
    
    
    
    6.88
    %
    
    
    526
    
    
    
    8.86
    %Unallocated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    318
    
    
    
    
    
    
    
    778Allowance for Loan & Lease Losses
    
    $
    6,008
    
    
    
    100.00
    %
    
    $
    5,496
    
    
    
    100.00
    %
    
    $
    5,922
    
    
    
    100.00
    %
    
    $
    5,594
    
    
    
    100.00
    %
    
    $
    5,388
    
    
    
    100.00
    %Off Balance Sheet Commitments
    
    $
    227
    
    
    
    
    
    
    $
    226
    
    
    
    
    
    
    $
    156
    
    
    
    
    
    
    $
    168
    
    
    
    
    
    
    $
    841Total Allowance for Credit Losses
    
    $
    6,235
    
    
    
    
    
    
    $
    5,722
    
    
    
    
    
    
    $
    6,078
    
    
    
    
    
    
    $
    5,762
    
    
    
    
    
    
    $
    6,229
 Deposits
  (In Thousands)Over Three
    
    
    Over SixMonths
    
    
    Months Less
    
    
    OverUnder
    
    
    Less than
    
    
    Than One
    
    
    OneThree Months
    
    
    Six Months
    
    
    Year
    
    
    YearTime Deposits
    
    $
    28,631
    
    
    $
    22,205
    
    
    $
    31,901
    
    
    $
    31,922
  (In Thousands)Non-Interest
    
    
    Interest
    
    
    Savings
    
    
    TimeDDAs
    
    
    DDAs
    
    
    Accounts
    
    
    AccountsDecember 31, 2009:Average balance
    
    $
    55,793
    
    
    $
    145,259
    
    
    $
    112,086
    
    
    $
    317,619Average rate
    
    
    0.00
    %
    
    
    1.02
    %
    
    
    0.24
    %
    
    
    2.91
    %December 31, 2008:Average balance
    
    $
    52,152
    
    
    $
    130,887
    
    
    $
    109,993
    
    
    $
    314,005Average rate
    
    
    0.00
    %
    
    
    1.46
    %
    
    
    0.77
    %
    
    
    3.97
    %December 31, 2007:Average balance
    
    $
    44,331
    
    
    $
    84,674
    
    
    $
    108,864
    
    
    $
    312,515Average rate
    
    
    0.00
    %
    
    
    2.30
    %
    
    
    1.87
    %
    
    
    4.58%
 33




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##### Table of Contents



Liquidity
     Daily Securities Sold Under Agreement to RepurchaseMaximum Amount
    
    
    Approximate AverageAmount Oustanding
    
    
    
    
    
    Borrowings Outstanding
    
    
    in Period
    
    
    Approximate Weightedat End of Period
    
    
    Weighted Average Rate
    
    
    Month End
    
    
    Outstanding
    
    
    Average Interest Rate(000S)
    
    
    End of Period
    
    
    (000s)
    
    
    (000s)
    
    
    For the Period2009
    
    $
    33,457
    
    
    
    0.42
    %
    
    $
    40,530
    
    
    $
    37,696
    
    
    
    0.48
    %2008
    
    $
    40,014
    
    
    
    0.50
    %
    
    $
    47,644
    
    
    $
    40,113
    
    
    
    1.96
    %2007
    
    $
    35,059
    
    
    
    3.72
    %
    
    $
    39,205
    
    
    $
    31,513
    
    
    
    4.64
    %
 34




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##### Table of Contents



Asset/Liability Management
    Impact of Inflation And Changing Prices
  Contractual Obligations
  35




---



##### Table of Contents



Payment Due by Period (In Thousands)Less than
    
    
    1-3
    
    
    3-5
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 year
    
    
    Years
    
    
    Years
    
    
    5 yearsSecurities sold under agreement to repurchase
    
    $
    43,257
    
    
    $
    43,257Time Deposits
    
    
    326,957
    
    
    
    221,435
    
    
    
    89,100
    
    
    
    14,977
    
    
    
    1,445Dividends Payable
    
    
    853
    
    
    
    853Long Term Debt
    
    
    34,199
    
    
    
    13,325
    
    
    
    18,274
    
    
    
    2,600Total
    
    $
    405,266
    
    
    $
    278,870
    
    
    $
    107,374
    
    
    $
    17,577
    
    
    $
    1,445
 Capital Resources
    
 ITEM 6A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Market Risk
   36




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##### Table of Contents



Interest Rate Shock on
    
    
    
    
    
    
    
    
    
    
    Interest Rate Shock onNet Interest Margin
    
    
    
    
    
    
    
    
    
    
    Net Interest IncomeNet Interest
    
    % Change
    
    
    Rate
    
    
    Rate
    
    
    Cumulative
    
    
    % ChangeMargin (Ratio)
    
    to Flat Rate
    
    
    Direction
    
    
    changes by
    
    
    Total ($000)
    
    
    to Flat Rate2.77%
    
    
    -10.98
    %
    
    Rising
    
    
    3.00
    %
    
    
    23,220
    
    
    
    -10.43
    %2.88%
    
    
    -7.27
    %
    
    Rising
    
    
    2.00
    %
    
    
    24,127
    
    
    
    -6.93
    %2.99%
    
    
    -3.61
    %
    
    Rising
    
    
    1.00
    %
    
    
    25,028
    
    
    
    -3.46
    %3.11%
    
    
    0.00
    %
    
    Flat
    
    
    0
    
    
    
    25,924
    
    
    
    0.00
    %3.20%
    
    
    3.12
    %
    
    Falling
    
    
    -1.00
    %
    
    
    26,874
    
    
    
    3.66
    %3.27%
    
    
    5.42
    %
    
    Falling
    
    
    -2.00
    %
    
    
    27,487
    
    
    
    6.03
    %3.32%
    
    
    7.02
    %
    
    Falling
    
    
    -3.00
    %
    
    
    27,977
    
    
    
    7.92
    %
  37




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##### Table of Contents



ITEM 7. FINANCIAL STATEMENTS
 Index To Consolidated Financial Statements
 Report of Independent Registered Public Accounting Firm
    
    
    39Consolidated Balance Sheet at December 31, 2009 and 2008
    
    
    41Consolidated Statements of Income for the years ended December 31, 2009, 2008 and 2007
    
    
    42Consolidated Statements of Changes in Shareholders Equity for the years ended December
31, 2009, 2008 and 2007
    
    
    43Consolidated Statements of Cash Flow for the years ended December 31, 2009, 2008 and 2007
    
    
    44Notes to Consolidated Financial Statements
    
    
    45
 38




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##### Table of Contents



(PLANTE MORAN)
    
    Plante & Moran, PLLC
SUITE 600
65 E. State St.
Columbus, OH 43215
Tel: 614.849.3000
Fax: 614.221.3535
plantemoran.com
 
 Report of Independent Registered Public Accounting Firm
 
    39




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##### Table of Contents



/s/ Plante & Moran, PLLCPlante & Moran, PLLC 
 40




---



##### Table of Contents



Farmers & Merchants Bancorp, Inc and Subsidiaries
 
 Consolidated Balance SheetDecember 31, 2009 and 2008(000s Omitted, Except Per Share Data)2009
    
    
    2008AssetsAssetsCash and due from banks (Note 1)
    
    $
    28,691
    
    
    $
    19,148Federal Funds Sold
    
    
    4,957
    
    
    
    1,739Total cash and cash equivalents
    
    
    33,648
    
    
    
    20,887Securities  available for sale (Note 3)
    
    
    207,281
    
    
    
    177,661Other Securities, at cost (Note 3)
    
    
    4,448
    
    
    
    4,498Loans, net (Note 4)
    
    
    563,911
    
    
    
    562,336Premises and equipment (Note 5)
    
    
    16,053
    
    
    
    16,806Goodwill (Note 2)
    
    
    4,074
    
    
    
    4,074Other assets (Note 2 & 6)
    
    
    24,445
    
    
    
    19,467Total Assets
    
    $
    853,860
    
    
    $
    805,729Liabilities and Stockholders EquityLiabilitiesDepositsNoninterest-bearing
    
    $
    65,302
    
    
    $
    62,582Interest-bearingNOW accounts
    
    
    160,432
    
    
    
    136,760Savings
    
    
    123,753
    
    
    
    122,482Time (Note 7)
    
    
    326,957
    
    
    
    293,908Total deposits
    
    
    676,444
    
    
    
    615,732Securities sold under agreement to repurchase (Note 8)
    
    
    43,257
    
    
    
    48,214FHLB Advances (Note 9)
    
    
    34,199
    
    
    
    45,635Dividend payable
    
    
    853
    
    
    
    857Accrued expenses and other liabilities (Note 10)
    
    
    5,523
    
    
    
    4,744Total liabilities
    
    
    760,276
    
    
    
    715,182Stockholders Equity (Note 14 and 15)Common stock  No par value - 6,500,000 shares authorized; 5,200,000 shares issued & outstanding
    
    
    12,677
    
    
    
    12,677Treasury Stock - 437,551 Shares 2009, 418,294 Shares 2008
    
    
    (9,082
    )
    
    
    (8,727
    )Unearned Stock Awards - 27,775 Shares 2009, 23,575 Shares 2008
    
    
    (573
    )
    
    
    (503
    )Retained earnings
    
    
    88,048
    
    
    
    84,864Accumulated other comprehensive income
    
    
    2,514
    
    
    
    2,236Total stockholders equity
    
    
    93,584
    
    
    
    90,547Total Liabilities and Stockholders Equity
    
    $
    853,860
    
    
    $
    805,729
  41




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##### Table of Contents



Farmers & Merchants Bancorp, Inc and Subsidiaries
 
 Consolidated Statement of IncomeYears Ended December 31, 2009, 2008 and 2007(000s Omitted, Except Per Share Data)2009
    
    
    2008
    
    
    2007Interest IncomeLoans, including fees
    
    $
    33,585
    
    
    $
    34,994
    
    
    $
    37,429Debt securities:U.S. Treasury and government agency
    
    
    5,496
    
    
    
    6,634
    
    
    
    5,813Municipalities
    
    
    1,788
    
    
    
    1,697
    
    
    
    1,635Dividends
    
    
    200
    
    
    
    226
    
    
    
    266Federal funds sold
    
    
    19
    
    
    
    273
    
    
    
    264Other
    
    
    26
    
    
    
    
    
    
    
    17Total interest income
    
    
    41,114
    
    
    
    43,824
    
    
    
    45,424Interest ExpenseDeposits
    
    
    11,007
    
    
    
    15,227
    
    
    
    18,402Federal funds purchased and securities sold under agreements to repurchase
    
    
    486
    
    
    
    1,127
    
    
    
    2,003Borrowed funds
    
    
    1,727
    
    
    
    1,747
    
    
    
    1,317Total interest expense
    
    
    13,220
    
    
    
    18,101
    
    
    
    21,722Net Interest Income- Before provision for loan losses
    
    
    27,894
    
    
    
    25,723
    
    
    
    23,702Provision for Loan Losses(Note 4)
    
    
    3,558
    
    
    
    1,787
    
    
    
    871Net Interest Income After ProvisionFor Loan Losses
    
    
    24,336
    
    
    
    23,936
    
    
    
    22,831Noninterest IncomeCustomer service fees
    
    
    3,276
    
    
    
    3,436
    
    
    
    3,201Other service charges and fees
    
    
    2,541
    
    
    
    2,322
    
    
    
    2,569Net gain on sale of loans
    
    
    1,776
    
    
    
    708
    
    
    
    617Net gain on sale of securities
    
    
    230
    
    
    
    15
    
    
    
    Total noninterest income
    
    
    7,823
    
    
    
    6,481
    
    
    
    6,387Noninterest ExpensesSalaries and Wages
    
    
    8,601
    
    
    
    8,715
    
    
    
    8,084Employee benefits (Note 11)
    
    
    3,018
    
    
    
    3,018
    
    
    
    2,804Occupancy expense
    
    
    1,113
    
    
    
    1,029
    
    
    
    564Furniture and equipment
    
    
    1,504
    
    
    
    1,443
    
    
    
    1,321Data processing
    
    
    1,136
    
    
    
    1,234
    
    
    
    1,019Franchise taxes
    
    
    914
    
    
    
    863
    
    
    
    873FDIC Assessment
    
    
    1,306
    
    
    
    151
    
    
    
    67Mortgage servicing rights amortization (Note 6)
    
    
    933
    
    
    
    370
    
    
    
    257Other general and administrative
    
    
    4,554
    
    
    
    4,421
    
    
    
    3,667Total other operating expenses
    
    
    23,079
    
    
    
    21,244
    
    
    
    18,656Income Before Income Taxes
    
    
    9,080
    
    
    
    9,173
    
    
    
    10,562Income Taxes (Note 10)
    
    
    2,475
    
    
    
    2,450
    
    
    
    2,828Net Income
    
    $
    6,605
    
    
    $
    6,723
    
    
    $
    7,734Earnings Per Share  Basic and Diluted
    
    $
    1.39
    
    
    $
    1.39
    
    
    $
    1.52Weighted Average Shares Outstanding
    
    
    4,741,392
    
    
    
    4,846,310
    
    
    
    5,097,636
  42




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##### Table of Contents



Farmers & Merchants Bancorp, Inc. and Subsidiaries
 
 Consolidated Statement of Changes in Shareholders EquityFor the Years Ended December 31, 2009, 2008, and 2007(000s Omitted, Except per Share Data)AccumulatedShares of
    
    
    
    
    
    
    
    
    
    
    Unearned
    
    
    
    
    
    
    Other
    
    
    TotalCommon
    
    
    Common
    
    
    Treasury
    
    
    Stock
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Stock
    
    
    Stock
    
    
    Awards
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalance- January 01, 2007
    
    
    5,163,820
    
    
    
    12,677
    
    
    
    (816
    )
    
    
    (244
    )
    
    
    77,089
    
    
    
    (974
    )
    
    
    87,732Comprehensive income (Note 1):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,734
    
    
    
    
    
    
    
    7,734Change in net unrealized gain on securities available for
sale, net of reclassification adjustment and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,854
    
    
    
    1,854Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,588Purchase of Treasury Stock
    
    
    (228,000
    )
    
    
    
    
    
    
    (4,710
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,710
    )Shares issued for vested stock awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    13Grant of Restricted Stock Awards-8760 shares(Net of Forfeiture  740)
    
    
    8,020
    
    
    
    
    
    
    
    160
    
    
    
    (160
    )

    
    
    
    
    
    
    
    
    
    
    Cash dividends declared  $0.64 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,248
    )
    
    
    
    
    
    
    (3,248
    )Balance- December 31, 2007
    
    
    4,943,840
    
    
    
    12,677
    
    
    
    (5,366
    )
    
    
    (391
    )
    
    
    81,575
    
    
    
    880
    
    
    
    89,375Cumulative effect of adoption of EITF 06-4 for post
retirement liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (152
    )
    
    
    
    
    
    
    (152
    )Comprehensive income (Note 1):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,723
    
    
    
    
    
    
    
    6,723Change in net unrealized gain on securities
sale, net of reclassification adjustment and tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,356
    
    
    
    1,356Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,079Purchase of Treasury Stock
    
    
    (171,889
    )
    
    
    
    
    
    
    (3,576
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,576
    )Shares issued for vested stock awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98
    
    
    
    
    
    
    
    
    
    
    
    98Grant of Restricted Stock Awards-10,000 shares(Net of Forfeiture  245)
    
    
    9,755
    
    
    
    
    
    
    
    215
    
    
    
    (210
    )
    
    
    
    
    
    
    
    
    
    
    5Cash dividends declared - $0.68 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,282
    )
    
    
    
    
    
    
    (3,282
    )Balance- December 31, 2008
    
    
    4,781,706
    
    
    $
    12,677
    
    
    $
    (8,727
    )
    
    $
    (503
    )
    
    $
    84,864
    
    
    $
    2,236
    
    
    $
    90,547Comprehensive income (Note 1):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,605
    
    
    
    
    
    
    
    6,605Change in net unrealized gain on securities
sale, net of reclassification adjustment and tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    278
    
    
    
    278Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,883Purchase of Treasury Stock
    
    
    (28,907
    )
    
    
    
    
    
    
    (555
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (555
    )Shares issued for vested stock awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Grant of Restricted Stock Awards-10,000 shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    123
    
    
    
    (8
    )
    
    
    
    
    
    
    115(Net of Forfeiture  350)
    
    
    9,650
    
    
    
    
    
    
    
    200
    
    
    
    (193
    )
    
    
    
    
    
    
    
    
    
    
    7Cash dividends declared - $0.72 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,413
    )
    
    
    
    
    
    
    (3,413
    )Balance- December 31, 2009
    
    
    4,762,449
    
    
    $
    12,677
    
    
    $
    (9,082
    )
    
    $
    (573
    )
    
    $
    88,048
    
    
    $
    2,514
    
    
    $
    93,584
  43




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##### Table of Contents



Farmers & Merchants Bancorp, Inc and Subsidiaries
 
 Consolidated Statement of Cash Flows Years Ended December 31, 2009, 2008 and 2007
    (000s Omitted)2009
    
    
    2008
    
    
    2007Cash Flows from Operating ActivitiesNet income
    
    $
    6,605
    
    
    $
    6,723
    
    
    $
    7,734Adjustments to reconcile net income to net cash from operating activities:Depreciation
    
    
    1,171
    
    
    
    1,132
    
    
    
    1,059Amortization of servicing rights
    
    
    933
    
    
    
    370
    
    
    
    257Amortization of Core Deposit Intangible
    
    
    157
    
    
    
    157
    
    
    
    Provision for loan loss
    
    
    3,558
    
    
    
    1,787
    
    
    
    871Accretion and amortization of securities
    
    
    809
    
    
    
    300
    
    
    
    131Deferred income taxes (benefit)
    
    
    142
    
    
    
    (39
    )
    
    
    (170
    )(Gain) loss on sale of other assets
    
    
    75
    
    
    
    194
    
    
    
    4Realized (gain) loss on sales of securities, net
    
    
    (230
    )
    
    
    (15
    )
    
    
    Change in other assets and other liabilities, net
    
    
    (6,026
    )
    
    
    (1,943
    )
    
    
    (1,343
    )Net cash provided by operating activities
    
    
    7,194
    
    
    
    8,666
    
    
    
    8,543Cash Flows from Investing ActivitiesActivity in securities:Sales
    
    
    16,333
    
    
    
    25
    
    
    
    215Maturities, prepayments and calls
    
    
    78,292
    
    
    
    75,084
    
    
    
    80,876Purchases
    
    
    (124,354
    )
    
    
    (65,580
    )
    
    
    (95,804
    )Loan and lease originations and principal collections, net
    
    
    (5,133
    )
    
    
    (41,266
    )
    
    
    6,620Proceeds from sales of assets
    
    
    494
    
    
    
    1,102
    
    
    
    Additions to premises and equipment
    
    
    (412
    )
    
    
    (1,081
    )
    
    
    (2,675
    )Purchase of Bank Owned Life Insurance
    
    
    
    
    
    
    
    
    
    
    (3,000
    )Net cash paid for acquisition
    
    
    
    
    
    
    
    
    
    
    (2,400
    )Net cash used in investing activities
    
    
    (34,780
    )
    
    
    (31,716
    )
    
    
    (16,168
    )Cash Flows from Financing ActivitiesNet increase (decrease) in deposits
    
    
    60,712
    
    
    
    (18,861
    )
    
    
    12,108Net change in federal funds purchased and securitiessold under agreements to repurchase
    
    
    (4,957
    )
    
    
    6,885
    
    
    
    6,511Proceeds from issuance of long-term debt
    
    
    
    
    
    
    19,600
    
    
    
    15,000Repayment of long-term debt
    
    
    (11,436
    )
    
    
    (5,781
    )
    
    
    (6,417
    )Purchase of Treasury Stock
    
    
    (555
    )
    
    
    (3,576
    )
    
    
    (4,710
    )Cash dividends paid on common stock
    
    
    (3,417
    )
    
    
    (3,217
    )
    
    
    (3,227
    )Net cash provided (used) by financing activities
    
    
    40,347
    
    
    
    (4,950
    )
    
    
    19,265Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    12,761
    
    
    
    (28,000
    )
    
    
    11,640Cash and Cash Equivalents- Beginning of Year
    
    
    20,887
    
    
    
    48,887
    
    
    
    37,247Cash and Cash Equivalents- End of Year
    
    $
    33,648
    
    
    $
    20,887
    
    
    $
    48,887Supplemental InformationCash paid during the year for:Interest
    
    $
    13,275
    
    
    $
    18,756
    
    
    $
    21,721Income taxes
    
    $
    2,725
    
    
    $
    2,445
    
    
    $
    3,120
  44




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##### Table of Contents



Farmers & Merchants Bancorp, Inc and Subsidiaries
 
 Notes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 1  Summary of Significant Accounting Policies
 Nature of OperationsThe Farmers & Merchants Bancorp, Inc. (the Company) through its bank subsidiary, The
Farmers & Merchants State Bank (the Bank) provides a variety of financial services to
individuals and small businesses through its offices in Northwest Ohio and Northeast
Indiana.Consolidation PolicyThe consolidated financial statements include the accounts of Farmers & Merchants
Bancorp, Inc. and its wholly-owned subsidiaries, The Farmers & Merchants State Bank
(the Bank), a commercial banking institution, and the Farmers & Merchants Life
Insurance Company, a reinsurance company for life, accident and health insurance for
the Banks consumer credits. The Farmers & Merchants Life Insurance Company was
dissolved during 2007 with the Bank no longer offering the insurance product to its
non-residential real estate consumers. The Bank continues to offer credit insurance
related products to our residential real estate customers; however, it is through an
unrelated third party vendor. All significant inter-company balances and transactions
have been eliminated.Use of EstimatesThe preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting
period. Material estimates that are particularly susceptible to significant change in
the near term relate to the determination of the allowance for loan losses and the
valuation of mortgage servicing rights. Actual results could differ from those
estimates.The determination of the adequacy of the allowance for loan losses is based on
estimates that are particularly susceptible to significant changes in the economic
environment and market conditions. In connection with the determination of the
estimated losses on loans, management obtains independent appraisals for significant
collateral.The Banks loans are generally secured by specific items of collateral including real
property, consumer assets, and business assets. Although the Bank has a diversified
loan portfolio, a substantial portion of its debtors ability to honor their contracts
is dependent on local economic conditions in the agricultural industry.While management uses available information to recognize losses on loans, further
reductions in the carrying amounts of loans may be necessary based on changes in
local economic conditions. In addition regulatory agencies, as an integral part of
their examination process, periodically review the estimated losses on loans. Such
agencies may require the Bank to recognize additional losses based on their judgments
about information available to them at the time of their examination. Because of these
factors, it is reasonably possible that the estimated losses on loans may change
materially in the near term. However, the amount of the change that is reasonably
possible cannot be estimated.Cash and Cash EquivalentsFor purposes of the consolidated statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three months or
less to be cash equivalents. This includes cash on hand, amounts due from banks, and
federal funds sold. Generally, federal funds are purchased and sold for one day
periods.
 45




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##### Table of Contents



Farmers & Merchants Bancorp, Inc and Subsidiaries
 Notes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 1  Summary of Significant Accounting Policies (Continued)
 Restrictions on Cash and Amounts Due from BanksThe Bank is required to maintain average balances on hand with the Federal Reserve
Bank. The aggregate reserve was $4.0 million for December 31, 2009 and it was $3.0
million for December 31, 2008.The Company and its subsidiaries maintain cash balances with high quality credit
institutions. At times such balances may be in excess of the federally insured limits.SecuritiesDebt securities are classified as available-for-sale. Securities available-for-sale are
carried at fair value with unrealized gains and losses reported in other comprehensive
income. Realized gains and losses on securities available for sale are included in
other income (expense) and, when applicable, are reported as a reclassification
adjustment, net of tax, in other comprehensive income. Gains and losses on sales of
securities are determined on the specific-identification method.Declines in the fair value of securities below their cost that are deemed to be other
than temporary are reflected in earnings as realized losses. In estimating
other-than-temporary impairment losses, management considers (1) the length of time and
the extent to which the fair value has been less than cost, (2) the financial condition
and near-term prospects of the issuer, and (3) the intent and ability of the Company to
retain its investment in the issuer for a period of time sufficient to allow for any
anticipated recovery in fair value. The related write-downs are included in earnings
as realized losses.Other SecuritiesOther Securities consists of Federal Home Loan Bank of Cincinnati and Indianapolis
stock, Bankers Bank stock, and Farmer Mac stock. These stocks are carried at cost and
are held to enable the Bank to conduct business with the entities. The Federal Home
Loan Banks sell and purchase their stock at par; therefore cost approximates market
value. The Federal Home Loan Bank of Cincinnati stock is held as collateral security
for all indebtedness of the Bank to the Federal Home Loan Bank.LoansLoans that management has the intent and ability to hold for the foreseeable future or
until maturity or pay-off are reported at the amount of unpaid principal, reduced by
unearned discounts and deferred loan fees and costs, as well as, by the allowance for
loan losses. Interest income is accrued on a daily basis based on the principal
outstanding.


Generally, a loan is classified as nonaccrual and the accrual of interest income is
generally discontinued when a loan becomes ninety days past due as to principal or
interest and these loans are placed on a cash basis for purposes of income
recognition. Management may elect to continue the accrual of interest when the
estimated net realizable value of collateral is sufficient to cover the principal and
accrued interest, and the loan is in the process of collection. When a loan is placed
on nonaccrual status, all previously accrued and unpaid interest receivable is charged
against income.Loan origination and commitment fees and certain direct loan origination costs are
deferred and amortized as a net adjustment to the related loans yield. The Bank is
generally amortizing these costs over the contractual life of such loans.
 46




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##### Table of Contents



Farmers & Merchants Bancorp, Inc and Subsidiaries
 Notes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 1  Summary of Significant Accounting Policies (Continued)
 Allowance for Loan LossesThe allowance for loan losses is established through a provision for loan losses
charged to income. Loans deemed to be uncollectable and changes in the allowance
relating to loans are charged against the allowance for loan losses, and subsequent
recoveries, if any, are credited to the allowance.The allowance for loan losses is evaluated on a regular basis by management and is
based on managements periodic review of the collectability of the loans in light of
historical experiences, the nature and volume of the loan portfolio, adverse situations
that may affect the borrowers ability to repay, estimated value of any underlying
collateral, and prevailing economic conditions. This evaluation is inherently
subjective, as it requires estimates that are subject to revision as more information
becomes available.The allowance consists of specific, general and unallocated components. The specific
component relates to loans that are classified as doubtful, substandard or special
mention. For such loans that are also classified as impaired, an allowance is
established when the discounted cash flows (or collateral value or observable market
price) of the impaired loan is lower than the carrying value of that loan. The general
component covers non-classified loans and is based on historical loss experience
adjusted for qualitative factors. The unallocated component is maintained to cover
uncertainties that could affect managements estimate of probable losses. The
unallocated component of the allowance reflects the margin of imprecision inherent in
the underlying assumptions used in the methodologies for estimating specific and
general losses in the portfolio.A loan is considered impaired when, based on current information and events, it is
probable that the Bank will be unable to collect the scheduled payments of principal or
interest when due according to the contractual terms of the loan agreement. Factors
considered by management in determining impairment include payment status, collateral
value, and the probability of collecting scheduled principal and interest payments when
due. Loans that experience insignificant payment delays and payment shortfalls
generally are not classified as impaired. Management determines the significance of
payment delays and payment shortfalls on a case-by-case basis, taking into
consideration all of the circumstances surrounding the loan and the borrower, including
length of the delay, the reasons for the delay, the borrowers prior payment record,
and the amount of the shortfall in relation to the principal and interest owed.
Impairment is measured on a loan by loan basis for commercial and agricultural loans by
either the present value of expected future cash flows discounted at the loans
effective interest rate, the loans obtainable market price, or the fair value of the
collateral if the loan is collateral dependent.


Large groups of homogeneous loans are collectively evaluated for impairment.
Accordingly, the Bank does not separately identify individual consumer loans for
impairment disclosures.Loans Held for SaleLoans originated and intended for sale in the secondary market are carried at the lower
of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are
recognized in a valuation allowance by charges to income.
 47




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##### Table of Contents



Farmers & Merchants Bancorp, Inc and Subsidiaries
 Notes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 1  Summary of Significant Accounting Policies (Continued)
 Servicing AssetsServicing assets are recognized as separate assets when rights are acquired through
purchase or through sale of financial assets. Capitalized servicing rights are
reported in other assets and are amortized into noninterest expense in proportion to,
and over the period of, the estimated future net servicing income of the underlying
financial assets. Servicing assets are evaluated for impairment based upon the fair
value of the rights as compared to amortized cost. Impairment is determined by
stratifying rights by predominant characteristics, such as interest rates and terms.
Fair value is determined using prices for similar assets with similar characteristics,
when available, or based upon discounted cash flows using market based assumptions.
Impairment is recognized through a valuation allowance for an individual stratum, to
the extent that fair value is less than the capitalized amount for the stratum. Fees
received for servicing loans owned by investors are based on a percentage of the
outstanding monthly principal balance of such loans and are included in operating
income as loan payments are received. Costs of servicing loans are charged to expense
as incurred.Goodwill and other Intangible AssetsGoodwill results from business acquisitions and represents the excess of the purchase
price over the fair value of acquired tangible assets and liabilities and identifiable
intangible assets. Goodwill is assessed at least annually for impairment and any such
impairment is recognized in the period identified.Other intangible assets consist of core deposit intangible assets arising from business
acquisitions. They are initially measured at fair value and then are amortized on a
straight line method over their estimated useful lives.Off Balance Sheet InstrumentsIn the ordinary course of business, the Bank has entered into commitments to extend
credit, including commitments under credit card arrangements, commercial letters of
credit and standby letters of credit. Such financial instruments are recorded when
they are funded.Bank Premises and EquipmentLand is carried at cost. Bank premises and equipment are stated at cost less
accumulated depreciation. Depreciation is based on the estimated useful lives of the
various properties and is computed using straight line and accelerated methods. Costs
for maintenance and repairs are charged to operations as incurred. Gains and losses on
dispositions are included in current operations.Federal Income TaxDeferred income tax assets and liabilities are determined using the liability (or
balance sheet) method. Under this method, the net deferred tax asset or liability is
determined based on the tax effects of the various temporary differences between the
book and tax bases of the various balance sheet assets and liabilities and gives
current recognition to changes in tax rates and laws.Earnings Per ShareBasic earnings per share represent income available to common stockholders divided by
the weighted-average number of common shares outstanding during the period. Basic and
dilutive earnings per share are the same as the restricted stock grants are primarily
anti-dilutive.
 48




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Farmers & Merchants Bancorp, Inc and Subsidiaries
 Notes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 1  Summary of Significant Accounting Policies (Continued)
 Comprehensive Income
   (In Thousands)2009
    
    2008
    
    2007Net Unrealized gain on
available-for-sale securities
    
    $
    701
    
    
    $
    2,055
    
    
    $
    2,810Reclassification adjustment for gain on sale of
available-for-sale securities
    
    $
    (281
    )
    
    $
    
    
    
    $
    Net unrealized gains
    
    $
    420
    
    
    $
    2,055
    
    
    $
    2,810Tax Effect
    
    $
    142
    
    
    $
    699
    
    
    $
    956Other comprehensive income
    
    $
    278
    
    
    $
    1,356
    
    
    $
    1,854
  Post Retirement Liability
  Reclassification
  Note 2  Business Combination
   49




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Farmers & Merchants Bancorp, Inc and Subsidiaries
 Notes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 2  Business Combination (Continued)
  (In Thousands)2010
    
    
    1572011
    
    
    1572012
    
    
    1572013
    
    
    1572014
    
    
    158$
    786
 Note 3  Securities
  (In Thousands)2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    ValueAvailable-for-Sale:U.S. Treasury
    
    $
    5,244
    
    
    $
    
    
    
    $
    (25
    )
    
    $
    5,219U.S. Government agency
    
    
    103,311
    
    
    
    1,501
    
    
    
    (136
    )
    
    
    104,676Mortgage-backed securities
    
    
    35,209
    
    
    
    1,639
    
    
    
    
    
    
    
    36,848State and local governments
    
    
    59,708
    
    
    
    1,009
    
    
    
    (179
    )
    
    
    60,538$
    203,472
    
    
    $
    4,149
    
    
    $
    (340
    )
    
    $
    207,281
 (In Thousands)2008Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    ValueAvailable-for-Sale:U.S. Treasury
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    U.S. Government agency
    
    
    80,477
    
    
    
    2,198
    
    
    
    
    
    
    
    82,675Mortgage-backed securities
    
    
    50,831
    
    
    
    1,052
    
    
    
    57
    
    
    
    51,826State and local governments
    
    
    42,964
    
    
    
    561
    
    
    
    365
    
    
    
    43,160$
    174,272
    
    
    $
    3,811
    
    
    $
    422
    
    
    $
    177,661
 50




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Farmers & Merchants Bancorp, Inc and Subsidiaries
 Notes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 3  Securities (Continued)
  2009(In Thousands)
    
    (In Thousands)Less Than Twelve Months
    
    Twelve Months & OverGross
    
    
    
    
    
    GrossUnrealized
    
    Fair
    
    Unrealized
    
    FairLosses
    
    Value
    
    Losses
    
    ValueU.S. Treasury
    
    $
    25
    
    
    $
    5,219
    
    
    $
    
    
    
    $
    U.S. Government agency
    
    
    136
    
    
    
    14,355
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    State and local governments
    
    
    179
    
    
    
    15,754
    
    
    
    
    
    
    
    
 2008(In Thousands)
    
    (In Thousands)Less Than Twelve Months
    
    Twelve Months & OverGross
    
    
    
    
    
    GrossUnrealized
    
    Fair
    
    Unrealized
    
    FairLosses
    
    Value
    
    Losses
    
    ValueU.S. Treasury
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    U.S. Government agency
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    46
    
    
    
    4,390
    
    
    
    11
    
    
    
    1,822State and local governments
    
    
    326
    
    
    
    11,899
    
    
    
    39
    
    
    
    482
   (In Thousands)2009
    
    
    2008
    
    
    2007Gross realized gains
    
    $
    281
    
    
    $
    15
    
    
    $
    Gross realized losses
    
    
    (51
    )
    
    
    
    
    
    
    $
    
    
    
    $
    Net Realized Gains
    
    $
    230
    
    
    $
    15
    
    
    $
    Tax expense related to net realized gains
    
    $
    78
    
    
    $
    5
    
    
    $
    
 51




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Farmers & Merchants Bancorp, Inc and Subsidiaries
 Notes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 3  Securities (Continued)
  (In Thousands)AmortizedCost
    
    
    Fair ValueOne year or less
    
    $
    13,335
    
    
    $
    13,631After one year through five years
    
    
    80,554
    
    
    
    81,402After five years through ten years
    
    
    56,302
    
    
    
    57,221After ten years
    
    
    18,072
    
    
    
    18,179Subtotal
    
    $
    168,263
    
    
    $
    170,433Mortgage Backed Securities
    
    
    35,209
    
    
    
    36,848Total
    
    $
    203,472
    
    
    $
    207,281
   Note 4  Loans
  (In Thousands)Loans:
    
    2009
    
    
    2008Commercial Real Estate
    
    $
    214,849
    
    
    $
    226,761Agricultural Real Estate
    
    
    41,045
    
    
    
    48,607Consumer Real Estate
    
    
    98,599
    
    
    
    89,773Commercial and industrial
    
    
    120,543
    
    
    
    112,526Agricultural
    
    
    59,813
    
    
    
    56,322Consumer, Overdrafts and other loans
    
    
    32,581
    
    
    
    26,469Industrial Development Bonds
    
    
    2,552
    
    
    
    7,572569,982
    
    
    
    568,030Less: Deferred loan fees and costs
    
    
    (63
    )
    
    
    (198
    )569,919
    
    
    
    567,832Less: Allowance for loan losses
    
    
    (6,008
    )
    
    
    (5,496
    )Loans  Net
    
    $
    563,911
    
    
    $
    562,336
 52




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Farmers & Merchants Bancorp, Inc and Subsidiaries
 Notes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 4  Loans (Continued)
  (In Thousands)Principal Payments Due WithinTwo to
    
    AfterOne Year
    
    Five Years
    
    Five YearsCommercial Real Estate
    
    $
    12,811
    
    
    $
    157,856
    
    
    $
    44,182Agricultural Real Estate
    
    
    1,410
    
    
    
    14,450
    
    
    
    25,185Consumer Real Estate
    
    
    8,035
    
    
    
    23,915
    
    
    
    66,649Commercial and industrial loans
    
    
    78,939
    
    
    
    32,898
    
    
    
    8,706Agricultural
    
    
    43,253
    
    
    
    13,861
    
    
    
    2,699Consumer, Master Card and Overdrafts
    
    
    5,882
    
    
    
    19,741
    
    
    
    6,958Industrial Development Bonds
    
    
    862
    
    
    
    639
    
    
    
    1,051
  (In Thousands)Fixed
    
    VariableRate
    
    RateCommercial Real Estate
    
    $
    31,218
    
    
    $
    183,631Agricultural Real Estate
    
    
    4,902
    
    
    
    36,143Consumer Real Estate
    
    
    23,153
    
    
    
    75,446Commercial and industrial loans
    
    
    26,412
    
    
    
    94,131Agricultural
    
    
    14,538
    
    
    
    45,275Consumer, Master Card and Overdrafts
    
    
    27,677
    
    
    
    4,904Industrial Development Bonds
    
    
    2,552
    
    
    
    
   (In Thousands)2009
    
    
    2008
    
    
    2007Allowance for Loan LossesBalance at beginning of year
    
    $
    5,496
    
    
    $
    5,922
    
    
    $
    5,594Provision for loan loss
    
    
    3,558
    
    
    
    1,787
    
    
    
    871Loans charged off
    
    
    (3,288
    )
    
    
    (2,561
    )
    
    
    (1,576
    )Recoveries
    
    
    242
    
    
    
    348
    
    
    
    732Acquisition allowance for loan loss
    
    
    
    
    
    
    
    
    
    
    301Allowance for Loan & Leases Losses
    
    $
    6,008
    
    
    $
    5,496
    
    
    $
    5,922Allowance for Unfunded Loan Commitments &
Letters of Credit
    
    $
    227
    
    
    $
    226
    
    
    $
    156Total Allowance for Credit Losses
    
    $
    6,235
    
    
    $
    5,722
    
    
    $
    6,078
 53




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Farmers & Merchants Bancorp, Inc and Subsidiaries
 Notes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 4  Loans (Continued)
    (In Thousands)2009
    
    
    2008Impaired loans without a valuation allowance
    
    $
    10,804
    
    
    $
    9,582Impaired loans with a valuation
allowance
    
    
    1,385
    
    
    
    2,095Total impaired loans
    
    $
    12,189
    
    
    $
    11,677Valuation allowance related to
impaired loans
    
    $
    353
    
    
    $
    466Total non-accrual loans
    
    $
    14,054
    
    
    $
    13,575Total loans past-due ninety days or more and still accruing
    
    $
    69
    
    
    $
    2,524
 (In Thousands)2009
    
    
    2008
    
    
    2007Average investment in
impaired loans
    
    $
    13,643
    
    
    $
    10,767
    
    
    $
    6,975Interest income recognized
on impaired loans
    
    $
    290
    
    
    $
    341
    
    
    $
    592Interest income recognized on
a cash basis on impaired loans
    
    $
    290
    
    
    $
    332
    
    
    $
    161
  Note 5  Premises and Equipment
  (In Thousands)2009
    
    
    2008Land
    
    $
    3,510
    
    
    $
    3,510Buildings (useful life 15-39 years)
    
    
    17,200
    
    
    
    17,133Furnishings (useful life 3-15 years)
    
    
    9,435
    
    
    
    10,22630,145
    
    
    
    30,869Less: Accumulated depreciation
    
    
    (14,092
    )
    
    
    (14,063
    )Premises and Equipment (Net)
    
    $
    16,053
    
    
    $
    16,806
 54




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Farmers & Merchants Bancorp, Inc and Subsidiaries
 Notes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 6  Servicing
     (In Thousands)2009
    
    
    2008Beginning Year
    
    $
    1,970
    
    
    $
    1,893Capitalized Additions
    
    
    1,158
    
    
    
    447Amortization
    
    
    (933
    )
    
    
    (370
    )Valuation Allowance
    
    
    
    
    
    
    End of Year
    
    $
    2,195
    
    
    $
    1,970
 Note 7  Deposits
  (In Thousands)2009
    
    
    2008Time deposits under $100,000
    
    $
    212,298
    
    
    $
    216,824Time deposits of $100,000 or more
    
    
    114,659
    
    
    
    77,084$
    326,957
    
    
    $
    293,908
  (In Thousands)2010
    
    
    221,4352011
    
    
    65,2172012
    
    
    23,8832013
    
    
    10,2042014
    
    
    4,773thereafter
    
    
    1,445$
    326,957
 55




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##### Table of Contents



Farmers & Merchants Bancorp, Inc and Subsidiaries
 Notes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 8   Securities Sold Under Agreement to Repurchase
  Daily Securities Sold Under Agreement to RepurchaseMaximum Amount
    
    Approximate Average
    
    ApproximateAmount Outstanding
    
    Weighted Average
    
    Borrowings
    
    Outstanding in
    
    Weighted Averageat End of Period
    
    Rate
    
    Outstanding Month
    
    Period
    
    Interest Rate for(000s)
    
    End of Period
    
    End (000s)
    
    (000s)
    
    the Period2009
    
    $
    33,457
    
    
    
    0.42
    %
    
    $
    40,530
    
    
    $
    37,696
    
    
    
    0.48
    %2008
    
    $
    40,014
    
    
    
    0.50
    %
    
    $
    47,644
    
    
    $
    40,113
    
    
    
    1.96
    %2007
    
    $
    35,059
    
    
    
    3.72
    %
    
    $
    39,205
    
    
    $
    31,513
    
    
    
    4.64
    %
 Note 9   Federal Home Loan Bank Advances
   (In Thousands)2010
    
    
    13,3252011
    
    
    13,2122012
    
    
    5,0622013
    
    
    2,600$
    34,199
 Note 10  Federal Income Taxes
  (In Thousands)2009
    
    
    2008
    
    
    2007Current:Federal
    
    $
    2,333
    
    
    $
    2,489
    
    
    $
    2,998Deferred:Federal
    
    
    142
    
    
    
    (39
    )
    
    
    (170
    )$
    2,475
    
    
    $
    2,450
    
    
    $
    2,828
 56




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##### Table of Contents



Farmers & Merchants Bancorp, Inc and Subsidiaries
 Notes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 10  Federal Income Taxes (Continued)
  (In Thousands)2009
    
    
    2008
    
    
    2007Income tax at statutory rates
    
    $
    3,087
    
    
    $
    3,119
    
    
    $
    3,591Increase(decrease) resulting from:Tax exempt interest
    
    
    (629
    )
    
    
    (654
    )
    
    
    (650
    )Change in prior estimates and other
    
    
    17
    
    
    
    (15
    )
    
    
    (113
    )$
    2,475
    
    
    $
    2,450
    
    
    $
    2,828
  (In Thousands)2009
    
    
    2008Deferred Tax Assets:Allowance for loan losses
    
    $
    2,042
    
    
    $
    1,869Other
    
    
    650
    
    
    
    751Total deferred tax assets
    
    
    2,692
    
    
    
    2,620Deferred Tax Liabilities:Accreted discounts on bonds
    
    
    56
    
    
    
    55FHLB stock dividends
    
    
    862
    
    
    
    862Mortgage servicing rights
    
    
    740
    
    
    
    667Other
    
    
    700
    
    
    
    560Net unrealized gain on available-for-sale securities
    
    
    1,295
    
    
    
    1,153Total deferred tax liabilities
    
    
    3,653
    
    
    
    3,297Net Deferred Tax Liability
    
    $
    (961
    )
    
    $
    (677
    )
 Note 11  Employee Benefit Plan
   57




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Farmers & Merchants Bancorp, Inc and Subsidiaries
 Notes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 12  Related Party Transactions
   Note 13  Off Balance Sheet Activities
 Credit Related Financial Instruments
   (In Thousands)2009
    
    2008Commitments to extend credit
    
    $
    151,696
    
    
    $
    156,575Credit card arrangements
    
    
    16,569
    
    
    
    15,840Standby letters of credit
    
    
    18,085
    
    
    
    20,418
  Collateral Requirements
  Legal Contingencies
  58




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Farmers & Merchants Bancorp, Inc and SubsidiariesNotes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 14  Minimum Regulatory Capital Requirements
      To Be Well CapitalizedUnder the PromptFor Capital
    
    
    
    
    
    
    Corrective ActionActual
    
    
    
    
    
    
    Adequacy
    
    
    Purposes
    
    
    Provisions(000s)
    
    
    
    
    
    
    (000s)
    
    
    
    
    
    
    (000s)As of December 31, 2009
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal Risk-Based Capital
(to Risk Weighted Assets)
Consolidated
    
    $
    92,447
    
    
    
    14.14
    %
    
    $
    52,294
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/AFarmers & Merchants State Bank
    
    
    92,184
    
    
    
    14.10
    %
    
    
    52,305
    
    
    
    8.00
    %
    
    $
    65,382
    
    
    
    10.00
    %Tier 1 Capital
(to Risk Weighted Assets)
Consolidated
    
    
    86,212
    
    
    
    13.19
    %
    
    
    26,147
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/AFarmers & Merchants State Bank
    
    
    70,949
    
    
    
    10.85
    %
    
    
    26,153
    
    
    
    4.00
    %
    
    
    39,229
    
    
    
    6.00
    %Tier 1 Capital
(to Adjusted Total Assets)
Consolidated
    
    
    86,212
    
    
    
    10.33
    %
    
    
    33,393
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/AFarmers & Merchants State Bank
    
    
    70,949
    
    
    
    8.47
    %
    
    
    33,487
    
    
    
    4.00
    %
    
    
    41,858
    
    
    
    5.00
    %
 59




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##### Table of Contents



Farmers & Merchants Bancorp, Inc and SubsidiariesNotes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 14  Minimum Regulatory Capital Requirements (Continued)
 To Be Well CapitalizedUnder the PromptFor Capital
    
    
    
    
    
    
    Corrective ActionActual
    
    
    
    
    
    
    Adequacy
    
    
    Purposes
    
    
    Provisions(000s)
    
    
    
    
    
    
    (000s)
    
    
    
    
    
    
    (000s)Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioAs of December 31, 2008
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal Risk-Based Capital
(to Risk Weighted Assets)
Consolidated
    
    $
    89,017
    
    
    
    13.95
    %
    
    $
    51,036
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/AFarmers & Merchants State Bank
    
    
    88,941
    
    
    
    13.94
    %
    
    
    51,048
    
    
    
    8.00
    %
    
    $
    63,810
    
    
    
    10.00
    %Tier 1 Capital
(to Risk Weighted Assets)
Consolidated
    
    
    83,294
    
    
    
    13.06
    %
    
    
    25,518
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/AFarmers & Merchants State Bank
    
    
    68,218
    
    
    
    10.69
    %
    
    
    25,524
    
    
    
    4.00
    %
    
    
    38,286
    
    
    
    6.00
    %Tier 1 Capital
(to Adjusted Total Assets)
Consolidated
    
    
    83,294
    
    
    
    10.50
    %
    
    
    31,716
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/AFarmers & Merchants State Bank
    
    
    68,218
    
    
    
    8.59
    %
    
    
    31,766
    
    
    
    4.00
    %
    
    
    39,708
    
    
    
    5.00
    %
 Note 15  Restrictions of Dividends & Inter-company Borrowings
  Note 16  Fair Value of Financial Instruments
   Cash and Cash Equivalents
  60




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Farmers & Merchants Bancorp, Inc and SubsidiariesNotes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 16  Fair Value of Financial Instruments (Continued)
 Securities and Other Securities
  Loans
  Deposits
  Borrowings
  Accrued Interest Receivable and Payable
  Dividends Payable
  Off Balance Sheet Financial Instruments
   61




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##### Table of Contents



Farmers & Merchants Bancorp, Inc and SubsidiariesNotes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 16  Fair Value of Financial Instruments (Continued)
 (In Thousands)2009

    
    
    2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairFinancial Assets:Cash and Cash Equivalents
    
    $
    33,648
    
    
    $
    33,648
    
    
    $
    20,887
    
    
    $
    20,887Securities  available for sale
    
    
    207,281
    
    
    
    207,281
    
    
    
    177,661
    
    
    
    177,661Other Securities
    
    
    4,448
    
    
    
    4,448
    
    
    
    4,498
    
    
    
    4,498Loans, net
    
    
    563,911
    
    
    
    563,532
    
    
    
    562,336
    
    
    
    562,049Interest receivable
    
    
    3,693
    
    
    
    3,693
    
    
    
    4,048
    
    
    
    4,048Financial Liabilities:Deposits
    
    $
    676,444
    
    
    $
    672,963
    
    
    $
    615,732
    
    
    $
    614,495Short-term debtRepurchase agreement sold
    
    
    43,257
    
    
    
    43,257
    
    
    
    48,214
    
    
    
    48,214Long term debt
    
    
    34,199
    
    
    
    34,947
    
    
    
    45,635
    
    
    
    44,940Interest payable
    
    
    852
    
    
    
    852
    
    
    
    907
    
    
    
    907Dividends payable
    
    
    853
    
    
    
    853
    
    
    
    857
    
    
    
    857Off-Balance Sheet Financial Instruments
Commitments to
extend credit
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Standby letters of credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Fair Value Measurements
      62




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Farmers & Merchants Bancorp, Inc and SubsidiariesNotes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 16  Fair Value of Financial Instruments (Continued)
   ($ in Thousands)Quoted Prices in Active
    
    
    Significant
    
    
    SignificantMarkets for Identical
    
    
    Observable Inputs
    
    
    Observable Inputs
    
    
    Balance atAssets (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    December 31, 20092009Assets-(Securities Available for Sale)
    
    $
    0
    
    
    $
    207,281
    
    
    $
    0
    
    
    $
    207,281Liabilities
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    02008Assets-(Securities Available for Sale)
    
    $
    0
    
    
    $
    177,661
    
    
    $
    0
    
    
    $
    177,661Liabilities
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
      63




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##### Table of Contents



Farmers & Merchants Bancorp, Inc and SubsidiariesNotes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 16  Fair Value of Financial Instruments (Continued)
 The Company also has other assets, which under certain conditions, are subject to
measurement at fair value. These assets include loans held for sale, bank owned life
insurance, and mortgage servicing rights. The Company estimated the fair values of these
assets utilizing Level 3 inputs, including, the discounted present value of expected
future cash flows. At December 31, 2009, the Company estimates that there is no
impairment of these assets and therefore, no impairment charge to other expense was
required to adjust these assets to their estimated fair values.
 Note 17  Condensed Financial Statements of Parent Company
 Balance Sheet
 (In Thousands)2009
    
    
    2008AssetsCash
    
    $
    471
    
    
    $
    315Related party receivables:Dividends & Accounts receivable from subsidiaries
    
    
    1,060
    
    
    
    963Note receivable from Bank subsidiary
    
    
    15,000
    
    
    
    15,000Investment in subsidiaries
    
    
    78,322
    
    
    
    75,471Total Assets
    
    $
    94,853
    
    
    $
    91,749LiabilitiesAccrued expenses
    
    $
    416
    
    
    $
    345Dividends payable
    
    
    853
    
    
    
    857Total Liabilities
    
    
    1,269
    
    
    
    1,202Stockholders EquityTotal Stockholders Equity
    
    $
    93,584
    
    
    $
    90,547Total Liabilities and Stockholders Equity
    
    $
    94,853
    
    
    $
    91,749
 Statement of Income
 (In Thousands)2009
    
    
    2008
    
    
    2007IncomeDividends from subsidiaries
    
    $
    3,940
    
    
    $
    6,708
    
    
    $
    6,238Interest
    
    
    713
    
    
    
    717
    
    
    
    712Total Income
    
    
    4,653
    
    
    
    7,425
    
    
    
    6,950Operating Expenses
    
    
    460
    
    
    
    364
    
    
    
    383Income Before Income Taxes and Equity in Undistributed Earnings (Distributions in excess of earnings) and Subsidiaries
    
    
    4,193
    
    
    
    7,061
    
    
    
    6,567Income Taxes
    
    
    161
    
    
    
    167
    
    
    
    1054,032
    
    
    
    6,894
    
    
    
    6,462Equity in undistributed earnings (Distributions in excess of earnings) of subsidiaries
    
    
    2,573
    
    
    
    (171
    )
    
    
    1,272Net Income
    
    $
    6,605
    
    
    $
    6,723
    
    
    $
    7,734
 64




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##### Table of Contents



Farmers & Merchants Bancorp, Inc and Subsidiaries
 Notes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 17  Condensed Financial Statements of Parent Company (Continued)
 Statements of Cashflows
 (In Thousands)2009
    
    
    2008
    
    
    2007Cash Flows from Operating ActivitiesNet income
    
    $
    6,605
    
    
    $
    6,723
    
    
    $
    7,734Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:Equity in undistributed net income (Distributions
in excess earnings) of subsidiaries
    
    
    (2,573
    )
    
    
    171
    
    
    
    (1,272
    )Changes in Assets and Liabilities:Account receivable
    
    
    
    
    
    
    
    
    
    
    35Dividends receivable
    
    
    (97
    )
    
    
    (162
    )
    
    
    (26
    )Other Liabilities
    
    
    193
    
    
    
    (228
    )
    
    
    428Net Cash Provided byOperating Activities
    
    
    4,128
    
    
    
    6,504
    
    
    
    6,899Cash Flows from Investing ActivitiesReturn of Capital from Investment in Subsidiary
    
    
    
    
    
    
    
    
    
    
    725Cash Flows from Financing ActivitiesPayment of dividends
    
    
    (3,417
    )
    
    
    (3,217
    )
    
    
    (3,227
    )Purchase of Treasury Stock
    
    
    (555
    )
    
    
    (3,575
    )
    
    
    (4,710
    )Net Change in Cash and
Cash Equivalents
    
    
    156
    
    
    
    (288
    )
    
    
    (313
    )Cash and Cash EquivalentsBeginning of year
    
    
    315
    
    
    
    603
    
    
    
    916Cash and Cash EquivalentsEnd of year
    
    $
    471
    
    
    $
    315
    
    
    $
    603
 65




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##### Table of Contents



Farmers & Merchants Bancorp, Inc and Subsidiaries
 Notes to Consolidated Financial Statements
December 31, 2009, 2008, and 2007
 Note 18  Quarterly Financial Data
 (000s omitted except per share data)
 Quarterly Financial Data - UNAUDITEDQuarter Ended in 2009Mar 31
    
    
    June 30
    
    
    Sep 30
    
    
    Dec 31Summary of Income:Interest income
    
    $
    10,376
    
    
    $
    10,459
    
    
    $
    10,081
    
    
    $
    10,198Interest expense
    
    
    3,474
    
    
    
    3,427
    
    
    
    3,220
    
    
    
    3,099Net Interest Income
    
    
    6,902
    
    
    
    7,032
    
    
    
    6,861
    
    
    
    7,099Provision for loan loss
    
    
    659
    
    
    
    1,079
    
    
    
    1,432
    
    
    
    388Net interest income after provision for loan loss
    
    
    6,243
    
    
    
    5,953
    
    
    
    5,429
    
    
    
    6,711Other income (expense)
    
    
    (3,880
    )
    
    
    (4,016
    )
    
    
    (3,739
    )
    
    
    (3,621
    )Net income before income taxes
    
    
    2,363
    
    
    
    1,937
    
    
    
    1,690
    
    
    
    3,090Income taxes
    
    
    633
    
    
    
    536
    
    
    
    414
    
    
    
    892Net income
    
    $
    1,730
    
    
    $
    1,401
    
    
    $
    1,276
    
    
    $
    2,198Earnings per Common Share
    
    $
    0.36
    
    
    $
    0.30
    
    
    $
    0.27
    
    
    $
    0.46Average common shares outstanding
    
    
    4,756,389
    
    
    
    4,742,910
    
    
    
    4,731,841
    
    
    
    4,734,674
 Quarter Ended in 2008Mar 31
    
    
    June 30
    
    
    Sep 30
    
    
    Dec 31Summary of Income:Interest income
    
    $
    11,211
    
    
    $
    11,134
    
    
    $
    10,816
    
    
    $
    10,663Interest expense
    
    
    5,254
    
    
    
    4,659
    
    
    
    4,431
    
    
    
    3,757Net Interest Income
    
    
    5,957
    
    
    
    6,475
    
    
    
    6,385
    
    
    
    6,906Provision for loan loss
    
    
    269
    
    
    
    180
    
    
    
    33
    
    
    
    1,305Net interest income after  provision for loan loss
    
    
    5,688
    
    
    
    6,295
    
    
    
    6,352
    
    
    
    5,601Other income (expense)
    
    
    (3,539
    )
    
    
    (3,474
    )
    
    
    (3,910
    )
    
    
    (3,840
    )Net income before income taxes
    
    
    2,149
    
    
    
    2,821
    
    
    
    2,442
    
    
    
    1,761Income taxes
    
    
    581
    
    
    
    782
    
    
    
    659
    
    
    
    428Net income
    
    $
    1,568
    
    
    $
    2,039
    
    
    $
    1,783
    
    
    $
    1,333Earnings per common share
    
    $
    0.32
    
    
    $
    0.42
    
    
    $
    0.37
    
    
    $
    0.28Average common shares outstanding
    
    
    4,917,707
    
    
    
    4,867,824
    
    
    
    4,822,467
    
    
    
    4,778,681
 
 ITEM 8. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTING AND FINANCIAL DISCLOSURE
  66




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ITEM 8A. CONTROLS AND PROCEDURES
 Management Report Regarding Disclosure Controls and Procedures
  67




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ITEM 8B. OTHER INFORMATION
  68




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##### Table of Contents



PART III
 
 ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 BOARD OF DIRECTORS
  Principal Occupation or
    
    Year FirstName
    
    Age
    
    Employment for Past Five Years
    
    Became DirectorDexter L. Benecke
    
    
    67
    
    
    President, Freedom Ridge, Inc.
    
    
    1999Steven A. Everhart
    
    
    55
    
    
    Secretary/Treasurer, MBC Holdings, Inc.
    
    
    2003Robert G. Frey
    
    
    69
    
    
    President, E.H. Frey & Sons, Inc.
    
    
    1987Jack C. Johnson
    
    
    57
    
    
    President, Hawks Clothing, Inc.
    
    
    1991Marcia S. Latta1
    
    
    48
    
    
    Vice President, BGSU Foundation
    
    
    2009Steven J. Planson
    
    
    50
    
    
    Self-Employed Farmer
    
    
    2008Anthony J. Rupp
    
    
    60
    
    
    President, Rupp Furniture Co.
    
    
    2000David P. Rupp, Jr.2
    
    
    68
    
    
    Attorney
    
    
    2001James C. Saneholtz
    
    
    63
    
    
    President, Saneholtz-McKarns, Inc.
    
    
    1995Kevin J. Sauder
    
    
    49
    
    
    President/CEO, Sauder Woodworking Co.
    
    
    2004Merle J. Short
    
    
    69
    
    
    Chairman, ProMow, Inc.
    
    
    1987Paul S. Siebenmorgen
    
    
    60
    
    
    President/CEO of the Corporation and
The Farmers & Merchants State Bank
    
    
    2005Steven J. Wyse
    
    
    65
    
    
    Private Investor
    
    
    1991
  
 1
    
    Ms. Latta was appointed to the Board of
Directors of the Company and The Farmers & Merchants State Bank on January 16,
2009.2
    
    David P. Rupp, Jr. is an attorney with
membership in the law firm of Plassman, Rupp, Short & Hagans of Archbold, Ohio.
The law firm has been retained by the Corporation, and its subsidiaries,
during the past twenty years and is to be retained currently. 69




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##### Table of Contents



EXECUTIVE OFFICERS
 Principal Occupation & Offices Held withName
    
    Age
    
    Corporation & Bank for Past Five YearsDavid P. Rupp, Jr.
    
    
    68
    
    
    ChairmanPaul S. Siebenmorgen
    
    
    60
    
    
    President & Chief Executive OfficerBarbara J. Britenriker
    
    
    48
    
    
    Executive Vice President
Chief Financial OfficerTodd A. Graham
    
    
    59
    
    
    Executive Vice PresidentChief Lending OfficerEdward A. Leininger
    
    
    53
    
    
    Executive Vice President Chief Operating OfficerRex D. Rice
    
    
    51
    
    
    Executive Vice President Senior Commercial Banking Director
    
 ITEM 10. EXECUTIVE COMPENSATION
 The information called for herein is presented in the proxy statement to be furnished in
connection with the solicitation of proxies on behalf of the Board of Directors of the
Registrant for use at its Annual Meeting to be held on April 15, 2010, and is incorporated
herein by reference.
 70




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##### Table of Contents



ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 The information called for by Item 403 of Regulation S-K is presented in the proxy
statement to be furnished in connection with the solicitation of proxies on behalf of the Board
of Directors of the Registrant for use at its Annual Meeting to be held Thursday, April 15,
2010 and is incorporated herein by reference.On April 23, 2005 the Companys shareholders approved the Farmers & Merchants Bancorp, Inc.
2005 Long-Term Stock Incentive Plan. The plan authorizes the issuance of up to 800,000 of the
Companys common shares in the form of stock options, restricted stock, performance shares, and
unrestricted stock to employees of the Company and its subsidiaries. During 2005, 4,000 shares
of restricted stock were issued under the plan to 38 employees of the Bank. Due to employee
termination, there were 80 shares forfeited during 2005. During 2006, the Company purchased
42,000 shares and awarded 6,100 restricted shares to 41 employees. 200 shares were forfeited
during 2006. 8,760 shares of restricted stock were issued to 46 employees during 2007. Due to
employee termination, 740 shares were forfeited during 2007. 600 shares had vesting
accelerated and were paid to a retiring officer. 228,000 shares were purchased in 2007. In
2008, 171,889 shares were purchased with 10,000 shares being awarded to 51 employees. 245
shares were forfeited in 2008. 2009 had purchases of 28,907 shares with awards of 10,000
shares to 49 employees. 350 shares were forfeited during the year. At year end, the Company
held 437,551 shares in Treasury stock and 27,775 in unearned stock awards.
 Equity Compensation Plan InformationNumber of securitiesremaining available forNumber of securities to be
    
    
    Weighted-average exercise
    
    
    future issuance under equityissued upon exercise of
    
    
    price of outstanding
    
    
    compensation plansoutstanding options,
    
    
    options, warrants and
    
    
    (excluding securitieswarrants and rights
    
    
    rights
    
    
    reflected in column (a))( a )
    
    
    ( b )
    
    
    ( c )Equity compensation
plans approved by
security holders
    
    
    0
    
    
    $
    0.00
    
    
    
    762,755Equity compensation
plans not approved
by security holders
    
    
    0
    
    
    $
    0.00
    
    
    
    0Total
    
    
    0
    
    
    $
    0.00
    
    
    
    762,755
 
 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 The information called for herein is presented in the proxy statement to be furnished in
connection with the solicitation of proxies on behalf of the Board of Directors of the
Registrant for use at its Annual Meeting to be held on April 15, 2010, and is incorporated
herein by reference.
 
 ITEM 13. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 The information called for by this Item is presented in the proxy statement to be furnished
in connection with the solicitation of proxies on behalf of the Board of Directors of the
Registrant for use at its Annual Meeting to be held on April 15, 2010, and is incorporated
herein by reference.
 71




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##### Table of Contents



PART IV
 
 ITEM 14. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
 a.    The Following documents are filed as part of this report.
 (1)
    
    Financial Statements (included in this 10-K under Item 8)
Report of Independent Accountants
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Shareholders Equity
Consolidated Statements of Cash Flows
Note to Consolidated Financial Statements(2)
    
    Financial Statement Schedules
Five Year Summary of Operations
 b.    Exhibits Required by Item 601 of Regulation S-K
 (3)
    
    a. Articles of Incorporation are incorporated by reference to the
Companys Quarterly Report on Form 10-Q that was filed with the
Commission on May 10, 2004.
b. Certificate of Amendment to the Companys Articles of
Incorporation is incorporated by reference to the Companys Current
Report on Form 8-K that was filed with the Commission on April 26,
2006.(3.1)
    
    Code of Regulations are incorporated by reference to the Companys
Quarterly Report on Form 10-Q that was filed with the Commission on
May 10, 2004.(10.1)
    
    Change in Control Agreement executed by and between the Company and
Paul S. Siebenmorgen on November 27, 2007 (incorporated by
reference to the Current Report on Form 8-K filed with the
Commission on November 30, 2007).(10.2)
    
    Change in Control Agreement executed by and between the Company and
Barbara J. Britenriker on November 27, 2007 (incorporated by
reference to the Current Report on Form 8-K filed with the
Commission on November 30, 2007).(10.3)
    
    Change in Control Agreement executed by and between the Company and
Edward A. Leininger on November 27, 2007 (incorporated by reference
to the Current Report on Form 8-K filed with the Commission on
November 30, 2007).(10.4)
    
    Change in Control Agreement executed by and between the Company and
Rex D. Rice on November 27, 2007 (incorporated by reference to the
Current Report on Form 8-K filed with the Commission on November
30, 2007).(10.5)
    
    2005 Long-Term Stock Incentive Plan (incorporated by reference to
the Quarterly Report on Form 10-Q filed with the Commission on
October 27, 2005).(10.6)
    
    Form on Restricted Stock Agreement (incorporated by reference to
the Quarterly Report on Form 10-Q filed with the Commission on
October 27, 2005).
 72




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##### Table of Contents



ITEM 14. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES (Continued)
 (21)
    
    Subsidiaries of Farmers & Merchants Bancorp, Inc.(31.1)
    
    Certification of the Chief Executive Officer Required under Rule 13(a)-14(a)/15d-14(a)(31.2)
    
    Certification of the Chief Financial Officer Required under Rule 13(a)-14(a)/15d-14(a)(32.1)
    
    Certification of the Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.(32.2)
    
    Certification of the Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 73




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##### Table of Contents



FARMERS & MERCHANTS BANCORP, INC
 
   Date: February 24, 2010
    By:
    /s/ Paul S. SiebenmorgenPaul S. SiebenmorgenChief Executive Officer Director  /s/ Paul S. Siebenmorgen
    
    Date: February 24, 2010
    
    /s/ Barbara J. Britenriker
    
    Date: February 24, 2010Paul S Siebenmorgen
    
    
    
    Barbara J. BritenrikerChief Executive Officer
(Principal Executive Officer)
    
    Chief Financial Officer
(Principal Financial Officer/Principal 
Accounting Officer)/s/ Dexter L. Benecke
    
    Date: February 24, 2010
    
    /s/ Steven A. Everhart
    
    Date: February 24, 2010Dexter L. Benecke, Director
    
    
    
    Steven A. Everhart, Director/s/ Robert G. Frey
    
    Date: February 24, 2010
    
    /s/ Jack C. Johnson
    
    Date: February 24, 2010Robert G. Frey, Director
    
    
    
    Jack C. Johnson, Director/s/ Marcia S. Latta
    
    Date: February 24, 2010
    
    /s/ Steven J. Planson
    
    Date: February 24, 2010Marcia S. Latta, Director
    
    
    
    Steven J. Planson, Director/s/ Anthony J. Rupp
    
    Date: February 24, 2010
    
    /s/ David P. Rupp, Jr
    
    Date: February 24, 2010Anthony J. Rupp, Director
    
    
    
    David P. Rupp, Jr., Director/s/ James C. Saneholtz
    
    Date: February 24, 2010
    
    /s/ Kevin J. Sauder
    
    Date: February 24, 2010James C. Saneholtz, Director
    
    
    
    Kevin J. Sauder, Director/s/ Merle J. Short
    
    Date: February 24, 2010
    
    /s/ Steven J. Wyse
    
    Date: February 24, 2010Merle J. Short, Director
    
    
    
    Steven J. Wyse, Director
 73