<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                                    FORM 10-K
               X    Annual Report Pursuant to Section 13 or 15(d)
             -----
                     of the Securities Exchange Act of 1934
                   For the fiscal year ended December 31, 2000
                                       or
                Transition Report Pursuant to Section 13 or 15(d)
          -----
                     of the Securities Exchange Act of 1934
              For the transition period from       to
                                             -----    -----
                         Commission File Number 0-14492
                        FARMERS & MERCHANTS BANCORP, INC.

                OHIO                                      34-1469491
------------------------------------            -------------------------------
(State or other jurisdiction of                          (IRS Employer
incorporation or organization)                         Identification No.)

307-11 North Defiance Street
         Archbold, Ohio                                     43502
------------------------------------            -------------------------------
      (Address of principal                               (Zip Code)
       Executive offices)

        Registrant's telephone number, including area code (419)446-2501
        -----------------------------------------------------------------

           Securities registered pursuant to Section 12(b) of the Act:

                                                  Name of each exchange on
         Title of each class                          which registered
              None                                          None
----------------------------------------     -----------------------------------
----------------------------------------     -----------------------------------

           Securities registered pursuant to Section 12(b) of the Act:

                         Common shares without par value
--------------------------------------------------------------------------------
                                (Title of class)


--------------------------------------------------------------------------------
                                (Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes     X           No
    ----------         ----------

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 305 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. { }

As of March 1, 2001, Registrant had outstanding 1,300,000 shares of common stock
at a market value of $110,500,000.


<PAGE>   2




                        FARMERS & MERCHANTS BANCORP, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                                     PAGE
Form 10-K Items
---------------
<S>               <C>                                                                                             <C>
Item 1.           Business                                                                                         2 - 20

Item 2.           Properties                                                                                           20

Item 3.           Legal Proceedings                                                                                    21

Item 4.           Submission of Matters to a Vote
                  of Security Holders                                                                                  21

Item 5.           Market for Registrant's Common Equity
                  and Related Stockholder Matters                                                                      21

Item 6.           Selected Financial Data                                                                              22

Item 7.           Management's Discussion and Analysis
                  of Financial Condition and Results
                  of Operations                                                                                    7 - 20

Item 8.           Financial Statements and Supplementary Data                                                     22 - 65

Item 9.           Disagreements on Accounting and
                  Financial Disclosure                                                                                 66

Item 10.          Directors and Executive Officers
                  of the Registrant                                                                               66 - 69

Item 11.          Management Remuneration and Transactions                                                             70

Item  12.         Security Ownership of Certain
                  Beneficial Owners and Management                                                                     70

Item  13.         Certain Relationships and Related
                  Transactions                                                                                         70

Item 14.          Financial Schedules and Reports on Form 8-K                                                     71 - 73
                  Schedule 1 - Schedule of Property and Equipment                                                      72
                  Schedule 2 - Schedule of Accumulated Depreciation -
                                 Property and Equipment                                                                73

Signatures                                                                                                             74

Total Pages:                                                                                                           74
</TABLE>

                                        1


<PAGE>   3


BUSINESS

HISTORY

The Farmers & Merchants State Bank is a community bank, as it has been since
1897. When Archbold's population was less than 900, there were six local
businessmen foresighted enough in their thinking and views to realize the need
for a bank in the village of Archbold. J. O. Swisher and Jacob Ehrat (livestock
brokers) C. M. McLaughlin and A. J. Vernier (hardware merchants) and L. D.
Gotshall and I. W. Gotshall (lumber merchants), were founders of the then
Farmers & Merchants Bank, a private bank. The bank's first office was one room
located in the Vernier Hotel building, currently occupied by the Archbold Barber
Shop.

In 1907, the first new structure was built at the corner of Depot and North
Defiance Streets, which is now the Subway. The bank was heralded as one of the
most unusual and attractive banks in the area, featuring marble interior, brass
trimmed teller cages, tile floor, leaded windows, and high vaulted ceiling. The
vault featured a time controlled money safe. The building and equipment were
unique to the early 1900's and adequately served the banking needs of the area
for over 50 years with only minor interior alterations.

In August of 1913 the village of Archbold was hit by a disastrous fire which
destroyed all the business district on the east side of N. Defiance Street from
the bank at the corner of Depot Street to the Murbach medical building at the
corner of Holland Street. This was a tremendous loss for a dozen or more
businesses, causing many to liquidate. Young businessmen and enterprising
citizens promoted a waterworks system and passed a $16,000 bond issue to finance
the project. This seemed to be the turning point for the advancement of industry
and the community rallied from this eventful experience to an unusual growth.

In 1919 the founding directors elected to change from a private bank to a state
chartered bank and at this time changed its name from the Farmers & Merchants
Bank to The Farmers & Merchants State Bank, as required in the state charter.
This has been the only name change in the bank's 99 year history. The bank's
capital funds were $53,510 thousand and resources were $571,549 thousand.

The bank experienced growth, especially during the post-war years and early
1950's. By 1958, the bank's resources had grown to 7 1/2 million dollars. The
directors and officers realized the need for a larger building to accommodate
the increase in business and services. In 1958, the bank moved to its present N.
Defiance Street location greatly improving service to its customers and offering
drive-up banking, electronic bookkeeping, convenient parking, and a social room
for the community to use. The new building featured the latest in modern banking
facilities and The Farmers & Merchants State Bank was prepared to more
efficiently serve the ever growing community.

With resources of over $23 million in 1969, The Farmers & Merchants State Bank
again realized the need for additional space and inaugurated a building
expansion, which nearly doubled the original structure built in 1958. The new
addition, opened early in 1970, provided for an additional drive-up window,
walk-up window, direct entrance from the bank parking lot to the lobby, three
spacious private offices, conference room, and a large community room with a
fully equipped kitchen to facilitate groups from 60 to 100.

In 1972, with total resources of over $34 million and to continue its growth,
The Farmers & Merchants State Bank established an office on N. Shoop Avenue,
Wauseon. The office was opened in November 1973 and provided greater banking
service to the Wauseon area. The Wauseon office provided complete banking
service and a community room with kitchen facilities to accommodate 15 - 80
people.

In 1977 - 1978 additional office space was added to The Farmers & Merchants
State Bank in Archbold, and an automatic teller machine, "Teller 24", was
installed in the entrance lobby.

A second Wauseon office was established in the downtown area on the corner of N.
Fulton and Depot streets in August of 1978. It is a very convenient location for
shoppers and businesses. The Downtown office also provides 24 hour banking with
"Teller 24".


                                       2
<PAGE>   4

During April of 1980 a second office was opened in Archbold, located in the
Lugbill Addition near Woodland Oaks. The Woodland office is a convenient branch
offering full banking services to those Archbold residents in the outlying area.

With resources of $83 million the decision was made to open full service offices
in Stryker and West Unity in 1981.

During that year, new computerized proof equipment was added to capture the
required data in today's complex and competitive banking environment. A new
division was added to the Operations Department in the creation of the Central
Information File Department. Plus, two new branches were opened, the Delta
office in June and the all new Bryan E. High office in December.

In 1985 the conversion of the former bank, The Farmers & Merchants State Bank,
into a holding company structure was performed to provide greater flexibility
for expanding the bank's business into activities closely related to banking, as
well as, placing the bank in a position to react in a timely and effective
manner to the many complex changes affecting the banking industry. On April 22,
1985, a new Ohio chartered bank was formed and incorporated as the FMSB Bank
following the formation of a holding company, The Farmers & Merchants Bancorp,
Inc., which was incorporated as a bank holding company under the laws of the
State of Ohio on February 25, 1985. A triangular merger was then effected
whereby the former bank, The Farmers & Merchants State Bank, was merged with and
into the new bank, the FMSB Bank with each outstanding share of common stock of
the former bank being converted by operation of law upon consummation of the
merger into two shares of common stock of Farmers & Merchants Bancorp, Inc. Upon
the merger becoming effective July 31, 1985, 260,000 shares of Farmers &
Merchants Bancorp, Inc., no par value common stock were issued. The resulting
new bank in the merger is the FMSB Bank; however, its name was changed
concurrently with the merger to The Farmers & Merchants State Bank. Upon
consummation of the merger, the stockholders of Farmers & Merchants Bancorp,
Inc. received the same percentage of ownership in the holding company as their
percentage of ownership of the former bank. The former bank then ceased to
exist. All of the 260,000 issued and outstanding shares of stock of the new
bank, The Farmers & Merchants State Bank, were held by the bank holding company,
Farmers & Merchants Bancorp, Inc.

With the success The Farmers & Merchants State Bank was experiencing in Stryker,
West Unity and Bryan and the prospect of continued growth in Williams County, it
was decided to open another office in Bryan and one in Montpelier. In May of
1992, the doors were opened at a second office in Bryan located on S. Main
Street; and in July of 1992 the bank was pleased to be able to offer their
financial services to the community of Montpelier. The Bryan S. Main Street
banking center has three drive-up lanes and a drive-up ATM. Also during 1992,
the West Unity Office was expanded and an additional drive-up lane was added at
the Delta Office.

Also during 1992, an accidental death and disability insurance company was
formed, Farmers & Merchants Life Insurance Company. The company was organized
under the laws of the State of Arizona with 100% of the 100,000 issued and
outstanding shares of common stock owned by Farmers & Merchants Bancorp, Inc.

The growth of The Farmers & Merchants State Bank continued to be very favorable
in 1993 with assets in excess of $370 million, but with the tremendous growth
that was occurring, the bank was feeling growing pains brought on by cramped
quarters. There were no longer community rooms in either the Main Office or the
Wauseon Shoop Office. All available space at the Main Office had been used, by
turning closets and storage space into offices and many of the offices that were
designed for one officer were housing two officers. The Marketing and Personnel
departments had been moved to the Wauseon Shoop Office basement, the former
community room. The time had come for the addition of more office space at the
Main Office. The former Christy Building, located on the north side of the Main
Office, was demolished during the fall of 1993 to clear the way for the building
expansion to begin.

Because of the ever-increasing flow of customers at the Wauseon N. Shoop Office,
a decision was made to install a drive-up ATM. That ATM was installed in
December, 1993. An ATM was also installed at Sauder Woodworking Co. to better
serve the Sauder employees, who work various shifts, making it inconvenient for
them to bank during regular banking hours.


                                       3
<PAGE>   5


1994 was a very special year for The Farmers & Merchants State Bank. Earnings
were very strong, asset quality remained outstanding, and the bank expanded its
presence within its market area. The goals for 1994 were exceeded, with a new
high in assets of $406 million. With a growing interest to expand the bank's
market area and branch into Henry County, an application was submitted for a
Napoleon office. Once the application was approved, the bank wasted no time in
getting the building constructed. The full service Napoleon Office, with a
drive-up ATM, was conveniently located on St. Rt. 108 on the north edge of
Napoleon making it easily accessible for the residents of Henry County.

During the time the Napoleon office was under construction, plans were completed
for expansion of the Wauseon N. Shoop Office. This was the first expansion of
this office since its opening in 1973, and with the basement being used for
offices, more office space was greatly needed. The new addition consisted of
four additional offices, a large secretarial/new accounts area, restroom, and
supply room.

In October, 1994, the newly constructed expansion of the Main Office and the
remodeling of the first floor of the original structure was completed. The
offices were ready for occupancy in time for the annual Christmas Club Open
House, November 4th and 5th. The remodeling of the offices located in the
basement of the Main Office began as soon as Open House was over.

The Napoleon Office opened for business during the second week of February,
1995. On Sunday, February 12, 1995, an Open House was held at the Main Office
and the new Napoleon Office.

An ATM was placed at Northwest State Community College in March, 1995, to better
serve the customers from the Four County Area. In April, 1995, a drive-up ATM
was installed at the Archbold Woodland Office.

During the spring of 1996, the Delta Office began an extensive remodeling and
expansion project. The need was seen for more loan officer space and an ATM
machine. The project was completed in October of 1996. Two more ATM locations
were also secured during this year. An ATM was placed in the Community Hospital
of Williams County, Bryan, and another in the Fulton County Health Center,
Wauseon. The Farmers & Merchants State Bank now has twelve ATM's located
throughout Fulton, Williams, and Henry Counties.

In June of 1996, Farmers & Merchants Bancorp split its stock, 5 for 1. The goal
was to bring the price per share down so it would be more affordable and
possibly encourage trading.

The Farmers & Merchants State Bank again hit a new growth plateau. At year end
assets went over the $500 million mark.

The Bank continued to expand ATM locations during 1997 by installing a drive-up
machine at our West Unity office. During the fourth quarter 1997 an ATM (cash
dispensing only) was installed at Wyse Commons at the Fairlawn Haven Complex in
Archbold. 1997 proved to be a very profitable year for the Bank and ended the
year with $528,273,000 in assets. An application was submitted and approved for
a new full service office to be located at the east end of the village of
Montpelier. Construction of that building began in October 1997 and was open for
business in June 1998.

With the opening of the Montpelier Eastside Office in June 1998, The Farmers &
Merchants State Bank had 12 office locations in 8 communities. There were four
new ATM's installed during 1998. Those ATM's are located at the Bryan East High
Office, Stryker Office, Montpelier Eastside Office, and Repp Oil in Fayette.
With the addition of these new ATM's the bank now has 18 ATM locations
throughout our market area. The existing Fulton County Health Center ATM was
relocated to Beck's Petro Country Store, Ridgeville Corners.

Construction of the Swanton Office began in June 1999. This office, which opened
in November 1999, is the bank's first office located in Lucas County. With the
addition of another drive-up ATM at the Swanton Office, the bank now has 19 ATM
locations. Assets at the end of the fourth quarter were $598,529 million.


                                       4

<PAGE>   6

FM Investments, the brokerage department of The Farmers & Merchants State Bank,
opened for business in April 1999. The office for this department is located in
the Main Office, Archbold. Securities are offered through Raymond James
Financial Services, Inc.

In 2000, two new automated teller machines were added to off-site locations,
Sauder Village in Archbold, Ohio and the Delta Eagles in Delta, Ohio. In
December of 2000 construction of the new Defiance Banking Center began. Assets
at the end of the fourth quarter exceeded $635 million.

One thing that has never changed through the tremendous growth The Farmers &
Merchants State Bank experienced over the years is that it continues to be "Your
Community Bank". This image remains a goal of the Bank's strategic plan. The
Bank is proud to have played a large part in the growth of northwest Ohio. It is
The Farmers & Merchants State Bank's commitment to insure that community banking
continues to grow and prosper by providing quality customer service and
adequately fulfilling the financial needs of the individuals, farmers,
businesses, and industries in our market area.

NATURE OF ACTIVITIES

The Farmers & Merchants State Bank through its equivalent of 252 full time
employees engages in general commercial banking and savings business. Its
activities include commercial and residential mortgage, consumer, and credit
card lending activities. Because of the geographical locations in which the
bank's branches are located, a substantial amount of the bank's loan portfolio
is composed of loans made to the farming industry for such things as farm land,
farm equipment, livestock and general operation loans for seed, fertilizer,
feed, etc. Other types of lending activities include loans for home
improvements, student loans, and loans for such items as autos, trucks,
recreational vehicles, mobile homes, motorcycles, etc. The bank also is engaged
in direct finance leasing and has invested in leveraged type leases, although
the activity in this area has substantially decreased in recent years.

The bank also provides checking account services, as well as, savings and other
time deposit services such as certificates of deposits. In addition, ATM's
(automated teller machines) (Money Access Corporation) are also provided in its
offices in Archbold, Wauseon, Bryan, Delta and Napoleon, Ohio. Two ATM's are
also located at Sauder Woodworking Co., Inc., a major employer in Archbold.
Additional locations are at Northwest State Community College, Fulton County
Hospital in Wauseon, and Williams County Hospital in Bryan.

Farmers & Merchants Life Insurance Company was established to provide needed
additional services to The Farmers & Merchants State Bank's customers through
the issuance of life and disability insurance policies. The lending officers of
The Farmers & Merchants State Bank are the selling agents of the policies to the
bank's customers. The insuring company will be USLIFE Credit Insurance Company,
an Illinois Corporation, while Farmers & Merchants Life Insurance Co. will be
the participating reinsurer. Farmers & Merchants Bancorp, Inc.'s original
investment in Farmers & Merchants Life Insurance Co. was $100,000. This
investment represented less than 5% of Farmers & Merchants Bancorp, Inc.'s
equity capital.

F&M Investments, the brokerage department of The Farmers & Merchants State Bank,
opened for business in April, 1999. Securities are offered through Raymond James
Financial Services, Inc.

Farmers & Merchants Bancorp, Inc. is a bank holding company within the meaning
of the Bank Holding Company Act of 1956. The bank subsidiary, The Farmers &
Merchant State Bank, is in turn regulated and examined by the Ohio Division of
Banks, the Federal Deposit Insurance Corporation and the Federal Reserve System.
The activities of the bank subsidiary are also subject to other federal and
state laws and regulations, including usury and consumer credit laws, state laws
relating to fiduciaries, the Federal Truth-in-Lending Act and Regulation Z as
promulgated thereunder by the Board of Governors, the Truth in Savings Act, the
Bank Bribery Act, the Competitive Equality Banking Act of 1987, the Expedited
Funds Availability Act, the Community Reinvestment Act, the FDICIA (Federal
Deposit Insurance Corporation Insurance Act), FIRREA (Federal Institutions
Reform, Recovery, and Enforcement Act of 1989), and the Bank Merger Act among
others.


                                       5

<PAGE>   7

The commercial banking business in the geographical area in which The Farmers &
Merchants State Bank operates is highly competitive. In its banking activities,
it competes directly with other commercial banks and savings and loan
institutions in each of its operating localities. The following is a summary by
geographical area of The Farmers & Merchants State Bank principal competition:

<TABLE>
<CAPTION>
          Branch                                                           Location
---------------------------                          -----------------------------------------------------
<S>                                                  <C>
Archbold, Ohio                                       Sky Financial (2 offices)

Wauseon, Ohio                                        National City Bank (Subsidiary of National City
                                                       Corporation)
                                                     First Federal Savings & Loan of Defiance
                                                     City Loan Bank
                                                     State Bank & Trust Company
                                                     Sky Financial

Stryker, Ohio                                        Sky Financial

West Unity, Ohio                                     National Bank of Montpelier

Delta, Ohio                                          State Bank & Trust Company
                                                     First Federal Savings & Loan of Delta

Bryan, Ohio                                          Sky Financial (2 offices)
                                                     National City Bank (Subsidiary of National City
                                                       Corporation)
                                                     First Federal Savings & Loan of Defiance
                                                       (2 offices)
                                                     Community First Bank & Trust
                                                     National Bank of Montpelier

Montpelier, Ohio                                     Sky Financial
                                                     National Bank of Montpelier (2 offices)
                                                     First Federal Savings & Loan of Defiance

Napoleon, Ohio                                       Henry County Bank (3 offices)
                                                     Beneficial Bank
                                                     First Federal Savings & Loan of Defiance, Ohio
                                                     Sky Financial (2 offices)
                                                     National City Bank (Subsidiary of National City
                                                       Corporation) (2 offices)

Swanton, Ohio                                        National City Bank (Subsidiary of National City
                                                         Corporation)
                                                     Fifth Third Bank
                                                     First Federal Savings & Loan of Delta
                                                     Key Bank
</TABLE>




                                       6



<PAGE>   8

SELECTED STATISTICAL AND FINANCIAL INFORMATION

EARNINGS SUMMARY

Farmers & Merchants Bancorp, Inc. reported net income of $7.4 million for 2000
which is an increase of $600 thousand over the 1999 net income of $6.8 million,
and virtually the same as 1998 net income of $7.6 million. The increase in 2000
net income is primarily a result of increased loan activity and interest rate
increases. Earnings per share correspondingly increased for 2000 to $5.69 per
share compared to $5.23 per share and $5.89 per share for 1999 and 1998,
respectively.

INTEREST INCOME

The following table presents net interest income, interest spread and net
interest margin for the three years 1998 through 2000, comparing average
outstanding balances of earnings assets and interest bearing liabilities with
the associated interest income and expense and their corresponding average rates
of earned and paid. The tax exempt asset yields have been tax effected to
reflect a marginal corporate tax rate of 34%. Average outstanding loan balances
include nonperforming loans and mortgage loans held for sale. Average
outstanding security balances are computed based on carrying values including
unrealized gains and losses on available-for-sale securities.



                                       7
<PAGE>   9


DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY, INTEREST RATES AND
INTEREST DIFFERENTIAL


<TABLE>
<CAPTION>
                                                                          2000
                                                   -----------------------------------------------------
                                                   Average              Interest/
                                                   Balance              Dividends             Yield/Rate
                                                   -------              ---------             ----------
<S>                                                <C>                 <C>                    <C>
             ASSETS
Interest Earning Assets:
    Loans (1)                                      $475,035              $42,661                 8.98%
    Taxable investment securities                    78,995                4,782                 6.05%
    Tax-exempt investment securities                 27,094                1,313                 4.85%
    Interest bearing deposits                           100                    4                 4.00%
    Federal funds sold                                2,021                  130                 6.43%
                                                   --------              -------
        Total Interest Earning Assets               583,245              $48,890                 8.38%
                                                                         =======                 ====
Non-Interest Earning Assets:
    Cash and cash equivalents                        16,020
    Other assets                                     19,810
                                                   --------
            Total Assets                           $619,075
                                                   ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest Bearing Liabilities:
    Savings deposits                               $ 97,922              $ 4,805                 4.91%
    Other time deposits                             304,666               17,494                 5.74%
    Other borrowed money                             28,637                1,942                 6.78%
    Federal funds purchased and securities
      sold under agreement to repurchase             20,670                1,268                 6.13%
                                                   --------              -------
        Total Interest Bearing Liabilities          451,895              $25,509                 5.64%
                                                                         =======                 ====
Non-Interest Bearing Liabilities:
    Non-interest bearing demand deposits            100,590
    Other                                             5,102
                                                   --------
            Total Liabilities                       557,587

Stockholders' Equity                                 61,488
                                                   --------
            Total Liabilities and
              Shareholders' Equity                 $619,075
                                                   ========

Interest/dividend income/yield                                           $48,890                 8.38%
Interest expense/yield                                                    25,509                 5.64%
                                                                         -------                 ----
    Net Interest Spread                                                  $23,381                 2.74%
                                                                         =======                 ====
    Net Interest Margin                                                                          4.01%
                                                                                                 ====

</TABLE>





                                       8
<PAGE>   10





<TABLE>
<CAPTION>
                                                                               1999
                                                         -----------------------------------------------------
                                                         Average              Interest/
                                                         Balance              Dividends             Yield/Rate
                                                         -------              ---------             ----------
<S>                                                      <C>                  <C>                   <C>
                    ASSETS
Interest Earning Assets:
    Loans (1)                                            $428,087              $37,236                 8.70%
    Taxable investment securities                          89,834                5,001                 5.57%
    Tax-exempt investment securities                       30,106                1,434                 4.76%
    Interest bearing deposits                                 100                    3                 3.00%
    Federal funds sold                                      2,019                  105                 5.20%
                                                         --------              -------
        Total Interest Earning Assets                     550,146              $43,779                 7.96%
                                                                               =======                 ====
Non-Interest Earning Assets:
    Cash and cash equivalents                               9,940
    Other assets                                           25,103
                                                         --------
Total Assets                                             $585,189
                                                         ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest Bearing Liabilities:
    Savings deposits                                     $ 98,711              $ 4,199                 4.25%
    Other time deposits                                   295,376               15,577                 5.27%
    Other borrowed money                                   16,503                1,029                 6.24%
    Federal funds purchased and securities
      sold under agreement to repurchase                    6,129                  345                 5.63%
                                                         --------              -------
        Total Interest Bearing Liabilities                416,719              $21,150                 5.08%
                                                                               =======                 ====
Non-Interest Bearing Liabilities:
    Non-interest bearing demand deposits                  110,064
    Other                                                   1,544
                                                         --------
            Total Liabilities                             528,327
Stockholders' Equity                                       56,862
                                                         --------
Total Assets & Shareholders' Equity                      $585,189
                                                         ========

Interest/dividend income/yield                                                 $43,779                 7.96%
Interest expense/yield                                                          21,150                 5.08%
                                                                               -------                 ----
    Net Interest Spread                                                        $22,629                 2.88%
                                                                               =======                 ====
    Net Interest Margin                                                                                4.11%
                                                                                                       ====

</TABLE>



                                       9
<PAGE>   11
<TABLE>
<CAPTION>

                                                                       1998
                                                      ----------------------------------------
                                                      Average       Interest/
                                                      Balance       Dividends       Yield/Rate
                                                      -------       ---------       ----------
<S>                                                 <C>            <C>              <C>

                    ASSETS

Interest Earning Assets:

    Loans (1)                                       $408,291         $ 36,335           8.90%
    Taxable investment securities                     75,880            4,641           6.12%
    Tax-exempt investment securities                  25,654            1,259           4.91%
    Interest bearing deposits                            100                5           5.00%
    Federal funds sold                                12,123              648           5.35%
                                                    --------         --------
        Total Interest Earning Assets                522,048         $ 42,888           8.22%
                                                                     ========       =========
Non-Interest Earning Assets:
    Cash and cash equivalents                         14,745
    Other assets                                      16,484
                                                    --------
Total Assets                                        $553,277
                                                    ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest Bearing Liabilities:
    Savings deposits                                $ 89,643         $  4,635           5.17%
    Other time deposits                              290,141           16,547           5.70%
    Other borrowed money                              11,051              698           6.32%
    Federal funds purchased and securities
     sold under agreement to repurchase                3,276              206           6.25%
                                                    --------         --------
        Total Interest Bearing Liabilities           394,111         $ 22,086           5.60%
                                                                     ========       =========
Non-Interest Bearing Liabilities:
    Non-interest bearing demand deposits             100,420
    Other                                              5,807
                                                    --------
            Total Liabilities                        500,338
Stockholders' Equity                                  52,939
                                                    --------
Total Assets & Shareholders' Equity                 $553,277
                                                    ========

Interest/dividend income/yield                                       $ 42,888            8.22%
Interest expense/yield                                                 22,086            5.61%
                                                                     --------       ----------
    Net Interest Spread                                              $ 20,802            2.61%
                                                                     ========       ==========
    Net Interest Margin                                                                  3.98%
                                                                                    ==========

</TABLE>


(1)     For purposes of these computations, nonaccruing loans are included in
        the daily average outstanding loan amounts.

                                       10


<PAGE>   12

The primary source of the Company's traditional banking revenue is net interest
income. Net interest income is the difference between interest income on
interest earning assets, such as loans and securities, and interest expense on
liabilities used to fund those assets such as interest bearing deposits and
other borrowings. Net interest income is affected by changes in both interest
rates and the amount and composition of earnings assets and liabilities. The
change in net interest income is most often measured as a result of two
statistics - interest spread and net interest margin. The difference between the
yields on earning assets and the rates paid for interest bearing liabilities
supporting those funds represents the interest spread. Because non-interest
bearing sources of funds such as demand deposits and stockholders' equity also
support earning assets, the net interest margin exceeds the interest spread.

The following tables show changes in interest income, interest expense and net
interest due resulting from changes in volume and rate variances for major
categories of earnings assets and interest bearing liabilities.


<TABLE>
<CAPTION>


                                                                     2000 vs 1999
                                                           ----------------------------------
                                                           Net             Due to Change in
                                                          Change        Volume           Rate
                                                          ------        ------           ----
<S>                                                   <C>             <C>            <C>

 Interest Earned On:
     Loans                                              $ 5,425        $ 4,216        $ 1,209
     Taxable investment securities                         (219)          (656)           437
     Tax-exempt investment securities                      (121)          (146)            25
     Interest bearing deposits                                1           --                1
     Federal funds sold                                      25           --               25
                                                        -------        -------        -------
        Total Interest Earning Assets                   $ 5,111        $ 3,414        $ 1,697
                                                        =======        =======        =======
Interest Paid On:
     Savings deposits                                   $   606        $   (39)       $   645
     Other time deposits                                  1,917            533          1,384
     Other borrowed money                                   913            823             90
     Federal funds sold and security
       repurchase agreements                                923            892             31
                                                        -------        -------        -------
                                                        $ 4,359        $ 2,209        $ 2,150
                                                        =======        =======        =======

<CAPTION>
                                                                     1999 vs 1998
                                                           ----------------------------------
                                                           Net             Due to Change in
                                                          Change        Volume           Rate
                                                          ------        ------           ----
<S>                                                   <C>             <C>            <C>
 Interest Earned On:
     Loans                                              $   901        $ 1,722        $  (821)
     Taxable investment securities                          360            777           (417)
     Tax-exempt investment securities                       175            212            (37)
     Interest bearing deposits                               (2)           --              (2)
     Federal funds sold                                    (543)          (526)           (17)
                                                        -------        -------        -------
         Total Interest Earning Assets                  $   891        $ 2,185        $(1,294)
                                                        =======        =======        =======
 Interest Paid On:
     Savings deposits                                   $  (436)       $   386        $  (822)
     Other time deposits                                   (970)           276         (1,246)
     Other borrowed money                                   331            340             (9)

     Federal funds sold and security
      repurchase agreements                                 139            160            (21)
                                                        -------        -------        -------
                                                        $  (936)       $ 1,162        $(2,098)
                                                        =======        =======        =======


</TABLE>

                                       11

<PAGE>   13



Interest income from fees on loans and leases increased $5.4 million to $42.7
million for 2000 over 1999 interest income on fees and loans of $37.2 million.
This compares with an increase of $901 thousand for 1999 over 1998 interest
income of $36.3 million. The increase for 2000 was primarily due to an increase
in loan activity with some increase coming from an increase in interest rates.

Net interest margin was 4.01% for 2000, 4.11% for 1999 and 3.98% for 1998. While
the industry has experienced some fluctuations in interest rates over the past
year, The Farmers & Merchants State Bank has been able to maintain their
margins.

NONINTEREST INCOME

Noninterest income for 2000 experienced a small increase of $200 thousand over
1999 to $3.3 million for 2000 compared to $3.1 million for 1999 and $4 million
for 1998. The reduction in noninterest income from 1998 to 1999 was primarily in
four categories. Miscellaneous customer service charges were $299 thousand for
1999 compared to $452 thousand for 1998. Mastercard fees dropped $199 thousand
for 1999 to $293 thousand compared to $492 thousand for 1998. Mortgage servicing
rights income was $138 thousand for 1999 compared to $814 thousand for 1998.
Finally, the gain on sale of loans held-for-sale was $116 thousand for 1999,
while gain on sale of loans held-for-sale for 1998 was $477 thousand.

NONINTEREST EXPENSE

Noninterest expenses for 2000 of $14.7 million increased very modestly over 1999
expenses of $14.3 million with employee wages and benefits accounting for the
increase. Noninterest expense for 1998 amounted to $12.9 million. No one
specific noninterest expense category accounted for a significant portion of the
increase in noninterest expenses from 1998 to 1999. Increases were experienced
in all categories as can be seen from the income statement in the shareholders'
report.

FINANCIAL CONDITION

Average earning assets have demonstrated consistent growth over the last three
years. Average earnings assets for 2000 were $583 million compared to $550
million and $522 million for 1999 and 1998, respectively. This growth in average
earnings assets represent a 6 percent and 5.4 percent increase for 2000 and
1999, respectively. Most of this growth has come from increased loan activity.
Average interest bearing liabilities have also showed steady increases rising
$23 million from $394 million for 1998 to $417 million for 1999 and increasing
again $35 million to $452 million for 2000, representing a 5.7 percent increase
for 1999 and a 8.4 percent increase for 2000.

INVESTMENT SECURITIES

Security balances at December 31 are summarized below:


<TABLE>
<CAPTION>

                                                                    (In Thousands)
                                                  -------------------------------------------
                                                  2000              1999              1998
                                                --------          --------          ---------
<S>                                           <C>               <C>               <C>

     U.S. Treasury and Government agencies     $ 61,115          $ 44,921          $ 55,686
     Mortgage-backed securities                   7,863             9,827            35,520
     State and local governments                 32,157            31,246            10,993
     Corporate debt securities                    9,196             9,627            19,115
     Commercial paper                             2,908             7,330            13,648
     Equity securities                               20                20                20
                                               --------          --------          --------
                                               $113,259          $102,971          $134,982
                                               ========          ========          ========

</TABLE>


                                       12

<PAGE>   14




The following table sets forth (dollars in thousands) the maturities of
investment securities at December 31, 2000 and the weighted average yields of
such securities calculated on the basis of cost and effective yields weighted
for the scheduled maturity of each security. Tax-equivalent adjustments, using a
thirty-four percent rate have been made in yields on obligations of state and
political subdivisions. Stocks of domestic corporations have not been included.

<TABLE>
<CAPTION>

                                                                         Maturities
                                                    -----------------------------------------------------
                                                                                    After One Year
                                                         Within One Year           Within Five Years
                                                    -----------------------    --------------------------
                                                       Amount         Yield      Amount       Yield
                                                       ------         -----      ------       -----
       <S>                                          <C>               <C>      <C>           <C>

       U.S. Treasury                                   $ 2,895        6.41%    $ 4,926        5.98%
       U.S. Government agency                           11,495        6.35%     39,716        6.28%
       Mortgage-backed securities                          410        4.46%      1,644        5.54%
       State and local governments                       2,593        5.01%      7,411        4.64%
       Taxable state and local governments                --          0.00%      5,722        6.54%
       Corporate debt securities                         5,205        5.99%      4,046        5.63%
       Commercial paper                                  2,908        6.47%       --          0.00%

<CAPTION>
                                                                        Maturities
                                                    -----------------------------------------------------
                                                         After Five Years
                                                         Within Ten Years           After Ten Years
                                                    -----------------------    --------------------------
                                                       Amount         Yield       Amount      Yield
                                                       ------         -----       ------      -----
       <S>                                          <C>               <C>      <C>           <C>
       U.S. Treasury                                   $  --          0.00%    $  --          0.00%
       U.S. Government agency                            1,329        5.02%       --          0.00%
       Mortgage-backed securities                        4,055        5.62%      1,815        6.21%
       State and local governments                      10,163        4.63%      5,549        5.18%
       Taxable state and local governments                --          0.00%       --          0.00%
       Corporate debt securities                          --          0.00%       --          0.00%
       Commercial paper                                   --          0.00%       --          0.00%

       </TABLE>


At December 31, 2000 the Bank held no large block of any one investment
security, except for U.S. Treasury and other U.S. Government agencies. No one
holding in debt securities exceeded $2.4 million. The Bank did hold stock in the
Federal Home Loan Bank of Cincinnati at a cost of $3 million. This is required
in order to obtain Federal Home Loan Bank Loans.

LOAN PORTFOLIO

The Bank's various loan portfolios are subject to varying levels of credit risk.
Management mitigates these risks through portfolio diversification and through
standardization of lending policies and procedures. The following table shows
the Bank's loan portfolio by category of loan:

       <TABLE>
       <CAPTION>

                                                                         (In Thousands)
                                         ---------------------------------------------------------------------------------
                                            2000              1999              1998              1997             1996
                                         ---------         --------          --------          --------          ---------
       <S>                              <C>               <C>                <C>              <C>               <C>
       Loans:

           Commercial/industrial          $ 96,990          $100,996          $ 81,253          $ 65,633          $ 67,763
           Agricultural                     51,337            46,035            38,882            44,939            41,195
           Real estate mortgage            261,289           237,056           200,675           205,626           195,043
           Installment                      69,081            71,662            68,385            75,767            63,199
           IDB                               8,647             7,015             4,587             4,511             3,670
                                          --------          --------          --------          --------          --------
               Total Loans                $487,344          $462,764          $393,782          $396,476          $370,870
                                          ========          ========          ========          ========          ========
       </TABLE>


                                       13



<PAGE>   15




The following table shows the maturity of loans:

<TABLE>
<CAPTION>

                                                              Maturities (In Thousands)
                                             ------------------------------------------------------------
                                                               After One
                                                 Within       Year Within         After
                                                One Year      Five Years       Five Years       Total
                                             ------------    ------------    -------------   -----------
<S>                                          <C>             <C>             <C>            <C>

    Commercial/industrial/agriculture        $     86,426    $     32,624    $     29,277    $   148,327
    Real estate mortgage                            5,733          14,386         241,170        261,289
    Installment                                    11,367          54,467           2,595         68,429
    Industrial Development Bonds                    2,255           1,102           5,290          8,647

</TABLE>


The following table presents the total of loans due after one year which have 1)
predetermined interest rates and 2) floating or adjustable interest rates:

<TABLE>
<CAPTION>
                                                              (In Thousands)
                                                                After One
                                                                   Year
                                                              -------------
                     <S>                                      <C>

                      Commercial/industrial/agriculture
                         Fixed                                 $  36,890
                         Variable                                 25,011

                      Real estate mortgage
                         Fixed                                    64,150
                         Variable                                191,406

                     Installment
                         Fixed                                    55,784
                         Variable                                  1,278

                     Industrial Development Bonds
                         Fixed                                     6,392
                         Variable                                    -

</TABLE>


The following table summarizes the Company's nonaccrual and past due loans as of
December 31:

<TABLE>
<CAPTION>
                                                      (In Thousands)
                                   ----------------------------------------------------------
                                    2000         1999         1998         1997         1996
                                   ------       ------       ------       ------       ------
     <S>                           <C>          <C>          <C>          <C>         <C>

     Nonaccrual loans              $6,622       $6,504       $6,455       $2,890       $3,489
     Accruing loans past due
        90 days or more             2,577        2,264        1,988        1,396        1,899
                                   ------       ------       ------       ------       ------
          Total                    $9,199       $8,768       $8,443       $4,286       $5,388
                                   ======       ======       ======       ======       ======

</TABLE>

As of December 31, 2000, management, to the best of their knowledge, is not
aware of any significant loans, group of loans or segments of the loan portfolio
not included above, where there are serious doubts as to the ability of the
borrowers to comply with the present loan payment terms.

Although loans may be classified as nonperforming, many continue to pay interest
irregularly or at less than original contractual rates. Interest income which
would have been recorded under the original terms of the nonaccrual loans was
$177 thousand for 2000 and $53 thousand for 1999. Any collections of interest on
nonaccrual loans are included in interest income when collected. This amounted
to $170 thousand for 2000 and $53 for 1999.

                                       14

<PAGE>   16

Loans are placed on nonaccrual status in the event one of the following occurs:
the total line of the customer is charged off to the extent of 50%, the loan is
in past due status for more than 180 days.

The $6.6 million of nonaccrual loans as of December 31, 2000 are secured.

At December 31, 2000 the Bank has $9.2 million of loans which it considers to be
potential problem loans in that the borrowers are experiencing financial
difficulties. These loans are subject to constant management attention and are
reviewed more frequently that quarterly.

The amount of the potential problem loans was considered in management's review
of the loan loss reserve required at December 31, 2000.

In extending credit to families, businesses and governments, banks accept a
measure of risk against which an allowance or reserve for possible loan losses
is established by way of expense charges to earnings. This expense, used to
enlarge a bank's allowance for loan losses, is determined by management based on
a detailed monthly review of the risk factors affecting the loan portfolio,
including general economic conditions, changes in the portfolio mix, past due
loan-loss experience and the financial condition of the bank's borrowers.


At December 31, 2000, the Bank had loans outstanding to individuals and firms
engaged in the various fields of agriculture in the amount of $51 million. The
ratio of this segment of loans to the total loan portfolio is not considered
unusual for a bank engaged in and servicing rural communities.

The allowance for loan losses is evaluated based on an assessment of the losses
inherent in the loan portfolio. This assessment results in an allowance
consisting of two components, allocated and unallocated.

Management considers several different risk assessments in determining the
allowance for loan losses. The allocated component of the allowance for loan
losses reflects expected losses resulting from an analysis of individual loans,
developed through specific credit allocations for individual loans and
historical loss experience for each loan category. For those loans where the
internal credit rating is at or below a predetermined classification and
management can reasonably estimate the loss that will be sustained based upon
collateral, the borrowers operating activity and economic conditions in which
the borrower operates, a specific allocation is made. For those borrowers which
are not currently behind in their payment, but for which management believes
based on economic conditions and operating activities of the borrower, the
possibility exists for future collection problems, a reserve is established. The
amount of reserve allocated to each loan portfolio is based on past loss
experiences, the different levels of risk within each loan portfolio. The
historical loan loss portion is determined using a historical loss analysis by
loan category.

The unallocated portion of the reserve for loan losses is determined based on
management's assessment of general economic conditions as well as specific
economic factors in the Bank's marketing area. This assessment inherently
involves a higher degree of uncertainty. It represents estimated inherent but
undetected losses within the portfolio that are probable due to uncertainties in
economic conditions, delays in obtaining information, including unfavorable
information about a borrower's financial condition and other current risk
factors that may not have yet manifested themselves in the Bank's historical
loss factors used to determine the allocated component of the allowance.

Actual charge-off of loan balances are based upon periodic evaluations of the
loan portfolio by management. These evaluations consider several factors,
including, but not limited to, general economic conditions, financial condition
of the borrower, and collateral.

With the average size of a real estate loan at $156,000, and because the Bank
has not experienced significant losses in the real estate portfolio over the
past several years, and it is not anticipated there will be significant losses
in the future, the portion of the reserve allocated to the real estate portfolio
declined from the previous year.

                                       15


<PAGE>   17

     The following table presents a reconciliation of the allowance for loan
losses:

<TABLE>
<CAPTION>

                                                                          (In Thousands)
                                              --------------------------------------------------------------------
                                                2000           1999           1998            1997          1996
                                              --------       --------       --------       --------       --------
<S>                                           <C>            <C>            <C>            <C>           <C>

Loans                                         $487,344       $462,764       $393,782       $396,476       $370,870
                                              ========       ========       ========       ========       ========
Daily average of outstanding loans            $475,035       $428,087       $408,291       $384,498       $358,261
                                              ========       ========       ========       ========       ========


Allowance for loan losses - January 1         $  6,750       $  5,850       $  5,850       $  5,500       $  5,500
    Loans Charged Off:
         Commercial                                257            185            472            263            623
         Installment                             1,883          1,085          1,260          1,239          1,053
         Real estate mortgages                     233            304             42             29             35
                                              --------       --------       --------       --------       --------
                                                 2,373          1,574          1,774          1,531          1,711
                                              --------       --------       --------       --------       --------
    Loan Recoveries:
         Commercial                                358            493            540            384            197
         Installment                               923            331            339            364            443
         Real estate mortgages                       6             13              3             22              3
                                              --------       --------       --------       --------       --------
                                                 1,287            837            882            770            643
                                              --------       --------       --------       --------       --------
    Net Charge Offs                              1,086            737            892            761          1,068
                                              --------       --------       --------       --------       --------
    Privision for loan loss                      1,496          1,637            892          1,111          1,068
                                              --------       --------       --------       --------       --------
Allowance for loan losses - December 31       $  7,160       $  6,750       $  5,850       $  5,850       $  5,500
                                              ========       ========       ========       ========       ========

</TABLE>


     Allocation of the allowance for loan losses among the various loan
categories is as follows:

<TABLE>
<CAPTION>
                                                                   % of Loans
                                                                     in Each
                                                       Amount      Category To
                                                       (000's)     Total Loans
                                                    ----------     -----------
           <S>                                      <C>            <C>

            Balance at End of Period Applicable To:
                Commercial/industrial               $    4,549       30.99%
                Installment                              1,237       14.43%
                Real estate                                952       54.58%
                Unallocated                                422        0.00%
                                                    ----------    ---------
                                                    $    7,160      100.00%
                                                    ==========    =========

</TABLE>


DEPOSITS

The amount of outstanding time certificates of deposits and other time deposits
in amounts of $100,000 or more by maturity are as follows:


<TABLE>
<CAPTION>

                                                                       Over Six
                                                         Over Three   Less Than       Over
                                      Under              Less Than      Twelve       Twelve
                                    Three Months         Six Months     Months       Months
                                    ------------         ----------    ---------   --------
         <S>                       <C>                   <C>          <C>          <C>

          Time deposits              $   29,786          $   16,405    $   8,040   $  19,314

</TABLE>

                                       16


<PAGE>   18


The following table presents the average amount of and average rate paid on each
deposit category:

<TABLE>
<CAPTION>

                                                  Demand         NOW           Savings       Time
                                                 Deposits      Accounts       Accounts     Accounts
                                                 --------      --------       --------     --------
   <S>                                       <C>              <C>            <C>          <C>


    December 31, 2000:
    ------------------
        Average balance (In thousands)        $   41,211      $  45,753      $  97,922    $ 304,666
        Average rate                               0.00%          2.14%          3.44%        5.77%


    December 31, 1999:
    ------------------
        Average balance (In thousands)        $   43,655      $  61,609      $ 101,506    $ 292,581
        Average rate                               0.00%          2.44%          2.65%        5.32%


    December 31, 1998:
    ------------------
        Average balance (In thousands)        $   38,906      $  44,218      $ 108,981    $ 287,484
        Average rate                               0.00%          2.29%          3.32%        5.76%

</TABLE>


SHORT-TERM BORROWINGS

The Company's average balance of short-term borrowings was less than 30% of end
of year stockholders' equity for each year reported.


RETURN ON ASSETS AND EQUITY

The Company has consistently maintained regulatory capital ratios at or above
the "well capitalized" levels. See Note 16 to the Consolidated Financial
Statements for more information.

Stockholders' equity ended at $65 million for 2000 compared to $57.9 million for
1999, a $7.1 million or 12.3% increase. Dividends for 2000 increased by $.10 per
share to $1.50 compared to $1.40 per share for 1999 and 1998 resulting in the
dividend payout ratios shown in the table below. Management and the Board of
Directors are continually reviewing this ratio. The amount of dividends which
can be paid are subject to regulatory restrictions.

The following table shows consolidated operating and capital ratios of the
Company for each of the last three years:

<TABLE>
<CAPTION>


                                                  2000        1999        1998
                                                  ----        ----        ----
              <S>                                <C>         <C>         <C>

               Return on average assets           1.19%       1.16%       1.38%
               Return on average equity          12.02%      11.95%      14.46%
               Dividend payout ratio             26.38%      26.79%      23.77%
               Equity to assets ratio            10.23%       9.67%       9.45%

</TABLE>

FUNDING

The Company's bank subsidiary continues to follow the strategy of acquiring
assets for investment purposes and retaining its own loan production, attempting
to achieve reasonable spreads through matching such assets with one of a number
of funding sources available.
                                       17

<PAGE>   19

The Farmers & Merchants State Bank functions as a financial intermediary, and as
a result, its financial condition should be examined in terms of trends in its
sources and uses of funds. The following comparison of daily average balances
(in thousands) indicates how the bank has managed its sources and uses of funds.

<TABLE>
<CAPTION>

                                                                      2000
                                                   -------------------------------------------
                                                                           Net Change
                                                    Average       ----------------------------
                                                    Balance         Amount         Percentage
                                                   ---------      ----------       ----------
         <S>                                      <C>            <C>               <C>

          Funding Uses:
              Loans                                $475,035       $ 46,948             10.97%
              Taxable securities                     78,995        (10,839)           -12.07%
              Tax exempt securities                  27,094         (3,012)           -10.00%
              Interest bearing deposits                 100           --                0.00%
              Federal funds sold                      2,021              2              0.10%
                                                   --------       --------
                                                   $583,245       $ 33,099              6.02%
                                                   ========       ========

          Funding Sources:
              Deposits:
                  Noninterest bearing demand       $100,590       $ (9,474)            -8.61%
                  Savings                            97,922           (789)            -0.80%
                  Other time                        304,666          9,290              3.15%
              Other borrowed money                   28,637         12,134             73.53%
              Federal funds purchased
                 agreements to repurchase            20,670         14,541            237.25%
                                                   --------       --------
                                                   $552,485       $ 25,702              4.88%
                                                   ========       ========

</TABLE>
                                       18

<PAGE>   20

<TABLE>
<CAPTION>


                                                            1999                          1998
                                         -----------------------------------------      -------
                                                                Net Change
                                           Average      --------------------------      Average
                                           Balance        Amount        Percentage      Balance
                                         ----------     ---------       ----------      -------
<S>                                      <C>            <C>             <C>           <C>
Funding Uses:
   Loans                                 $428,087       $ 19,796             4.85%    $408,291
   Taxable securities                      89,834         13,954            18.39%      75,880
   Tax exempt securities                   30,106          4,452            17.35%      25,654
   Interest bearing deposits                  100           --               0.00%         100
   Federal funds sold                       2,019        (10,104)          -83.35%      12,123
                                         --------       --------                      --------
                                         $550,146       $ 28,098             5.38%    $522,048
                                         ========       ========                      ========



Funding Sources:
    Deposits:
        Noninterest bearing demand       $110,064       $  9,644             9.60%    $100,420
        Savings                            98,711          9,068            10.12%      89,643
        Other time                        295,376          5,235             1.80%     290,141
    Other borrowed money                   16,503          5,452            49.33%      11,051
    Federal funds purchased and
      agreements to repurchase              6,129          2,853            87.09%       3,276
                                         --------       --------                      --------
                                         $526,783       $ 32,252             6.52%    $494,531
                                         ========       ========                      ========

</TABLE>


LIQUIDITY

Historically, the primary source of liquidity has been core deposits which
include noninterest bearing demand deposits, NOW and money market accounts and
time deposits of individuals. Through marketing efforts and competitive interest
rates, new customers were attracted during 2000 and core deposits increased in
2000. Overall deposits increased $13 million to $516 million for 2000 compared
to deposits at the end of 1999 of $503 million, while deposits at the end of
1999 had demonstrated a decrease of $9 million from 1998 levels of $512 million.

The primary use of new funds is placing the funds back into the community
through loans for the acquisition of new homes, consumer products and for
business development. The use of new funds for loans is measured by the loan to
deposit ratio. The Company's loan to deposit ratio for 2000 was 93% compared to
92.13% for 1999 and 78.33% for 1998.

Short-term debt such as federal funds purchased and securities sold under
agreement to repurchase also provides the Company with liquidity. Short-term
debt was $18.9 million at the end of 2000 compared to $7.3 million at the end of
1999 and $2.9 million at the end of 1998, providing $11.6 million in additional
funds for the Company.

Other borrowings are also a source of funds. Other borrowings consist of loans
from the Federal Home Loan Bank of Cincinnati at fixed rates. These funds are
then used to provide housing mortgages back to the community in the form of
fixed rate loans. Borrowings from this source increased $5.7 million to $30.7
million for 2000 compared to $25 million for 1999 and $11.2 million for 1998.


                                       19



<PAGE>   21

ASSET/LIABILITY MANAGEMENT

The primary functions of asset/liability management are to assure adequate
liquidity and maintain an appropriate balance between interest earning assets
and interest bearing liabilities. It involves the management of the balance
sheet mix, maturities, repricing characteristics and pricing components to
provide an adequate and stable net interest margin with an acceptable level of
risk. Interest rate sensitivity management seeks to avoid fluctuating net
interest margins and to enhance consistent growth of net interest income through
periods of changing interest rates.

Changes in net income, other than volume related, arise when interest rates on
assets reprice in a time frame or interest rate environment that is different
from that of the repricing period for liabilities. Changes in net interest
income also arise from changes in the mix of interest-earning assets and
interest-bearing liabilities.

Historically, The Farmers & Merchants State Bank has maintained liquidity
through cash flows generated in the normal course of business, loan repayments,
maturing earning assets, the acquisition of new deposits, and borrowings. The
Bank's asset and liability management program is designed to maximize net
interest income over the long term while taking into consideration both credit
and interest rate risk.

Interest rate sensitivity varies with different types of interest-earning assets
and interest bearing liabilities. Overnight federal funds on which rates change
daily and loans which are tied to the market rate differ considerably from
long-term investment securities and fixed rate loans. Similarly, time deposits
over $100,000 and money market certificates are much more interest rate
sensitive than passbook savings accounts. The shorter term interest rate
sensitivities are the key to measurement of the interest sensitivity gap, or
excess interest sensitive earnings assets over interest-bearing liabilities.

The following table summarizes the repricing opportunities as of December 31,
2000 for each major category of interest-earning assets (at amortized cost) and
interest-bearing liabilities:

<TABLE>
<CAPTION>




                                             0-90         90-365         1-5            Over 5
                                             Days          Days         Years           Years       Total
                                         ----------     ----------    ---------      ---------    --------
<S>                                      <C>            <C>           <C>            <C>          <C>

Interest bearing deposit                 $    --        $     100     $    --        $    --       $     100
Investment securities                        5,314         19,311        64,248         24,366       113,239
Loans                                      131,003        215,578        90,388         50,375       487,344
                                         ---------      ---------     ---------      ---------     ---------
    Total Rate Sensitive Assets            136,317        234,989       154,636         74,741       600,683
                                         ---------      ---------     ---------      ---------     ---------

Deposits                                   168,195        170,117       178,151           --         516,463
Federal funds purchased and
  agreements to repurchase                  18,903           --            --             --          18,903
Other borrowings                            10,663          2,645        14,671          2,807        30,786
                                         ---------      ---------     ---------      ---------     ---------
    Total Rate Sensitive Liabilities       197,761        172,762       192,822          2,807       566,152
                                         ---------      ---------     ---------      ---------     ---------
Gap                                      $ (61,444)     $  62,227     $ (38,186)     $  71,934     $  34,531
                                         =========      =========     =========      =========     =========
</TABLE>




OTHER MATTERS

Information required by subsections of Item 1, to which no response has been
made, are inapplicable to the business of the Company.

                                       20
<PAGE>   22
PROPERTIES

The principal office of Farmers & Merchants Bancorp, Inc. is located in
facilities owned by The Farmers & Merchants State Bank at 307-11 North Defiance
Street, Archbold, Ohio 43502.

The Farmers & Merchants State Bank operates from and utilizes the entire
facilities at 307-11 North Defiance Street. In addition, the bank owns the
property from 200 to 208 Ditto Street, Archbold, Ohio, which it uses for Bank
parking and a community mini-park area. The Bank owns real estate at two
locations, 207 Ditto Street and 209 Ditto Street in Archbold, Ohio upon which
the bank built a commercial building to be used for storage, and a parking lot
for company vehicles and employee parking.

In late 1993 construction began on a 15,237 square foot addition on an adjacent
lot it owned at 313 North Defiance Street. This addition was substantially
completed by the end of 1994 with final completion taking place in the spring of
1995. Then in 1993 the Bank purchased real estate across from the main
facilities to provide for possible parking expansion.

In 1989 the Bank purchased additional real estate in Bryan, Ohio, and has
established another branch operation in Bryan. The Bank, in 1988, purchased real
estate immediately adjacent to its branch bank premises in Delta, Ohio for
expansion of parking facilities. In 1990 the Bank purchased real estate in
Delta, Ohio for additional parking to serve its branch office. The Bank
constructed in 1994 a 1,540 square foot addition to the branch in Wauseon, Ohio.
The bank obtained permission to open a branch in Napoleon, Ohio. Facilities were
completed in the Spring of 1995. The Bank also owns real estate consisting of
land and buildings housing each of its full service branch operations, except
for the Montpelier, Ohio facilities which are leased. Construction has begun on
permanent facilities for the Montpelier operations and was completed in June of
1998.

The Bank has purchased a parcel of land at 1175 Hotel Drive in Defiance, Ohio
and has commenced building a full service banking center with plans to open
during the third quarter of 2001.
<TABLE>
<CAPTION>
     Branch                                                                          Location
-----------------------------                                              -------------------------------
<S>                                                                        <C>
Archbold, Ohio                                                             1313 South Defiance Street

Wauseon, Ohio                                                              1130 North Shoop Avenue
                                                                           119 North Fulton Street

Stryker, Ohio                                                              300 South Defiance Street

West Unity, Ohio                                                           200 West Jackson Street

Bryan, Ohio                                                                924 W. High Street
                                                                           1000 South Main Street

Delta, Ohio                                                                101 Main Street

Montpelier, Ohio                                                           225 West Main Street
                                                                           1150 East Main Street

Napoleon, Ohio                                                             2255 Scott Street

Swanton, Ohio                                                              7 Turtle Creek Circle
</TABLE>

The majority of the above locations have drive-up service facilities.

LEGAL PROCEEDINGS

There are no material pending legal proceedings, other than ordinary routine
proceedings incidental to the business of the Bank, to which the Bank is a party
or of which any of its properties is the subject.



                                       21

<PAGE>   23

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No items were submitted during the fourth quarter of the fiscal year covered by
this report to a vote of the security holders through solicitation of proxies or
otherwise.

                                     PART II

MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The company's stock is not quoted on the National Association of Securities
Dealers Automated Quotations System (NASDAQ).

The company's stock is traded in the principal market area of Fulton, Williams,
and Henry Counties, Ohio. The company has no broker that sets a price for the
company's stock, therefore, the only source as to the high and low sale price is
from private sales. The high and low sale price known to the company's
management is as follows:
<TABLE>
<CAPTION>
                                                 1st Quarter          2nd Quarter        3rd Quarter          4th Quarter
                                                 -----------          -----------        -----------          -----------
<S>                                              <C>                <C>                 <C>                   <C>
                             2000   High         $   115.00         $   115.00          $   115.00            $   120.00
                                    Low          $    80.00         $    80.00          $    85.00            $    85.00

                             1999   High         $    75.00         $   100.00          $   113.00            $   105.00
                                    Low          $    75.00         $    75.00          $    85.00            $    75.00
</TABLE>

As of March 1, 2001, there were 1,623 record holders of common stock of the
company.

Dividends are paid quarterly. Per share dividends for the years ended 2000 and
1999 are as follows:

<TABLE>
<CAPTION>
                              1st Quarter        2nd Quarter          3rd Quarter        4th Quarter              Total
                              -----------        -----------          -----------        -----------            ---------
<S>                           <C>                <C>                  <C>                <C>                    <C>
         2000                   $.35               $.35                $.35                $.45                    $1.50
         1999                   $.30               $.30                $.30                $.50                    $1.40
</TABLE>

SELECTED FINANCIAL DATA

Selected financial data is presented on pages 60 and 61 of the Annual Report to
shareholders for the year ended December 31, 2000 and are incorporated herein by
reference.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Report of Independent Accountants




                                       22

<PAGE>   24


MESSAGE FROM MANAGEMENT:

Once again, it is with great pride that we report a favorable performance for
the Farmers & Merchants Bancorp, Inc. during the most recent operating year that
ended December 31, 2000. Farmers & Merchants Bancorp, Inc.'s year was
highlighted by strong revenue growth with excellent asset quality, proper
management of interest rates, and control of overhead expenses. This resulted in
12.21 percent Return on Average Equity and 1.18 percent Return on Average
Assets. With a new high in assets of $635,160,000, capital accounts have
increased to $64,988,000 with net income of $7,391,000 or $5.69 per share. Our
continued success can be attributed, in part, to the strength of the economy in
our market area. The results of Farmers & Merchants Bancorp, Inc. in 2000 also
reflect favorably on the professionalism, dedication, and enthusiasm of our
people. Although resources do not show up on the balance sheet, they are
critical to continued success.

The outlook for 2001 at this point is fraught with many opposing variables.
There has been a slowing of the economy with energy prices putting pressure on
the cost of living and inflation. The Federal Reserve has switched their bias of
easing, with two interest rate decreases since the first of the year and a real
possibility of more to come. The Federal Reserve has room to do this given they
have increased rates 1.7% over the last two years. Lower interest rates will
benefit businesses by possible reducing operating costs. If the fixed rates on
mortgages continue to decline, another refinancing boom will help banks maintain
income levels as it did in 1998.

Additional factors that will affect the banking industry are the postal rate
increases along with consumer privacy regulations. Financial institutions spend
a great deal on postage. Developing alternative means of communicating with our
customers, such as the Internet, will be important to help contain costs. As
with the majority of regulations, additional paperwork and increased costs will
result because of the new privacy rules. As a bank, privacy is already an
integral part of our customer relations.

Most technology surveys show more banks establishing websites and offering
Internet banking this coming year. We have also seen Internet banks realizing
the need to establish brick and mortar. By the time you read this, banking on
the Internet at The Farmers & Merchants State Bank will be a realty; however, we
will also continue to expand through brick and mortar. We pride ourselves on our
customer service and the importance of maintaining a personal touch. Our newest
addition will be a branch in Defiance opening in 2001.

2001 will be a challenging year with the many forces playing against each other
in the economy. The one fact we are confident of is that The Farmers & Merchants
State Bank will continue to offer quality financial services to help our
customers maintain a quality life. We have a 103 year track record of solid
performance and don't see that changing. We view the current banking environment
as an opportunity to further solidify strong customer relationships.

We sincerely thank our customers, employees, members of our Boards, the
communities we serve, and you our shareholders for your contributions to our
2000 success and continued loyalty and support. As we move into 2001, all of us
at The Farmers & Merchants State Bank will be working hard to deliver another
year of consistent, quality growth for you. We look forward to reporting our
accomplishments.




Joe E. Crossgrove                                  Eugene D. Bernath
President/CEO                                      Chairman of the Board




                                       23

<PAGE>   25


                                    CONTENTS

                    Audited Consolidated Financial Statements

                        FARMERS & MERCHANTS BANCORP, INC.

                 And wholly owned subsidiaries December 31, 2000


<TABLE>
<S>                                                                                              <C>
Message from Management                                                                          23

Table of Contents                                                                                24

Board of Directors, Advisory Boards and Officers                                                 25 - 27

Independent Auditors' Report                                                                     28

Consolidated Balance Sheets                                                                      29

Consolidated Statements of Income                                                                30

Consolidated Statements of Changes in Shareholders' Equity                                       31

Consolidated Statements of Cash Flows                                                            32

Notes to Consolidated Financial Statements                                                       33 - 53

Independent Auditors' Report on Supplementary Information                                        54

Five Year Summary                                                                                55

Trading Market for the Company's Stock                                                           56

Selected Financial Data by Management                                                            57

Independent Auditors' Report                                                                     58

Management Report                                                                                59

Charts of Selected Highlights                                                                    60 - 61

2000 Promotional Highlights                                                                      62 - 65
</TABLE>




                                       24

<PAGE>   26


<TABLE>
<S>                                <C>                             <C>
DIRECTORS                          MAYNARD SAUDER                  RANDAL H. SCHROEDER
                                   Chairman                        Asst. Vice President
EUGENE D. BERNATH                  Sauder Woodworking Co.          Chief Operations Officer
Chairman of the Board
The Farmers & Merchants            MERLE J. SHORT                  MICHAEL D. CULLER
State Bank                         Farmer                          Asst. Vice President
                                   President                       Chief Agri Finance Officer
DEXTER L. BENECKE                  Promow, Inc.
President                                                          DIANN K. MEYER
Viking Trucking, Inc.              STEVEN J. WYSE                  Asst. Vice President
Vice President                     President                       Human Resource Officer
Alex Products, Inc.                SteelinQ Systems, Inc.
                                                                   KENT E. ROTH
JERRY L. BOYERS                    DIRECTOR EMERITUS               Auditor
President                                                          Security Officer
Edifice Construction               ELIAS H. FREY
Management                         LEE E. GRAFICE                  MARILYN K. JOHNSON
                                   CHARLES E. LUGBILL              Assistant Cashier
JOE E. CROSSGROVE                  JAMES L. PROVOST                Compliance and CRA
President/Chief Executive          KENNETH E. STAMM                Officer
Officer                            ROBERT H. STOTZER
The  Farmers & Merchants           ROBERT V. WHITMER               JUDITH A. WARNCKE
State Bank                                                         Asst. Cashier
                                                                   Marketing Officer
ROBERT G. FREY                     ARCHBOLD MAIN
President                          OFFICE                          J. SCOTT MILLER
E. H. Frey & Sons, Inc.                                            Asst. Cashier
                                   EUGENE D. BERNATH               Agri Finance Officer
JULIAN GIOVARELLI                  Chairman of the Board
President                                                          RUTH ANN DUNN
GIO Sales, Inc.                    JOE E. CROSSGROVE               Asst. Cashier
                                   President                       Loan Documentation
JACK C. JOHNSON                    Chief Executive Officer         Administrator
President
Hawk's Clothing, Inc.              MAYNARD SAUDER                  JANE C. BRUNER
Partner                            Vice President                  Asst. Cashier
REJO Partnership                                                   Operations Supervisor
                                   HAROLD H. PLASSMAN
DEAN E. MILLER                     Vice President                  BRETT J. KAHRS
President                                                          Asst. Cashier
MBC Holdings, Inc.                 EDWARD A. LEININGER             Senior Investment Executive
                                   Executive Vice President
DALE L. NAFZIGER                   Commercial Loan Officer         KELBY J. SCHMUCKER
Vice President                                                     Asst. Cashier
Homestead Ice Cream Co.            REX D. RICE                     Credit Analyst
                                   Executive Vice President
HAROLD H. PLASSMAN                 Chief Lending Officer           LYDIA A. HUBER
Attorney                                                           Executive Administrative
Plassman, Rupp, Hensal &           BARBARA J. BRITENRIKER          Assistant
Short                              Vice President
                                   Comptroller & Chief             ARCHBOLD WOODLAND
ANTHONY J. RUPP                    Financial Officer               OFFICE
President
Rupp Furniture Co.                 GEORGE JELEN                    DEBORAH L. SHINABERY
                                   Asst. Vice President            Asst. Vice President
JAMES C. SANEHOLTZ                 Secondary Market Officer        Branch Manager
President                          Loan Underwriter
Saneholtz-McKarns, Inc.
</TABLE>



                                       25

<PAGE>   27

<TABLE>
<S>                             <C>                                   <C>
DIANE J. SWISHER                WAUSEON ADVISORY                     PATRICIA R. BURKHOLDER
Asst. Cashier                   BOARD                                Assistant Cashier
Asst. Branch Manager                                                 Assistant Branch Manager
                                RICHARD L. ELROD
ARCHBOLD ADVISORY               President
BOARD                           Mustang Corporation                  WEST UNITY ADVISORY
                                                                     BOARD
BRUCE C. LAUBER                 WARREN A. KAHRS
President                       President                            ALVIN E. CAROTHERS
Lauber Manufacturing Co.        Kahrs Tractor Sales, Inc.            Farmer

JO ELLEN HORNISH                JOSEPH H. KOLB                       BEN G. WESTFALL
President                       Owner                                President
Hornish Brothers, Inc.          Kolb & Son                           Westfall Realty, Inc.

GENE SCHAFFNER                  SANDRA K. BARBER                     TED W. MANEVAL
Farmer                          Fulton County Recorder               Farmer
                                Chairman, Ohio Lottery
GEORGE F. STOTZER               Commission                           R. BURDELL COLON
Partner                                                              President
Stotzer Do-It Center            DR. KENNETH H. KLING                 Rup-Col., Inc.
                                Owner
LARRY M. WENDT                  Fulton County Vision Services        CHARLES W. KLINGER
Farmer                                                               Pharmacist
                                                                     Klinger Pharmacy
                                STRYKER OFFICE
WAUSEON SHOOP
OFFICE                          RONALD D. SHORT                      DELTA OFFICE
ALLEN G. LANTZ                  Asst. Vice President
Vice President                  Branch Manager                       CYNTHIA K. KNAUER
Branch Manager                                                       Asst. Vice President
                                PATTI L. ROSEBROCK                   Branch Manager
GLORIA GUNN                     Asst. Cashier
Asst. Vice President            Asst. Branch Manager                 ARTHUR J. SHORT
Asst. Branch Manager                                                 Asst. Branch Manager

JERRY A. BORTON                 STRYKER ADVISORY                     DELTA ADVISORY
Assistant Cashier               BOARD                                BOARD
Agri Finance Officer
                                FRED W. GRISIER                      TERRY J. KAPER
SUSAN DIERINGER                 Owner                                Attorney
Asst. Cashier                   Grisier Funeral Home                 Barber, Kaper, Stamm &
Loan Officer                                                         Robinson
                                RICHARD E. RAKER
                                Owner                                ROBERT E. GILDERS
WAUSEON DOWNTOWN                Raker Oil Company                    Chairman
OFFICE                                                               GB Manufacturing
                                STEVEN PLANSON
CAROL J. ENGLAND                Farmer                               EUGENE BURKHOLDER
Asst. Vice President                                                 President
Branch Manager                  WILLIAM J. BRENNER                   Falor Farm Center
Corporate Secretary             Attorney
                                                                     AL KREUZ
JEAN E. HORWATH                                                      Retired Fulton County
Asst. Cashier                   WEST UNITY OFFICE                    Commissioner
Asst. Branch Manager
                                LEWIS D. HILKERT                     DONALD G. GERDES
                                Vice President                       Human Resource Manager
                                Branch Manager                       Worthington Steel, Delta
</TABLE>




                                       26


<PAGE>   28

<TABLE>
<S>                              <C>                            <C>
BRYAN EAST HIGH                  MONTPELIER WEST                NAPOLEON ADVISORY
OFFICE                           MAIN                           BOARD
                                 OFFICE
DAVID C. FRAZER                                                 BARBARA C. SCHIE
Assistant Vice President         LANCE D. NOFZIGER              Office Manager
Branch Manager                   Asst. Cashier                  Fulton Anesthesia Associates,
                                 Branch Manager                 Inc.
CAROL L. CHURCH
Assistant Cashier                                               DAVID M. DAMMAN
Assistant Branch Manager         MONTPELIER EASTSIDE            Farm Drainage Contractor
                                 OFFICE                         Farmer

SOUTHTOWNE OFFICE                JOHN S. FEE                    JAMES J. VAN POPPEL
                                 Asst. Vice President           President
MICHAEL T. SMITH                 Branch Manager                 Van Poppel Limited
Assistant Cashier
Branch Manager                   GREGORY A. SIMS                DENNIS L. MEYER
                                 Asst. Branch Manager           Realtor
RUTH M. FORD                                                    Reiser Realty
Asst. cashier
Asst. Branch Manager             MONTPELIER ADVISORY
                                 BOARD                          SWANTON OFFICE
RICHARD S. BRUCE
Assistant Vice President         GREGORY D. SHOUP               BARRY N. GRAY
Commercial Loan Officer          President                      Asst. Cashier
                                 Peltcs Lumber Co., Inc.        Branch Manager

BRYAN ADVISORY                   RICHARD S. DYE                 DEBRA J. KAUFFMAN
BOARD                            Probation Department           Asst. Cashier
                                 Bryan Municipal Court          Asst. Branch Manager
RUSTY BRUNICARDI
President                        ROBERT D. MERCER               SWANTON ADVISORY
Chief Executive Officer          President                      BOARD
Community Hospital of            Bob Mercer Realty and
Williams Co., Inc.               Auctions                       ANTHONY G. FRY
                                                                President
D. ROBERT SHAFFER                GEORGE B. RINGS                Select Stone
Farmer                           Pharmacist
                                 Rings Pharmacy                 DANIEL P. MCQUADE
DR. C. NICHOLAS WALZ                                            Attorney
Partner                                                         The McQuades Co., LPA
Williams County Family           NAPOLEON OFFICE
Medical Center                                                  LISA J. MITCHELL
                                 STEPHEN E. JACKSON             Owner/Manager
PAUL R. MANLEY                   Asst. Vice President           Swanton Health Care Center
Process Manager - Frame &        Branch Manager
Panel                                                           NORMAN ZEITER
Sauder Woodworking Co.           DIANA J. DENNIE                President/Owner
                                 Asst.  Cashier                 Swanton Welding Co.
GARRY COURTNEY                   Asst.  Branch Manager
President/CEO
C.F. Electronics                 MICHAEL F. SCHNITKEY
                                 Asst.  Cashier
                                 Agri Finance Officer

                                 GARY W. SPENCER
                                 Asst. Vice President
                                 Commercial Loan Officer
</TABLE>





                                       27

<PAGE>   29





January 10, 2001



Board of Directors
Farmers & Merchants Bancorp, Inc.
Archbold, Ohio

                          INDEPENDENT AUDITORS' REPORT

We have audited the consolidated balance sheets of Farmers & Merchants Bancorp,
Inc. and subsidiaries, Archbold, Ohio, as of December 31, 2000 and 1999 and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for the years ended December 31, 2000, 1999 and 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Farmers
& Merchants Bancorp, Inc. and subsidiaries, as of December 31, 2000 and 1999,
and the results of its consolidated operations and cash flows for the years
ended December 31, 2000, 1999 and 1998 in conformity with generally accepted
accounting principles.



                                                        KROUSE, KERN & CO., INC.
                                                        Fort Wayne, Indiana




                                       28
<PAGE>   30



                        FARMERS & MERCHANTS BANCORP, INC.
                           Consolidated Balance Sheets

                           December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                      ASSETS

                                                                   (In Thousands)
                                                             --------------------------
                                                               2000              1999
                                                             --------          --------
<S>                                                          <C>              <C>
Cash and due from banks                                      $  17,951        $  17,245

Interest bearing deposits with banks                               100              100

Federal funds sold                                                 370                -

Investment securities at market                                113,259          102,971

Federal Home Loan Bank stock                                     2,973            2,764

Loans, less allowance for loan losses of $7,160
    for 2000 and $6,750 for 1999                               479,587          455,535

Loans held for resale                                              328              389

Finance lease receivable                                           730              693

Bank premises and equipment-net                                 10,354           10,176

Accrued interest and other assets                                8,670            7,020

Deferred tax charge                                                838            1,636
                                                             ---------        ---------
TOTAL ASSETS                                                 $ 635,160        $ 598,529
                                                             =========        =========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
    Deposits:

        Demand                                               $  40,729        $  54,051

        NOW accounts                                            52,850           47,919

        Savings                                                110,393          110,059

        Time                                                   312,491          291,137
                                                             ---------        ---------
            Total Deposits                                     516,463          503,166

    Federal funds purchased                                          -            3,090

    Securities sold under agreement to repurchase               18,903            4,253

    Other borrowings                                            30,786           25,039

    Dividend payable                                               585              650

    Accrued interest and other liabilities                       3,435            4,442
                                                             ---------        ---------
            Total Liabilities                                  570,172          540,640
                                                             ---------        ---------
SHAREHOLDERS' EQUITY:
    Common stock, no par value - authorized 1,500,000
      shares; issued  1,300,000 shares                          12,677           12,677

    Undivided profits                                           51,416           45,975

    Accumulated other comprehensive income                         895             (763)
                                                             ---------        ---------
            Total Shareholders' Equity                          64,988           57,889
                                                             ---------        ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                   $ 635,160        $ 598,529
                                                             =========        =========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

                                       29


<PAGE>   31

                        FARMERS & MERCHANTS BANCORP, INC.

                        Consolidated Statements of Income

              for the years ended December 31, 2000, 1999 and 1998
<TABLE>
<CAPTION>
                                                           (In Thousands)(Except for Per Share Amounts)
                                                           --------------------------------------------
                                                                2000           1999            1998
                                                           -------------   ------------    ------------
INTEREST INCOME:
<S>                                                        <C>             <C>            <C>
    Interest and fees on loans                                  $   42,661   $   37,236   $   36,335
    Interest and Dividends on Investment Securities:
        U.S. Treasury and government agency                          3,829        3,754        3,427
        State and local governments                                  1,513        1,645        1,473
        Corporate debt securities                                      544          849          822
        Dividends                                                      209          187          178
    Interest on federal funds sold                                     130          105          648
    Interest on deposits in banks                                        4            3            5
                                                                ----------   ----------   ----------
           Total Interest Income                                    48,890       43,779       42,888
                                                                ----------   ----------   ----------
INTEREST EXPENSE:
    Deposits                                                        22,299       19,776       21,182
    Borrowed funds                                                   3,210        1,374          903
                                                                ----------   ----------   ----------
           Total Interest Expense                                   25,509       21,150       22,085
                                                                ----------   ----------   ----------
           Net Interest Income                                      23,381       22,629       20,803
PROVISION FOR LOAN LOSSES                                            1,496        1,637          892
                                                                ----------   ----------   ----------
NET INCOME AFTER PROVISION
    FOR LOAN LOSS                                                   21,885       20,992       19,911
                                                                ----------   ----------   ----------
OTHER INCOME:
    Service charges on deposit accounts                              1,745        1,524        1,320
    Other service charges and fees                                   1,533        1,574        2,706
    Net securities gains (losses)                                        -           31            -
                                                                ----------   ----------   ----------
           Total Other Income                                        3,278        3,129        4,026
                                                                ----------   ----------   ----------
OTHER EXPENSES:
    Salaries and wages                                               6,542        5,885        5,438
    Pension and other employee benefits                              1,603        1,536        1,394
    Occupancy expense (net)                                            432          542          510
    Furniture and equipment                                          1,178        1,272          981
    Data processing fees                                               758          766          743
    Franchise taxes                                                    772          629          604
    Other operating expense                                          3,369        3,691        3,197
                                                                ----------   ----------   ----------
           Total Other Expenses                                     14,654       14,321       12,867
                                                                ----------   ----------   ----------
INCOME BEFORE INCOME TAXES                                          10,509        9,800       11,070
INCOME TAXES                                                         3,118        3,007        3,413
                                                                ----------   ----------   ----------
NET INCOME                                                      $    7,391   $    6,793   $    7,657
                                                                ==========   ==========   ==========
NET INCOME PER SHARE - BASIC                                    $     5.69   $     5.23   $     5.89
                                                                ==========   ==========   ==========

WEIGHTED AVERAGE SHARES OUTSTANDING                              1,300,000    1,300,000    1,300,000
                                                                ==========   ==========   ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements

                                       30


<PAGE>   32

                        FARMERS & MERCHANTS BANCORP, INC.


           Consolidated Statements of Changes in Shareholders' Equity

              for the years ended December 31, 2000, 1999 and 1998



<TABLE>
<CAPTION>
                                                                                   (In Thousands)
                                                                       -----------------------------------------
                                                                                                    Accumulated
                                                                                                       Other
                                                                         Common      Undivided     Comprehensive
                                                                         Stock       Profits          Income
                                                                       -----------  -----------     ------------
<S>                                                                    <C>          <C>             <C>
BALANCE AT DECEMBER 31, 1997                                            $ 12,677    $ 35,165        $  1,002
    Comprehensive income:
        Net income for 1998                                                   --       7,657              --
        Other comprehensive income net of tax:
            Unrealized gain on Available-For-Sale
              securities (net of tax effect of $345)                          --          --             669
    Cash dividends ($1.40 per share)                                          --      (1,820)             --
                                                                        --------    --------        --------
BALANCE AT DECEMBER 31, 1998                                              12,677      41,002           1,671

    Comprehensive income:
        Net income for 1999                                                   --       6,793              --
        Other comprehensive income net of tax:
            Unrealized loss on Available-For-Sale
              securities (net of tax effect of ($1,253))                      --          --          (2,454)
        Reclassification adjustment (net of tax)                              --          --              20
    Cash dividends ($1.40 per share)                                          --      (1,820)             --
                                                                        --------    --------        --------
BALANCE AT DECEMBER 31, 1999                                              12,677      45,975            (763)
    Comprehensive income:
        Net income for 2000                                                            7,391
        Other comprehensive income net of tax:
            Unrealized gain on Available-For-Sale
              securities (net of tax effect of $853)                                                   1,658
    Cash dividends ($1.50 per share)                                                  (1,950)             --
                                                                        --------    --------        --------
BALANCE AT DECEMBER 31, 2000                                            $ 12,677    $ 51,416        $    895
                                                                        ========    ========        ========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

                                       31
<PAGE>   33
                        FARMERS & MERCHANTS BANCORP, INC.
                      Consolidated Statements of Cash Flows
              for the years ended December 31, 2000, 1999 and 1998
<TABLE>
<CAPTION>
                                                                            (In Thousands)
                                                            ----------------------------------------------
                                                                 2000            1999             1998
                                                            ------------     ------------     ------------
<S>                                                         <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

    Net income                                               $   7,391        $   6,793        $   7,657

    Adjustments to Reconcile Net Income to Net Cash
      Provided by Operating Activities:
        Depreciation                                             1,096            1,243              943
        Amortization of servicing rights                           129              163              307
        Amortization of securities premiums/discounts              222              413              392
        Provision for loan losses                                1,496            1,637              892
        Provision for deferred income taxes                        (55)            (172)              52
        (Gain) loss on sale of other                               (80)            (114)            (447)
        (Gain) loss on sale of securities                         --                (31)            --
        Originations of mortgage loans held for sale           (21,553)         (33,426)        (107,368)
        Proceeds from mortgage loans held for sale              21,727           33,542          107,845
        Net change in other assets/liabilities                  (2,807)             633             (769)
                                                            ------------     ------------     ------------
           Net Cash Provided by Operating Activities             7,566           10,681            9,504
                                                            ------------     ------------     ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of bank premises and equipment                     (1,276)          (1,991)          (2,740)
    Proceeds from sale of bank premises and equipment               15             --               --
    Maturity proceeds of available-for-sale securities          28,427           36,635           22,000
    Sale proceeds of available-for-sale securities                --             17,114             --
    Purchase of available-for-sale securities                  (36,660)         (32,314)         (53,228)
    Net increase in loans and leases                           (25,585)         (57,863)          (9,970)
                                                            ------------     ------------     ------------
           Net Cash Used by Investing Activities               (35,079)         (38,419)         (43,938)
                                                            ------------     ------------     ------------

CASH FLOWS FROM FINANCING ACTIVITIES:

    Net increase in deposits                                    13,297           (9,017)          50,885
    Net change in short-term borrowings                         11,560           19,427              318
    Proceeds from other borrowings                              27,000             --              1,000
    Payments on other borrowings                               (21,253)          (1,201)          (1,053)
    Payment of dividends                                        (2,015)          (1,820)          (1,820)
                                                            ------------     ------------     ------------
           Net Cash Provided by Financing Activities            28,589            7,389           49,330
                                                            ------------     ------------     ------------
           Net Change in Cash and Cash Equivalents               1,076          (20,349)          14,896
CASH AND CASH EQUIVALENTS - January 1                           17,345           37,694           22,798
                                                            ------------     ------------     ------------
CASH AND CASH EQUIVALENTS - December 31                      $  18,421        $  17,345        $  37,694
                                                            ============     ============     ============
RECONCILIATION OF CASH AND CASH EQUIVALENTS:

    Cash and due from banks                                  $  17,951        $  17,245        $  18,549
    Interest bearing deposits                                      100              100              100
    Federal funds sold                                             370             --             19,045
                                                            ------------     ------------     ------------
                                                             $  18,421        $  17,345        $  37,694
                                                            ============     ============     ============
SUPPLEMENTARY CASH FLOWS DISCLOSURES:
    Cash paid during the year for:
        Interest (net of amount capitalized)                 $  25,155        $  21,357        $  22,020
        Income taxes                                             4,334            2,024            3,280
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.



                                       32
<PAGE>   34

                        FARMERS & MERCHANTS BANCORP, INC.

                   Notes to Consolidated Financial Statements


NOTE 1.           SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

                           NATURE OF ACTIVITIES:

                           The consolidated income of Farmers & Merchants
                           Bancorp, Inc. is principally from income of the bank
                           subsidiary, The Farmers & Merchants State Bank. The
                           subsidiary Bank grants agribusiness, commercial,
                           consumer and residential loans to customers primarily
                           in northwest Ohio.

                           CONSOLIDATION POLICY:

                           The 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 life, accident and health
                           insurance company. All material inter-company
                           balances and transactions have been eliminated.

                           ESTIMATES:

                           The preparation of financial statements in conformity
                           with generally accepted accounting principles
                           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. 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.




                                       33
<PAGE>   35


                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


NOTE 1.           SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
                    (Continued)

                           CASH AND CASH EQUIVALENTS:

                           For purposes of the statement of cash flows, the
                           company considers all highly liquid debt instruments
                           purchased with a 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.

                           INVESTMENT SECURITIES:

                           Debt securities are classified as held-to-maturity
                           when the Bank has the positive intent and ability to
                           hold the securities to maturity. Securities
                           held-to-maturity are carried at amortized cost. The
                           amortization of premiums and the accretion of
                           discounts are recognized in interest income using
                           methods approximating the interest method over the
                           period to maturity.

                           Debt securities not classified as held-to-maturity
                           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 individual
                           held-to-maturity and available-for-sale securities
                           below their cost that are other than temporary result
                           in write-downs of the individual securities to their
                           fair value. The related write-downs are included in
                           earnings as realized losses.

                           LOANS:

                           Loans are stated 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 on commercial, installment, and real
                           estate loans is accrued on a daily basis based on the
                           principal outstanding.

                           Generally, a loan (including a loan considered
                           impaired under Statement 114, "Accounting by
                           Creditors for Impairment of a Loan") is classified as
                           nonaccrual and the accrual of interest income is
                           generally discontinued when a loan becomes 90 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.

                           Loans held for resale are valued at the lower of
                           aggregate cost or market, market determined by
                           current market quotations.




                                       34
<PAGE>   36

                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


NOTE 1.           SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
                    (Continued)

                           LOANS (Continued):

                           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. Fees related
                           to standby letters of credit are recognized at the
                           beginning of the commitment period.

                           ALLOWANCE FOR LOAN LOSSES:

                           The allowance for possible loan losses is established
                           through a provision for loan losses charged against
                           income. Loans deemed to be uncollectible and changes
                           in the allowance relating to impaired 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 maintained at a
                           level believed to be adequate by management to absorb
                           probable loan losses inherent in the loan portfolio
                           for on and off balance sheet credit exposure as of
                           the balance sheet dates. Management's evaluation of
                           the adequacy of the allowance is based on the Bank's
                           past loan loss experience, known and inherent risks
                           in the portfolio, adverse situations that may affect
                           the borrowers ability to repay (including the timing
                           of future payments), the estimated value of any
                           underlying collateral, composition of the loan
                           portfolio, current economic conditions, and other
                           relevant factors. Allowances for impaired loans are
                           generally determined based on collateral values or
                           the present value of estimated future cash flows.
                           This evaluation is inherently subjective as it may
                           require material estimates including the amount and
                           timing of future cash flows expected to be received
                           on impaired loans that may be susceptible to
                           significant change.

                           SERVICING ASSETS AND LIABILITIES:

                           It is the Bank's policy to service loans it has sold
                           to FREDDIE MAC. When the Bank undertakes an
                           obligation to service financial assets, it recognizes
                           either a servicing asset or a servicing liability for
                           that servicing contract at its fair market value.
                           Servicing assets and liabilities are to be amortized
                           in proportion to and over the period of estimated net
                           servicing income. The amount of serving assets
                           recognized during 2000 was $111 thousand, while
                           servicing assets amortized during 2000 was $129
                           thousand. Capitalized mortgage servicing rights are
                           included in other assets and totaled $870 thousand
                           and $889 thousand at December 31, 2000 and 1999,
                           respectively. No valuation allowance is required.





                                       35
<PAGE>   37

                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


NOTE 1.           SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
                    (Continued)

                           FINANCE LEASES:

                           Finance leases are recorded at the sum of the minimum
                           lease payments less any executory costs and profit
                           thereon to be paid and any unguaranteed residual
                           value. If the residual is guaranteed, it is included
                           in the minimum lease payments. The difference between
                           the gross investment in the lease and the cost is
                           recorded as unearned income, which is amortized over
                           the lease term by the interest method. The unearned
                           interest is included in the balance sheet as a
                           deduction from the related gross investment, which
                           results in the net investment in the lease.

                           BANK PREMISES AND EQUIPMENT:

                           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 accelerated methods. Costs for
                           maintenance and repairs are charged to operations as
                           incurred. Gains and losses on dispositions are
                           included in current operations.

                           OTHER REAL ESTATE OWNED:

                           Real estate properties acquired through or in lieu of
                           loan foreclosure are initially recorded at the lower
                           of the Bank's carrying amount or fair value less
                           estimated selling cost at the date of foreclosure.
                           Any write-downs based on the asset's fair value at
                           the date of acquisition are charged to the allowance
                           for loan losses. After foreclosure, these assets are
                           carried at the lower of their new cost basis or fair
                           value less cost to sell. Costs of significant
                           property improvements are capitalized, whereas, costs
                           relating to holding the property are expensed. The
                           portion of interest costs relating to the development
                           of real estate are capitalized. Valuations are
                           periodically performed by management, and any
                           subsequent write-downs are recorded as a charge to
                           operations, if necessary, to reduce the carrying
                           value of a property to the lower of its cost or fair
                           value less cost to sell.

                           FAIR VALUE OF FINANCIAL INSTRUMENTS:

                           FASB Statement No. 107, "Disclosures about Fair Value
                           of Financial Instruments", requires disclosure of the
                           fair value information about financial instruments,
                           both assets and liabilities, whether or not
                           recognized in the balance sheet, for which it is
                           practicable to estimate that value. In cases where
                           quoted market prices are not available, fair values
                           are based on estimates using present value or other
                           valuation techniques. Those techniques are
                           significantly affected by assumptions used, including
                           the discount rate and estimates of cash flows. In
                           that regard, the derived fair value estimates cannot
                           be substantiated by comparison to independent markets
                           and, in many cases, could not be realized in
                           immediate settlement of the instrument. FASB
                           Statement No. 107 excludes certain financial
                           instruments and all non-financial instruments from
                           its disclosure requirements. Accordingly, the
                           aggregate fair value amounts presented do not
                           represent the underlying value of the Company.



                                       36
<PAGE>   38

                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


NOTE 1.           SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
                    (Continued)

                           FEDERAL INCOME TAX:

                           Income taxes are provided for the tax effects of the
                           transactions reported in the financial statements and
                           consist of taxes currently due plus deferred taxes
                           related primarily to differences between the basis of
                           the allowance for loan losses and available-for-sale
                           securities. The deferred tax assets and liabilities
                           represent the future tax return consequences of those
                           differences, which will either be taxable or
                           deductible when the assets and liabilities are
                           recovered or settled. Deferred tax assets and
                           liabilities are reflected at income tax rates
                           applicable to the period in which the deferred tax
                           assets or liabilities are expected to be realized or
                           settled. As changes in tax laws or rates are enacted,
                           deferred tax assets and liabilities are adjusted
                           through the provision for income taxes. The Bancorp
                           files consolidated income tax returns with its bank
                           subsidiary.

                           EARNINGS PER SHARE:

                           Basic earnings per share are computed based on the
                           weighted average number of shares of common stock
                           outstanding during each year.

NOTE 2.           CASH AND CASH EQUIVALENTS

                  Banks are required to maintain reserve funds in vault cash
                  and/or on deposit with the Federal Reserve Bank. The aggregate
                  reserves required at December 31, 2000 and 1999 were $4.8
                  million and $5.6 million, respectively.

NOTE 3.           INVESTMENT SECURITIES

                  The amortized cost and estimated market values of investments
                  in securities as of December 31, are detailed below. Fair
                  market values are based on quoted market prices or dealer
                  quotes except for domestic corporations stocks that are
                  recorded at cost.



<TABLE>
<CAPTION>
                                                                           (In Thousands)
                                                        -----------------------------------------------------
                                                                                2000
                                                        -----------------------------------------------------
                                                           Gross          Gross         Gross          Gross
                                                         Amortized     Unrealized     Unrealized       Market
                                                           Cost           Gains         Losses         Value
                                                        -----------   ------------   -------------  ----------
                  <S>                                   <C>           <C>            <C>            <C>
                  Available-for-Sale:
                      U.S. Treasury                      $  7,821      $    100       $   --         $  7,921
                      U.S. Government agency               52,540           778            124         53,194
                      Mortgage-backed securities            7,924             5             66          7,863
                      State and local governments          31,438           771             52         32,157
                      Corporate debt securities             9,251          --               55          9,196
                      Commercial paper                      2,908          --             --            2,908
                      Equity securities                        20          --             --               20
                                                        -----------   ------------   -------------  ----------

                                                         $111,902      $  1,654       $    297       $113,259
                                                        ===========   ============   =============  ==========
</TABLE>

                                       37
<PAGE>   39

                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


NOTE 3.           INVESTMENT SECURITIES (Continued)
<TABLE>
<CAPTION>
                                                                            (In Thousands)
                                                       --------------------------------------------------------
                                                                                 1999
                                                       --------------------------------------------------------
                                                           Gross         Gross         Gross           Gross
                                                         Amortized     Unrealized    Unrealized        Market
                                                           Cost          Gains         Losses          Value
                                                       ------------   ------------   -------------  -----------
                  <S>                                  <C>            <C>            <C>            <C>
                  Available-for-Sale:
                      U.S. Treasury                     $  6,823       $     25       $      6       $  6,842

                      U.S. Government agency              38,840              2            763         38,079

                      Mortgage-backed securities          10,234              2            409          9,827

                      State and local governments         31,075            501            330         31,246

                      Corporate debt securities            9,802           --              175          9,627

                      Commercial paper                     7,330           --             --            7,330

                      Equity securities                       20           --             --               20
                                                        -----------   ------------   -------------  ----------

                                                        $104,124       $    530       $  1,683       $102,971
                                                        ===========   ============   =============  ==========
</TABLE>

                  The gross realized gains and losses for the years ended
                  December 31, are presented below:

<TABLE>
<CAPTION>
                                                                  (In Thousands)
                                                      -------------------------------------
                                                          2000          1999        1998
                                                      -----------   -----------  ----------
                  <S>                                 <C>           <C>          <C>
                  Gross realized gains                 $     --       $    38     $     --
                                                      -----------   -----------  ----------
                  Gross realized losses                      --             7           --
                                                      -----------   -----------  ----------
                      Net Realized Gains(Losses)       $     --       $    31     $     --
                                                      ===========   ===========  ==========
</TABLE>

                  The amortized cost and estimated market value of debt
                  securities at December 31, 2000, by contractual maturity, are
                  shown below. Expected maturities will differ from contractual
                  maturities because borrowers may have the right to call or
                  prepay obligations with or without call or prepayment
                  penalties.


<TABLE>
<CAPTION>
                                                                (In Thousands)
                                                          -------------------------
                                                           Amortized
                                                             Cost       Fair Value
                                                          -----------   -----------
                  <S>                                     <C>           <C>
                  One year or less                         $ 25,486      $  25,513
                  After one year through five years          65,483         66,352
                  After five years through ten years         14,703         14,804
                  After ten years                             6,210          6,570
                                                          -----------   -----------
                      Total                                $111,882      $ 113,239
                                                          ===========   ===========
</TABLE>


                                       38

<PAGE>   40
                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)

NOTE 3.           INVESTMENT SECURITIES (Continued)

                  Investments with a carrying value of $95.4 million and $68.8
                  million at December 31, 2000 and 1999, respectively, were
                  pledged to secure public deposits and securities sold under
                  repurchase agreements.

NOTE 4.           FEDERAL HOME LOAN BANK STOCK

                  The Federal Home Loan Bank stock is recorded at cost. The
                  stock is held as collateral security for all indebtedness of
                  the Bank to the Federal Home Loan Bank.

NOTE 5.           LOANS

                  Loans at December 31, are summarized below:


<TABLE>
<CAPTION>
                                                                      (In Thousands)
                                                               ----------------------------
                  Loans                                           2000             1999
                                                               ------------     -----------
                  <S>                                          <C>              <C>
                     Real estate                                $ 261,289        $ 237,056
                     Commercial and industrial                     96,990          100,996
                     Agricultural (excluding real estate)          51,337           46,035
                     Consumer and other loans                      68,429           71,589
                     Overdrafts                                       652               73
                     Industrial Development Bonds                   8,647            7,015
                                                               ------------     -----------
                                                                  487,344          462,764

                     Less: Deferred loan fees and costs              (597)            (479)
                                                               ------------     -----------
                                                                  486,747          462,285
                     Less: Allowance for loan losses               (7,160)          (6,750)
                                                               ------------     -----------

                         Loans - Net                            $ 479,587        $ 455,535
                                                               ============     ===========
<CAPTION>

                                                                              (In Thousands)
                                                               ---------------------------------------------
                                                                   2000            1999             1998
                                                               ------------     -----------      -----------
<S>                                                          <C>              <C>              <C>
                  Allowance for Loan Losses
                      Balance at beginning of year              $   6,750        $   5,850        $   5,850
                      Provision for loan loss                       1,496            1,637              892
                      Recoveries                                    1,287              837              882
                      Loans charged off                            (2,373)          (1,574)          (1,774)
                                                               ------------     -----------      -----------

                                                                $   7,160        $   6,750        $   5,850
                                                               ============     ===========      ===========
</TABLE>


                                       39
<PAGE>   41


                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


NOTE 5.           LOANS (Continued)

                  As of December 31, 2000 and 1999, the recorded investment in
                  impaired loans amounted to approximately $9.3 and $8.5
                  million, respectively. The average recorded investment in
                  impaired loans amounted to approximately $8.6 million, $6.5
                  million and $4.7 million for 2000, 1999 and 1998,
                  respectively. Of the loans that were considered impaired for
                  2000 and 1999, the recorded investment in impaired loans that
                  have a related allowance determined in accordance with SFAS
                  No. 114 and No. 118 was $6.5 million and $6.3 million,
                  respectively for which the related allowance for loan loss was
                  $3.4 million and $2.8 million, respectively.

                  The Bank stops accruing interest income when a loan is deemed
                  to be impaired, and recognizes interest income when the
                  interest income is actually received. Interest income
                  recognized on impaired loans was $177, $53 and $172 thousand
                  for 2000, 1999 and 1998, respectively.

                  As of December 31, 2000 there were $14 thousand in commitments
                  to lend additional funds to debtors whose loans are not
                  performing.

                  $147.1 million in one to four family residential mortgage
                  loans have been pledged as security for loans the Bank has
                  received from the Federal Home Loan Bank.

                  Senior officers and directors and their affiliated companies
                  were indebted to the Bank in the aggregate of $14.9 and $14.2
                  million at December 31, 2000 and 1999, respectively. All such
                  loans were made on substantially the same terms and
                  conditions, including interest rates and collateral, as those
                  prevailing at the time for comparable loan transactions with
                  other persons. Loans made during 2000 were $24.8 million and
                  repayments were $24.1 million. In the opinion of management,
                  these loans do not involve more than normal risk of
                  collectibility or possess other unfavorable features.

                  Loans for which the Bank is providing collection services is
                  $163.5, $158.2 and $147.9 million for 2000, 1999 and 1998,
                  respectively. Servicing assets recognized during 2000 amounted
                  to $111 thousand and amortization of servicing assets amounted
                  to $129 thousand. The fair value of recognized servicing
                  assets was $1.4 million, fair value being determined by the
                  present value of expected future cash flows. No allowance for
                  impairment has been provided.

                  As of December 31, 2000 there were $4.9 million of undisbursed
                  loans in process.

NOTE 6.           FINANCE LEASE RECEIVABLE

                  Finance leases as of December 31 are as follows:


<TABLE>
<CAPTION>
                                                       (In Thousands)
                                                  ------------------------
                                                      2000         1999
                                                  -----------  -----------
<S>                                               <C>          <C>
                  Gross investment in leases       $     820    $     792
                  Unearned income                        (90)         (99)
                                                  -----------  -----------

                  Finance Lease Receivable         $     730    $     693
                                                  ===========  ===========
</TABLE>




                                       40
<PAGE>   42
                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)



NOTE 6.           FINANCE LEASE RECEIVABLE (Continued)

                  All amounts are considered collectible, and therefore, no
                  allowance has been provided.

NOTE 7.           BANK PREMISES AND EQUIPMENT

                  The major categories of banking premises and equipment and
                  accumulated depreciation at December 31 are summarized below:



<TABLE>
<CAPTION>
                                                                      (In Thousands)
                                                                ---------------------------
                                                                    2000           1999
                                                                -----------     -----------
                  <S>                                           <C>             <C>
                  Land                                           $  2,614        $  1,983

                  Buildings                                         9,349           9,123
                  Furnishings                                       6,390           6,031
                                                                -----------     -----------
                                                                   18,353          17,137

                  Less:  Accumulated depreciation                  (7,999)         (6,961)
                                                                -----------     -----------

                      Banking Premises and Equipment (Net)       $ 10,354        $ 10,176
                                                                ===========     ===========
</TABLE>
NOTE 8.           DEPOSITS

                  Time deposits at December 31 consist of the following:

<TABLE>
<CAPTION>
                                                               (In Thousands)
                                                         -------------------------
                                                            2000           1999
                                                         ----------     ----------
                  <S>                                    <C>            <C>
                  Time deposits under $100,000            $238,946       $223,372

                  Time deposits of $100,000 or more         73,545         67,765
                                                         ----------     ----------

                                                          $312,491       $291,137
                                                         ==========     ==========
</TABLE>

                  For each of the five years subsequent to December 31, 2000,
                  maturities for time deposits having a remaining term of more
                  than one year follows:



<TABLE>
<S>                                                    <C>
                               2001                     $   193,643
                               2002                          45,799
                               2003                          68,189
                               2004                           2,719
                               2005 and thereafter            2,141
                                                       --------------

                                                        $   312,491
                                                       ==============
</TABLE>


                  Deposits to related parties as of December 31, 2000 and 1999
                  amounted to $14.7 million and $11.6 million, respectively.




                                       41
<PAGE>   43
                      FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)






NOTE 9.           REPURCHASE AGREEMENTS

                  The Bank's policy requires qualifying securities as collateral
                  for the underlying repurchase agreements. As of December 31,
                  2000 and 1999 securities with a book value of $25.2 million
                  and $4.5 million, respectively, were underlying the repurchase
                  agreements and were under the Bank's control.

NOTE 10.          OTHER BORROWINGS

                  Other borrowings consisted of the following at December 31:

<TABLE>
<CAPTION>

                                                             (In Thousands)
                                                          --------------------
                                                            2000        1999
                                                          --------    --------
               <S>                                        <C>         <C>
                Federal Home Loan Bank, various
                 loans due in monthly installments
                 of $105 thousand plus annual
                 payments of $400 thousand includ-
                 ing interest at varying rates from
                 5.40% to 7.05%.  Notes are
                 secured by a blanket lien on 100%
                 of the one to four family residential
                 mortgage loan portfolio                  $  30,786   $  25,039
                                                          =========   =========
</TABLE>

                  The following is a schedule by years of future minimum
principal payments as of December 31:

<TABLE>

                               <S>                      <C>
                                 2001                     $  13,308
                                 2002                         6,367
                                 2003                         6,418
                                 2004                         1,153
                                 2005 and thereafter          3,540
                                                          ---------

                                                          $  30,786
                                                          =========
</TABLE>









                                       42


<PAGE>   44

                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


NOTE 11.          FEDERAL INCOME TAXES

                  Deferred tax assets and liabilities at December 31 are
comprised of the following:

<TABLE>
<CAPTION>




                                                               (In Thousands)
                                                            --------------------
                                                              2000        1999
                                                            --------    --------
                <S>                                         <C>         <C>
                   Deferred Tax Assets:

                      Allowance for loan losses             $  2,142    $  2,008
                      Net unrealized loss on available-
                        for-sale securities                        -         392
                                                            --------    --------
                                                               2,142       2,400
                                                            --------    --------

                   Deferred Tax Liabilities:

                      Accreted discounts on bonds                 67          40
                      FHLB stock dividends                       427         356
                      Mortgage servicing rights                  297         302
                      Other                                       52          66
                      Net unrealized gain on available-
                        for-sale securities                      461           -
                                                            --------    --------
                                                               1,304         764
                                                            --------    --------

                          Net Deferred Tax Asset            $    838    $  1,636
                                                            ========    ========
</TABLE>

                  The components of income tax expense for the years ended
December 31 are as follows:

<TABLE>
<CAPTION>

                                                          (In Thousands)
                                                --------------------------------
                                                  2000        1999        1998
                                                --------    --------    --------
                <S>                             <C>         <C>         <C>
                       Current:
                          Federal               $  3,173    $  3,195    $  3,361

                       Deferred:
                          Federal                    (55)       (188)         52
                                                --------    --------    --------

                                                $  3,118    $  3,007    $  3,413
                                                ========    ========    ========
</TABLE>



                                       43


<PAGE>   45



                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)





NOTE 11.          FEDERAL INCOME TAXES (Continued)


<TABLE>
<CAPTION>


                                                  (In Thousands)
                                       --------------------------------------
                                          2000        1999           1998
                                       ---------   ---------      -----------
<S>                                     <C>        <C>            <C>
Income tax at statutory rates           $  3,485   $  3,399       $   3,771
Tax effect:
    Tax exempt interest                     (447)      (468)           (428)
    Costs attributable to tax
      exempt interest                         80         76              70
                                        --------   --------       ---------

                                        $  3,118   $  3,007       $   3,413
                                        ========   ========       =========
</TABLE>




NOTE 12.          RETIREMENT INCOME PLAN

                  The Bank has established a 401(k) profit sharing plan which
                  allows eligible employees to save at a minimum one percent of
                  eligible compensation on a pre-tax basis, subject to certain
                  Internal Revenue Service limitations. The Bank will match 50%
                  of employee 401(k) contributions up to four percent of total
                  eligible compensation. In addition the Bank may make a
                  discretionary contribution from time to time as is deemed
                  advisable. A participant is 100% vested in the participant's
                  deferral contributions and employer matching contributions. A
                  seven year vesting schedule applies to employer discretionary
                  contributions.

                  In order to be eligible to participate, the employee must be
                  21 years of age, completed six months of service, work 1,000
                  hours in the plan year and be employed on the last day of the
                  year. Entry dates have been established at January 1 and July
                  1 of each year.

                  The plan calls for only lump-sum distributions upon either
                  termination of employment, retirement, death or disability.

                  Contributions to the 401(k) profit sharing plan for both the
                  employer matching contribution and the discretionary
                  contribution were $410, $363, and $421 thousand for 2000, 1999
                  and 1998, respectively.

NOTE 13.          RELATED PARTY TRANSACTIONS

                  The Bank has conducted transactions with its officers and
                  directors as set forth in Note 5.

NOTE 14.          COMMITMENTS AND CONTINGENT LIABILITIES

                  The Bank's financial statements do not reflect various
                  commitments and contingent liabilities which arise in the
                  normal course of business and which involve elements of credit
                  risk, interest rate risk and liquidity risk. These commitments
                  and contingent liabilities are commitments to extend credit,
                  credit card arrangements and standby letters of credit. A
                  summary of the Bank's commitments and contingent liabilities
                  at December 31, 2000 and 1999 is as follows:







                                       44
<PAGE>   46


                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


NOTE 14.          COMMITMENTS AND CONTINGENT LIABILITIES (Continued)

<TABLE>
<CAPTION>


                                      (In Thousands)
                                  ----------------------
                                    2000         1999
                                  ---------   ----------
<S>                               <C>          <C>
Commitments to extend credit      $  74,745    $  83,344
Credit card arrangements             19,515       12,163
Standby letters of credit               898        1,531

</TABLE>

                  Commitments to extend credit, credit card arrangements and
                  standby letters of credit all include exposure to some credit
                  loss in the event of nonperformance of the customer. The
                  Bank's credit policies and procedures for credit commitments
                  and financial guarantees are the same as those for extensions
                  of credit that are recorded in the financial statements.
                  Because these instruments have fixed maturity dates, and
                  because many of them expire without being drawn upon, they
                  generally do not present any significant liquidity risk to the
                  Bank.

                  In the ordinary course of business, the company at times, is
                  subject to pending and threatened legal actions and
                  proceedings. It is the opinion of management that the outcome
                  of any such matters and proceedings would not have a material
                  effect on the financial position of the company.

NOTE 15.          FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

                  All of the Bank's loans, commitments, and standby letters of
                  credit have been granted to customers in the Bank's market
                  area of northwest Ohio. All such customers are depositors of
                  the Bank. Also, investments in state and municipal securities
                  may involve governmental entities within the Bank's market
                  area. The concentrations of credit by type of loan are set
                  forth in Note 5. Standby letters of credit were granted
                  primarily to commercial borrowers.

NOTE 16.          REGULATORY CAPITAL REQUIREMENTS

                  The Bank is subject to various regulatory capital requirements
                  administered by its primary federal regulator, the Federal
                  Deposit Insurance Corporation (FDIC). Failure to meet the
                  minimum regulatory requirements can initiate certain
                  mandatory, and possible additional discretionary actions by
                  regulators, that if undertaken, could have a direct material
                  effect on the Bank and the consolidated financial statements.
                  Under the regulatory capital adequacy guidelines and the
                  regulatory framework for prompt corrective action, the Bank
                  must meet specific capital guidelines involving quantitative
                  measures of the Bank's assets, liabilities, and certain
                  off-balance-sheet items as calculated under regulatory
                  accounting practices. The Bank's capital amounts and
                  classification under the prompt corrective action guidelines
                  are also subject to qualitative judgements by the regulators
                  about components, risk weightings, and other factors.

                  Quantitative measures established by regulation to ensure
                  capital adequacy require the Bank to maintain minimum amounts
                  and ratios of: total risk-based capital and Tier I capital to
                  risk-weighted assets (as defined in the regulations), and Tier
                  I capital to adjusted total assets (as defined). Management
                  believes, as of December 31, 2000, that the Bank meets all the
                  capital adequacy requirements to which it is subject.








                                       45
<PAGE>   47



                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


NOTE 16.          REGULATORY CAPITAL REQUIREMENTS (Continued)

                  As of December 31, 2000 the most recent notification from the
                  FDIC indicated the Bank was categorized as well capitalized
                  under the regulatory framework for prompt corrective action.
                  To remain categorized as well capitalized, the Bank will have
                  to maintain minimum total risk-based, Tier I risk-based, and
                  Tier I leverage ratios as disclosed in the table below. There
                  are no conditions or events since the most recent notification
                  that management believes have changed the Bank's prompt
                  corrective action category.

                  The Bank's actual and required capital amounts and ratios as
                  of December 31, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>


                                                                                      To Be Well Capitalized
                                                                                          Under the Prompt
                                                                 For Capital             Corrective Action
                                               Actual        Adequacy Purposes(a)          Provisions(a)
                                         ------------------  --------------------   -------------------------
                                           (000's)             (000's)                 (000's)
                                           Amount    Ratio     Amount      Ratio       Amount        Ratio
                                         ---------  -------  ----------  --------   ------------  -----------
<S>                                      <C>        <C>      <C>         <C>        <C>          <C>
        As of December 31, 2000

        Total Risk-Based Capital
          (to Risk Weighted Assets)
           Consolidated                  $  69,581    15.6%   $  35,680     8.0%     $      -        N/A
           Farmers & Merchants
             State Bank                     69,199    14.6%      37,920     8.0%       47,400       10.0%
        Tier I Capital
          (to Risk Weighted Assets)
           Consolidated                     63,977    14.3%      17,900     4.0%                     N/A
           Farmers & Merchants
             State Bank                     53,274    11.3%      18,860     4.0%       28,290        6.0%
        Tier I Capital
          (to Adjusted Total Assets)
           Consolidated                     63,977    10.2%      25,090     4.0%                     N/A
           Farmers & Merchants
             State Bank                     53,274     8.5%      25,070     4.0%       31,340        5.0%
</TABLE>



                                       46

<PAGE>   48



                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


NOTE 16.          REGULATORY CAPITAL REQUIREMENTS (Continued)

<TABLE>
<CAPTION>

                                                                                             To Be Well Capitalized
                                                                                                 Under the Prompt
                                                                          For Capital           Corrective Action
                                                       Actual         Adequacy Purposes(a)        Provisions(a)
                                                 -----------------    --------------------   ----------------------
                                                   (000's)              (000's)               (000's)
                                                   Amount   Ratio       Amount     Ratio       Amount     Ratio
                                                 --------- --------   ---------  ---------   ----------  ----------

<S>                                              <C>       <C>        <C>        <C>         <C>         <C>

                As of December 31, 1999

                Total Risk-Based Capital
                  (to Risk Weighted Assets)
                    Consolidated                 $  63,970    14.8%    $  34,580     8.0%     $      -     N/A

                    Farmers & Merchants
                     State Bank                     63,554    13.9%       36,580     8.0%       45,720    10.0%

                Tier I Capital
                 (to Risk Weighted Assets)
                   Consolidated                     58,563    13.6%       17,220     4.0%                  N/A

                   Farmers & Merchants
                    State Bank                      47,833    10.5%       18,220     4.0%       27,330     6.0%

                Tier I Capital
                 (to Adjusted Total Assets)
                   Consolidated                     58,563     9.9%       23,660     4.0%                  N/A

                   Farmers & Merchants
                    State Bank                      47,833     8.1%       23,620     4.0%       29,530     5.0%
</TABLE>



                (a)  The amount and ratios provided are minimums under the
                     regulations.

                  The Bank is restricted as to the amount of dividends which can
                  be paid. Dividends declared by the Bank that exceed the net
                  income for the current year plus retained income for the
                  preceding two years must be approved by federal and state
                  regulatory agencies. Under this formula dividends of $16.6
                  million may be paid without prior regulatory approval.
                  Regardless of formal regulatory restrictions, the Bank may not
                  pay dividends that would result in its capital levels being
                  reduced below the minimum requirements shown above.

NOTE 17.          FAIR VALUE INFORMATION AND INTEREST RATE RISK

                  Fair values of financial instruments are management's estimate
                  of the values at which the instruments could be exchanged in a
                  transaction between willing parties. These estimates are
                  subjective and may vary significantly from amounts that would
                  be realized in actual transactions. In addition, other
                  significant assets are not considered financial assets
                  including deferred tax assets, premises and equipment and
                  intangibles. Further, the tax ramifications related to the
                  realization of the unrealized gains and losses can have a
                  significant effect on the fair value estimates and have not
                  been considered in any of the estimates.


                                       47



<PAGE>   49


                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)



NOTE 17.          FAIR VALUE INFORMATION AND INTEREST RATE RISK (Continued)

                  The book values and estimated fair values for on and
                  off-balance sheet financial instruments as of December 31,
                  2000 and 1999 are reflected below:

<TABLE>
<CAPTION>


                                                                     (In Thousands)
                                                   ----------------------------------------------------
                                                            2000                          1999
                                                   -----------------------    -------------------------
                                                       Book        Fair          Book          Fair
                                                       Value       Value         Value         Value
                                                   -----------  ----------    ------------  -----------
<S>                                                <C>          <C>           <C>          <C>

                Financial Assets:

                    Cash and cash equivalents        $  17,951   $  17,951     $  17,245    $  17,245
                    Interest bearing deposits              100         100           100          100
                    Federal funds sold                     370         370             -
                    Available-for-sale securities      113,259     113,259       102,971      102,971
                    Federal Home Loan Bank               2,973       2,973         2,764        2,764
                    Net loans                          480,645     492,595       456,617      459,540
                    Interest receivable                  5,077       5,077         5,077        5,077


                Financial Liabilities:

                    Deposits                         $ 516,463   $ 518,648     $ 503,166    $ 502,220
                    Short-term borrowings:
                     Federal funds purchased                 -           -         3,090        3,090
                     Repurchase agreement sold          18,903      18,903         4,253        4,253
                    Other borrowings                    30,786      31,313        25,039       24,976
                    Interest payable                     1,784       1,784         1,784        1,784
</TABLE>


                The following assumptions and methods were used in estimating
                the fair value for financial instruments:

                           CASH AND SHORT-TERM INVESTMENTS:

                           The carrying amounts reported in the balance sheet
                           for cash and due from banks and federal funds sold
                           approximate their fair values.

                           INVESTMENT SECURITIES:

                           Fair values for securities are based on quoted market
                           prices, where available. If quoted prices are not
                           available, fair values are based on quoted market
                           prices of comparable instruments.

                           STOCK IN FEDERAL HOME LOAN BANK:

                           No ready market exists for the stock, and it has no
                           quoted market value. The stock is redeemable at par;
                           therefore, fair value equals cost.


                                       48


<PAGE>   50

                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


NOTE 17.          FAIR VALUE INFORMATION AND INTEREST RATE RISK (Continued)

                           LOANS:

                           Most commercial and real estate mortgage loans are
                           made on a variable rate basis. For those
                           variable-rate loans that reprice frequently, and with
                           no significant change in credit risk, fair values are
                           based on carrying values. The fair values of the
                           fixed rate and all other loans are estimated using
                           discounted cash flow analysis, using interest rates
                           currently being offered for loans with similar terms
                           to borrowers with similar credit quality.

                           DEPOSITS:

                           The fair values disclosed for deposits with no
                           defined maturities are equal to their carrying
                           amounts, which represent the amount payable on
                           demand. The carrying amounts for variable-rate,
                           fixed-term money market accounts and certificates of
                           deposit approximate their fair value at the reporting
                           date. Fair value for fixed-rate certificates of
                           deposit are estimated using a discounted cash flow
                           analysis that applies interest rates currently being
                           offered on certificates to a schedule of aggregated
                           expected monthly maturities on time deposits.

                           BORROWINGS:

                           Short-term borrowings are carried at cost which
                           approximates fair value. Other long-term debt was
                           generally valued using a discounted cash flows
                           analysis with a discounted rate based on current
                           incremental borrowing rates for similar types of
                           arrangements, or if not available, based on an
                           approach similar to that used for loans and deposits.
                           Long-term borrowings include their related current
                           maturities.

                           ACCRUED INTEREST RECEIVABLE AND PAYABLE:

                           The carrying amounts of accrued interest approximate
                           their fair values.

                           INTEREST RATE RISK:

                           The Company assumes interest rate risk (the risk that
                           general interest rate levels will change) as a result
                           of its normal operations. As a result, the fair
                           values of the Company's financial instruments will
                           change when interest rate levels change and that
                           change may be either favorable or unfavorable to the
                           Company. Management attempts to match maturities of
                           assets and liabilities to the extent believed
                           necessary to minimize interest rate risk. However,
                           borrowers with fixed rate obligations are more likely
                           to prepay in a falling rate environment and less
                           likely to prepay in a rising rate environment.
                           Conversely, depositors who are receiving fixed rates
                           are more likely to withdraw funds before maturity in
                           a rising rate environment and less likely to do so in
                           a falling rate environment. Management monitors rates
                           and maturities of assets and liabilities and attempts
                           to minimize interest rate risk by adjusting terms of
                           new loans and deposits and by investing in securities
                           with terms that mitigate the Company's overall
                           interest rate risk.


                                       49

<PAGE>   51


                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


NOTE 18.          FARMERS & MERCHANTS BANCORP, INC. (PARENT COMPANY ONLY)
                  FINANCIAL INFORMATION



                                 BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                       (In Thousands)
                                                                                   -----------------------
                                                                                      2000        1999
                                                                                   ---------   -----------
<S>                                                                                 <C>         <C>
                ASSETS:

                    Cash                                                            $    706    $    669
                    Related party receivables:
                      Dividends                                                          300         350
                      Note receivable                                                 10,000      10,000
                    Investment in subsidiaries                                        54,741      47,696
                                                                                    --------    --------

                TOTAL ASSETS                                                        $ 65,747    $ 58,715
                                                                                    ========    ========

                LIABILITIES:

                    Accrued expenses                                                $    174    $    176
                    Dividends payable                                                    585         650
                                                                                    --------    --------
                        Total Liabilities                                                759         826
                                                                                    --------    --------

                SHAREHOLDERS' EQUITY:

                    Common stock, no par value -
                      1,500,000 shares authorized; 1,300,000 shares issued            12,677      12,677
                    Undivided profits                                                 51,416      45,975
                    Accumulated other comprehensive income                               895        (763)
                                                                                    --------    --------
                        Total Shareholders' Equity                                    64,988      57,889
                                                                                    --------    --------

                TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                          $ 65,747    $ 58,715
                                                                                    ========    ========
</TABLE>




                                       50

<PAGE>   52

                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


NOTE 18.          FARMERS & MERCHANTS BANCORP, INC. (PARENT COMPANY ONLY)
                  FINANCIAL INFORMATION (Continued)

                              STATEMENTS OF INCOME
<TABLE>
<CAPTION>

                                                                           (In Thousands)
                                                                 ---------------------------------
                                                                    2000        1999       1998
                                                                 ----------   ---------  ---------
<S>                                                               <C>         <C>         <C>
                INCOME:
                    Equity in net income of subsidiaries          $  7,055    $  6,451    $  7,313
                    Interest income                                    600         600         600
                                                                  --------    --------    --------
                        Total Income                                 7,655       7,051       7,913
                                                                  --------    --------    --------

                EXPENSES:
                    Miscellaneous                                       23          14          19
                    Professional fees                                   17          18          16
                    Supplies                                             7           6           6
                    Taxes                                               43          44          39
                                                                  --------    --------    --------
                        Total Expense                                   90          82          80
                                                                  --------    --------    --------

                INCOME BEFORE INCOME TAXES                           7,565       6,969       7,833

                INCOME TAXES                                           174         176         176
                                                                  --------    --------    --------

                NET INCOME                                        $  7,391    $  6,793    $  7,657
                                                                  ========    ========    ========
</TABLE>




                                       51

<PAGE>   53

                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)



NOTE 18.          FARMERS & MERCHANTS BANCORP, INC. (PARENT COMPANY ONLY)
                  FINANCIAL INFORMATION (Continued)

                  STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                                  (In Thousands)
                                                                   ----------------------------------------
                                                                                                Accumulated
                                                                                                   Other
                                                                        Common    Undivided    Comprehensive
                                                                        Stock     Profits          Income
                                                                   ------------  ------------  -------------
<S>                                                                <C>           <C>           <C>
                BALANCE AT DECEMBER 31, 1997                        $   12,677    $   35,165     $   1,002
                   Comprehensive income:
                    Net income for 1998                                      -         7,657             -
                    Other comprehensive income net of tax:
                        Unrealized gain on Available-For-Sale
                          securities (net of tax effect of $345)             -             -           669
                   Dividends ($1.40 per share)                               -        (1,820)            -
                                                                    ----------    ----------     ---------
                BALANCE AT DECEMBER 31, 1998                            12,677        41,002         1,671
                   Comprehensive income:
                    Net income for 1999                                      -         6,793             -
                    Other comprehensive income net of tax:
                        Unrealized loss on Available-For-Sale
                          securities (net of tax effect of ($1,253))         -             -        (2,454)
                    Reclassification adjustment (net of tax)                                            20
                   Dividends ($1.40 per share)                               -        (1,820)            -
                                                                    ----------    ----------     ---------
                BALANCE AT DECEMBER 31, 1999                            12,677        45,975          (763)
                   Comprehensive income:
                    Net income for 2000                                      -         7,391             -
                    Other comprehensive income net of tax:
                        Unrealized loss on Available-For-Sale
                          securities (net of tax effect of $853)             -             -         1,658
                   Dividends ($1.50 per share)                               -        (1,950)            -
                                                                    ----------    ----------     ---------

                BALANCE AT DECEMBER 31, 2000                        $   12,677    $   51,416     $     895
                                                                    ==========    ==========     =========
</TABLE>





                                       52
<PAGE>   54
                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)



NOTE 18.          FARMERS & MERCHANTS BANCORP, INC. (PARENT COMPANY ONLY)
                    FINANCIAL INFORMATION (Continued)


                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                       (In Thousands)
                                                                           ---------------------------------------
                                                                              2000           1999          1998
                                                                           ----------     ----------     ---------
                  <S>                                                      <C>            <C>            <C>
                  CASH FLOWS FROM OPERATING ACTIVITIES:
                      Net income                                            $ 7,391        $ 6,793        $ 7,657
                      Adjustments to Reconcile Net Income
                        to Net Cash Provided by Operating Activities:
                          Equity in undistributed net income
                            of subsidiaries                                  (7,055)        (6,451)        (7,313)
                          Changes in Operating Assets and
                            Liabilities:
                             Accrued expenses                                    (2)          (178)           175
                                                                           ----------     ----------     ---------
                                  Net Cash Provided by
                                    Operating Activities                        334            164            519
                                                                           ----------     ----------     ---------
                  CASH FLOWS FROM INVESTING ACTIVITIES:
                      Dividends from wholly-owned subsidiaries                1,718          1,640          1,170
                                                                           ----------     ----------     ---------
                  CASH FLOWS FROM FINANCING ACTIVITIES:
                      Payment of dividends                                   (2,015)        (1,820)        (1,820)
                                                                           ----------     ----------     ---------
                                 Net Change in Cash and
                                   Cash Equivalents                              37            (16)          (131)

                  CASH AND CASH EQUIVALENTS -

                    beginning of year                                           669            685            816
                                                                           ----------     ----------     ---------
                  CASH AND CASH EQUIVALENTS -

                    END OF YEAR                                             $   706        $   669        $   685
                                                                           ==========     ==========     =========

</TABLE>



                                       53
<PAGE>   55



January 10, 2001



Board of Directors
Farmers & Merchants Bancorp, Inc.
Archbold, Ohio

                         INDEPENDENT AUDITORS' REPORT ON
                            SUPPLEMENTARY INFORMATION

Our report on our audits of the basic financial statements of Farmers &
Merchants Bancorp, Inc., Archbold, Ohio, and its wholly-owned subsidiaries, The
Farmers & Merchants State Bank and Farmers & Merchants Life Insurance Company
for the years ended December 31, 2000 and 1999, appears on page 6. The
examination was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The five year summary of operations is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.



                                          KROUSE, KERN & CO., INC.
                                          Fort Wayne, Indiana





                                       54
<PAGE>   56

                        FARMERS & MERCHANTS BANCORP, INC.

                  Five Year Summary of Consolidated Operations
<TABLE>
<CAPTION>
                                                                    (In Thousands Except for Per Share Amounts)
                                       -----------------------------------------------------------------------------------------
                                            2000               1999               1998               1997               1996
                                       -------------      -------------      -------------      -------------      -------------
<S>                                    <C>                <C>                <C>                <C>                <C>
Summary of Income:

   Interest income                      $    48,890        $    43,779        $    42,888        $    40,158        $    38,382

    Interest expense                         25,509             21,150             22,085             21,139             20,905
                                       -------------      -------------      -------------      -------------      -------------
        Net Interest Income                  23,381             22,629             20,803             19,019             17,477
Provision for loan losses                     1,496              1,637                892              1,111              1,068
                                       -------------      -------------      -------------      -------------      -------------
Net interest income after
  provision for loan losses                  21,885             20,992             19,911             17,908             16,409

Other income (expense)                      (11,376)           (11,192)            (8,841)            (8,096)            (8,614)
                                       -------------      -------------      -------------      -------------      -------------
Net income before income taxes               10,509              9,800             11,070              9,812              7,795

Income taxes                                  3,118              3,007              3,413              3,035              2,312
                                       -------------      -------------      -------------      -------------      -------------

Net income                              $     7,391        $     6,793        $     7,657        $     6,777        $     5,483
                                       =============      =============      =============      =============      =============

Per Share of Common Stock:
    Earnings per common share
      outstanding:
        (Based on weighted
         average number of
         shares outstanding)
        (All per share amounts
          have been retroactively
         restated to reflect a
         5 for 1 stock split in
         1996)
            Net income                  $      5.69        $      5.23        $      5.89        $      5.22        $      4.22
           Dividends                    $      1.50        $      1.40        $      1.40        $      1.25        $      1.15
           Weighted average
              number of shares
              outstanding                 1,300,000          1,300,000          1,300,000          1,300,000          1,300,000

Year-end assets                         $   635,160        $   598,529        $   585,869        $   528,273        $   501,449
Average assets                              619,075            585,189            553,277            510,163            482,770
Year-end equity capital                      64,988             57,889             55,350             48,844             43,381
Average equity capital                       61,488             56,862             52,940             46,548             41,501
</TABLE>


See Independent Auditors' Report on Supplementary Information.



                                       55
<PAGE>   57
                        FARMERS & MERCHANTS BANCORP, INC.


                     Trading Market for the Company's Stock



The Company's stock is not actively traded on any exchange. The range and sales
prices, based upon information that the Company has been made aware, are listed
below:

<TABLE>
<CAPTION>
                                                                                        Stock Prices
                                                                     --------------------------------------------------
                                                                     Quarter               Low                  High
                                                                     -------            ----------           ----------
<C>                                                                  <C>                <C>                  <C>
2000-- by quarter                                                      1st              $   80.00            $  115.00
                                                                       2nd                  80.00               115.00
                                                                       3rd                  85.00               115.00
                                                                       4th                  85.00               120.00

1999-- by quarter                                                      1st              $   75.00            $   75.00
                                                                       2nd                  75.00               100.00
                                                                       3rd                  85.00               113.00
                                                                       4th                  75.00               105.00
</TABLE>

Dividends declared on a quarterly basis for the last two fiscal years:

<TABLE>
<CAPTION>
                                                                     Quarter               2000                 1999
                                                                     -------            ----------           -----------
<S>                                                                  <C>                <C>                  <C>
Dividends declared per share
                                                                       1st                $   .35               $  .30
                                                                       2nd                    .35                  .30
                                                                       3rd                    .35                  .30
                                                                       4th                    .45                  .50
</TABLE>






                                       56
<PAGE>   58
                      SELECTED FINANCIAL DATA BY MANAGEMENT



FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Farmers & Merchants Bancorp, Inc. has again continued its consistent pattern
of solid income and asset growth. Interest income increased in 2000 for the
Company from $43.8 million for 1999 to $48.9 million for 2000, an 11.6%
increase. The loan portfolio grew to $487.8 million for 2000 up from $463.4
million for 1999, a 5.3% increase, while at the same time net interest income
increased from $22.6 million for 1999 to $23.4 million for 2000 a 3.3% increase.
As a result of the above growth and management working hard to hold down
overhead expenses, net income for 2000 increased $600 over 1999 from $6.8
million for 1999 to $7.4 million for 2000 an 8.8% increase.

LIQUIDITY:

Maintaining sufficient funds to meet depositor and borrower needs on a daily
basis are among management's top priorities. This is accomplished by investing
in assets such as U. S. Government, U. S. Agency, Municipal, and Corporate
investment securities and Commercial Paper which can be converted to cash in a
timely manner, as well as, maintaining appropriate levels of cash. The average
aggregate balance of these assets was $103.2 million for 2000 representing 16.7%
of total average assets.

CAPITAL RESOURCES:

Shareholders' equity was $65 million at December 31, 2000 compared to $57.9
million for 1999. The company continues to have a strong capital base and its
bank subsidiary The Farmers & Merchants State Bank continues to maintain
regulatory capital ratios that are significantly above the defined regulatory
capital ratios.

At December 31, 2000, The Farmers & Merchants State Bank had a total risk-based
capital ratio of 14.6% and a 11.3% core capital to risk-based asset ratio which
are well in excess of regulatory guidelines. The bank's leverage ratio of 8.5%
is also substantially in excess of regulatory guidelines. These ratios compare
to 13.9%, 10.5% and 8.1%, respectively for 1999.

The Company's subsidiaries are restricted by regulations from making dividend
distributions in excess of certain prescribed amounts.




                                       57
<PAGE>   59
January 10, 2001



To the Board of Directors
The Farmers & Merchants State Bank
Archbold, Ohio

                          INDEPENDENT AUDITORS' REPORT

We have examined management's assertion that The Farmers & Merchants State Bank
maintain a system of internal control over financial reporting which is designed
to provide reasonable assurance to the Bank's management and Board of Directors
regarding the preparation of reliable published financial statements as of
December 31, 2000, included in the accompanying management report.

Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
obtaining an understanding of the internal control structure over financial
reporting, testing and evaluating the design and operating effectiveness of the
internal control structure, and such other procedures as we considered necessary
in the circumstances. We believe that our examination provides a reasonable
basis for our opinion.

Because of inherent limitations in any internal control structure, errors or
irregularities may occur and not be detected. Also, projections of any
evaluation of the internal control structure over financial reporting to future
periods are subject to the risk that the internal control structure may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, management's assertions that The Farmers & Merchants State Bank
maintained a system of internal control over financial reporting which is
designed to provided reasonable assurance to the Bank's management and Board of
Directors regarding the preparation of reliable published financial statements
as of December 31, 2000, is fairly stated, in all material respects, based upon
criteria established in "Internal Control - Integrated Framework" issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).



                                           KROUSE, KERN & CO., INC.
                                           Fort Wayne, Indiana




                                       58
<PAGE>   60
                                MANAGEMENT REPORT
                             as of December 31, 2000




FINANCIAL STATEMENTS

Management of The Farmers & Merchants State Bank is responsible for the
preparation, integrity and fair presentation of its published financial
statements as of December 31, 2000, and for the year then ended. The financial
statements have been prepared in accordance with generally accepted accounting
principles and, as such, include amounts, some of which are based on judgments
and estimates of management.

INTERNAL CONTROLS

Management is responsible for establishing and maintaining an effective internal
control structure over financial reporting. The system contains monitoring
mechanisms, and actions are taken to correct deficiencies identified.

There are inherent limitations in the effectiveness of any system of internal
control, including the possibility of human error and the circumvention or
overriding of controls. Accordingly, even an effective internal control system
can provide only reasonable assurance with respect to financial statement
preparation. Further, because of changes in conditions, the effectiveness of an
internal control system may vary over time.

Management assessed its internal control structure over financial reporting as
of December 31, 2000. This assessment was based on criteria for effective
internal control over financial reporting described in "Internal Control -
Integrated Framework" issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this assessment, management believes that The
Farmers & Merchants State Bank maintained an effective internal control
structure over financial reporting as of December 31, 2000.

DESIGNATED LAWS

Management is also responsible for compliance with the federal and state laws
and regulations relating to safety and soundness, including those designated
laws and regulations regarding dividend restrictions and loans to insiders.
Based on our assessment, management believes The Farmers & Merchants State Bank
complied in all material respects, with those designated laws and regulations
for the year ended December 31, 2000.







                                       59
<PAGE>   61
                        FARMERS & MERCHANTS BANCORP, INC.

                      SELECTED FINANCIAL DATA BY MANAGEMENT





<TABLE>
<CAPTION>
Key Ratios:                      2000           1999           1998          1997          1996
                            -------------- -------------- -------------- ------------- -------------
<S>                         <C>            <C>            <C>            <C>           <C>
Return on average equity            12.02%         11.95%         14.46%        14.56%        13.21%

Return on average assets             1.19%          1.16%          1.38%         1.33%         1.14%
Loan to deposit ratio               93.00%         92.13%         78.33%        86.31%        84.15%

Capital to assets ratio             10.23%          9.67%          9.45%         9.25%         8.65%
</TABLE>




                 GRAPH                                     GRAPH
         Return on Average Equity                 Return on Average Assets


                 GRAPH                                     GRAPH
         Loan to Deposit Ratio                     Capital to Assets Ratio





                                       60
<PAGE>   62
                        FARMERS & MERCHANTS BANCORP, INC.

                      SELECTED FINANCIAL DATA BY MANAGEMENT



<TABLE>
<CAPTION>
                                      (In Thousands Except for Per Share Amounts)
                          ----------------------------------------------------------------
                             2000         1999          1998          1997          1996
                          ----------   ----------    ----------    ----------    ---------
<S>                       <C>          <C>           <C>           <C>           <C>
Loans                      479,587       462,865       401,192       397,295       368,900
Total Assets               635,160       598,529       585,869       528,273       501,449
Shareholders' Equity        64,988        57,889        55,350        48,844        43,381
Interest Income             48,890        43,779        42,888        40,158        38,382
Interest Expense            25,509        21,150        22,085        21,139        20,905
Net Interest                23,381        22,629        20,803        19,019        17,477
Other Expense               11,376        11,192         8,841         8,096         8,614
Federal Income Tax           3,118         3,007         3,413         3,035         2,312
Net Income                   7,391         6,793         7,657         6,777         5,483
Net Income per Share          5.69          5.23          5.89          5.22          4.22
Dividends per Share           1.50          1.40          1.40          1.25          1.15
</TABLE>



<TABLE>
<S>                                                  <C>
                     GRAPH                                          GRAPH
   Shareholders' Equity Loans Total Assets              Interest Expense Interest Income



                     GRAPH                                          GRAPH
   Federal Income Tax Net Income Other Expense       Dividends per Share Net Income Per Share
</TABLE>

















                                       61
<PAGE>   63
                          [2000 ANNUAL REPORT PHOTOS]


<TABLE>
<S>                                                                 <C>

          JAMES PROVOST HONORED BY FELLOW DIRECTORS
               UPON RETIREMENT FROM THE BOARD

      Joe Crossgrove, James Provost, and Eugene Bernath
         Merle Short, Steven Wyse, Harold Plassman,                        F & M EMPLOYEES AND SPOUSES ASSIST
                 Lee Graffice, Dale Nafziger                                   WITH WAUSEON CRUISE NIGHTS
         Jack Johnson, Robert Frey, James Saneholtz,
  Dean Miller, Maynard Sauder, Dexter Benecke, Jerry Boyers           Duane England, Carol England, AVP/Branch Mgr.
                                                                    Wauseon Downtown; Donald Colon, and Carol Colon,
                                                                                   Mortgage Secretary









                 PRESIDENT AND BRANCH MANAGERS
       Deborah Shinabery, AVP/Woodland; Cynthia Knauer,
        AVP/Delta; Carol England, AVP/Wauseon Downtown                            WAUSEON HEALTH & TRADE SHOW
                Stephen Jackson, AVP/Napoleon;
          Ronald Short, AVP/Stryker; Lance Nofziger;                        Brett Kahrs, AC/Senior Investment Exec.;
      AC/Montpelier W. Main; Lewis Hilkert, VP/West Unity              Gloria Gunn, AVP/Branch Asst. Mgr. Wauseon Shoop;
            Barry Gray, AC/Swanton; John Fee, AVP/                  and Allen Lantz, VP/Branch Mgr. Wauseon Shoop and guest
Montpelier Eastside; Joe Crossgrove, Pres./CEO; Michael Smith,
       AC/Bryan SouthTowne; David Frazer, Bryan E. High;
                 Allen Lantz, VP/Wauseon Shoop

</TABLE>





                                       62
<PAGE>   64
<TABLE>
<S>                                                                 <C>
                                                                           ARCHBOLD EVANGELICAL CHURCH PRAISE TEAM
                                                                            ENTERTAINING GUESTS AT WOODLAND OFFICE
                                                                                 20TH ANNIVERSARY CELEBRATION

                                                                          Edward Leininger, EVP/Commercial Loan Officer
                                                                                Dave Yoder, Sam Short, Deb Short,
                                                                             Woodland Office Teller, Linda Marihugh
                                                                            Marv Burnett, Peter Cousino, and Bev Nelson









               "FOOTBALL FEVER" REFERRAL
                     CONTEST WINNER

Brett Kahrs, AC/Senior Investment Officer and Ellie Shinhearl,
         West Unity Office Secretarial Supervisor




                                                                                       DELTA STAFF CELEBRATES
                                                                                 15TH ANNIVERSARY OF DELTA OFFICE

                                                                             Kelly Culler, Receptionist, Cynthia Knauer,
                                                                               AVP/Mgr.; Beth Bay, Loan Secretary;
                                                                                 Ginger Spiess, Teller Supervisor
                                                                              Joe McGee, Teller; Jacqueline Richards,
                                                                     Teller; Sheila Tejkl, Teller; Arthur Short, AC/Asst. Mgr.;
                                                                         Deanne Little, Teller; Becky Huddy, New Accts. Rep.;
                                                                                        Laura Donaldson, Teller

              CUSTOMER APPRECIATION DAY 2000
  Brenda Short, Stryker Office Secretary and Dolores Garcia

</TABLE>








                                       63
<PAGE>   65
<TABLE>
<S>                                                                 <C>









    BRYAN CUB SCOUTS VISIT BRYAN E. HIGH OFFICE

 David Frazer, AVP/Mgr. And Tiger Cubs of Pack 321


                                                                        CHRISTMAS CLUB OPEN HOUSE
                                                                       AT MONTPELIER W. MAIN OFFICE

                                                                          Lance Nofziger, AC/Mgr.,
                                                                    and Open House helper Velma Overmier













              NAPOLEON OFFICE HOSTED
           5TH ANNIVERSARY CELEBRATION

Stephen Jackson, AVP/Mgr. And Diana Dennie, AC/Asst. Mgr.



                                                                          PAUL TRODER RETIRES FROM
                                                                             BRYAN ADVISORY BOARD

                                                                     Michael Smith, AC/Bryan SouthTowne Mgr.;
                                                                     Joe Crossgrove, Pres./CEO; Paul Troder,
                                                                       David Frazer, AVP/Bryan E. High Mgr.;
                                                                    Richard Bruce, AVP/Commercial Loan Officer
</TABLE>




                                       64
<PAGE>   66
<TABLE>

<S>                                                                 <C>
                                                                              F & M RECEIVED ARCHBOLD CHAMBER OF
                                                                                COMMERCE MEMBER OF THE YEAR AWARD

                                                                                Fred Witte, Chamber Co-Administrator;
                                                                    Joe Crossgrove, Pres./CEO; Eugene Bernath, F & M Bancorp, Inc.
                                                                             Chairman; Mari Yoder, Chamber Co-Administrator

       MONTPELIER EASTSIDE MANAGER
     VISITS WITH GUEST AT OPEN HOUSE

    Roger Goebel and John Fee, AVP/Mgr.














                                                                                F & M SUPPORTS FULTON CO. FAIR JR.
                                                                                         LIVESTOCK SALE

                                                                         Allen Lantz and Cynthia Knauer representing F & M,
                                                                    Joel Brown, Joe Radabaugh, Daryl Nofziger, and Shanna Roth
                                                                                 with her Grand Champion Beef Feeder

           SWANTON EMPLOYEES EXPERIENCE
           1ST OPEN HOUSE CELEBRATION

         Heather Waldron Teller; Vicky Bratton,
Loan Secretary; Kathy Keeler, Teller; Hoilyn McKibben, Teller
       Carrol Muston, New Accts. Rep; Debra Kauffman,
          AC/Asst. Mgr.; Barry Gray, AC/Mgr.;
 Judy Carpenter, Teller Supervisor; Joanne Pero, Teller








                                                                       F & M DONATES TO WILLIAM CO. FAIR FOUNDATION

                                                                    Art Follett, Williams Co. Fair Foundation president,
                                                                          Lewis Hilkert, VP/Branch Mgr. West Unity
                                                                           Ronald Short, AVP/Branch Mgr. Stryker;
                                                                       Michael Smith, AC/Branch Mgr. Bryan SouthTowne;
                                                                         David Frazer, AVP/Branch Mgr. Bryan E. High
</TABLE>


                                       65



<PAGE>   67
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

No disagreements exist on accounting and financial disclosures or related
matters.

No change of accountants has been made since 1982.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                               BOARD OF DIRECTORS

The information called for herein is presented below:

<TABLE>
<CAPTION>
                                                                                                 Year First
                                                     Principal Occupation or                      Became
          Name                  Age               Employment for Past Five Years                  Director
---------------------------     ---            -----------------------------------------         -----------
<S>                             <C>            <C>                                               <C>
Eugene Bernath                   67            Farmer                                              1978
                                               Chairman of the Board,
                                                 Farmers & Merchants Bancorp, Inc.
                                                 The Farmers & Merchants State Bank

Dexter Benecke                   58            President, Viking Trucking, Inc.                    1999

Jerry L. Boyers                  67            President, Edifice Construction                     1976
                                                 Management

Joe E. Crossgrove                63            President, Chief Executive Officer                  1992
                                                 The Farmers & Merchants State
                                                 Bank

Robert G. Frey                   60            President, E.H.  Frey & Sons, Inc.                  1987

Julian Giovarelli                69            President, GIO Sales, Inc.                          2000

Jack C. Johnson                  48            President, Hawk's Clothing, Inc.                    1991
                                                 Partner, REJO Partnership

Dean E. Miller                   56            President, MBC Holdings, Inc.                       1986

Dale L. Nafziger                 70            Vice-President, Homestead Ice Cream Co.             1969

Anthony J. Rupp                  51            President, Rupp Furniture Co.                       2000

David P. Rupp Jr.                59            Attorney, Plassman, Rupp, Hensel                    2001
                                                 & Short

James C. Saneholtz               54            President, Saneholtz-McKarns, Inc.                  1995

Maynard Sauder                   68            President, Sauder Woodworking Co.                   1980

Merle J. Short                   60            Farmer, President of Promow, Inc.                   1987

Steven J. Wyse                   56            President, SteelinQ Systems, Inc.                   1991
</TABLE>


                                       66
<PAGE>   68
                               EXECUTIVE OFFICERS


<TABLE>
<CAPTION>
                                                       Principal Occupation
          Name                  Age                     for Past Five Years
---------------------------     ---            -----------------------------------------
<S>                             <C>            <C>
Eugene Bernath                  67             Farmer
                                               Chairman of the Board
                                               Farmers & Merchants State Bank

Joe E. Crossgrove               63             President, Chief Executive Officer
                                                 The Farmers & Merchants State
                                                 Bank (since 1991) Executive Vice
                                                 President and Treasurer of Farmers
                                                 & Merchants Bancorp, Inc.
                                                 Director and Vice President of Farmers
                                                 & Merchants Life Insurance Co.

Rex D. Rice                     41             Vice President
                                               Chief Lending Officer

Edward Leininger                44             Vice President
                                               Commercial Loan Officer

Allen G. Lantz                  47             Vice President
                                               Branch Manager

Lewis Hilkert                   50             Vice President
                                               Branch Manager

Carol England                   60             Assistant Vice President
                                               Corporate Secretary
                                               Branch Manager

Ronald D. Short                 48             Assistant Vice President
                                               Branch Manager

Cynthia Knauer                  54             Assistant Vice President
                                               Branch Manager

Dave Frazier                    42             Assistant Vice President
                                               Branch Manager

John Fee                        40             Assistant Vice President
                                               Branch Manager

Steve Jackson                   46             Assistant Vice President
                                               Branch Manager
</TABLE>


                                       67
<PAGE>   69
<TABLE>
<S>                             <C>            <C>
Deborah Shinabery               45             Assistant Vice President
                                               Branch Manager

Randal H. Schroeder             40             Assistant Vice President
                                               Chief Operations Officer

George Jelen                    49             Assistant Vice President
                                               Mortgage Loan Officer

Barbara Britenriker             39             Assistant Vice President
                                               Chief Financial Officer
                                               Comptroller

Michael D. Culler               42             Assistant Vice President
                                               Chief Agricultural Finance Officer

Diann K. Meyer                  40             Assistant Vice President
                                               Human Resource Officer

Gloria Gunn                     43             Assistant Vice President
                                               Assistant Branch Manager

Richard Bruce                   53             Assistant Vice President
                                               Commercial Loan Officer

Kent Roth                       36             Auditor
                                               Bank Security Officer

Marilyn Johnson                 44             Compliance Officer

Jean Horwath                    49             Assistant Cashier
                                               Assistant Branch Manager

Diane Swisher                   43             Assistant Cashier
                                               Assistant Branch Manager

Patti Rosebrock                 43             Assistant Cashier
                                               Assistant Branch Manager

Michael T. Smith                34             Assistant Cashier
                                               Branch Manager

Debra Kauffman                  40             Assistant Cashier
                                               Assistant Branch Manager
                                               Assistant Corporate Secretary

J. Scott Miller                 44             Assistant Cashier
                                               Assistant Agri-Finance Officer

Judith Warncke                  53             Assistant Cashier
                                               Marketing Officer
</TABLE>


                                       68
<PAGE>   70

<TABLE>
<S>                             <C>            <C>
Diana Dennie                    38             Assistant Cashier
                                               Branch Manager

Jerry Borton                    51             Assistant Cashier
                                               Loan Officer

Jane Bruner                     40             Assistant Cashier
                                               Operations Supervisor

Patricia Burkholder             37             Assistant Cashier
                                               Assistant Branch Manager

Barry Gray                      40             Assistant Cashier
                                               Assistant Branch Manager

Lesley Shirkey                  31             Asset Recovery Officer

Brett Kahrs                     36             Brokerage Officer

Carol Church                    41             Assistant Cashier
                                               Assistant Branch Manager

Ruth Ford                       47             Assistant Branch Manager

Lance Nofziger                  30             Branch Manager

Michael Schnitkey               32             Assistant Cashier
                                               Agricultural Finance Officer

Gregory Sims                    30             Assistant Branch Manager

Ruth Ann Dunn                   46             Assistant Cashier
                                               Administrative Agri Assistant

Sue Dieringer                   42             Assistant Cashier
                                               Consumer Loan Officer

Kelby Schmucker                 33             Credit Analyst
</TABLE>











                                       69

<PAGE>   71




ITEM 11. MANAGEMENT REMUNERATION AND 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
7, 2001 is incorporated herein by reference.

The directors of Farmers & Merchants Bancorp, Inc. are also the directors of The
Farmers & Merchants State Bank and Farmers & Merchants Life Insurance Co.

The Board of Directors are the same for both Farmers & Merchants Bancorp, Inc.
and its wholly-owned subsidiary, The Farmers & Merchants State Bank. The Board
of Directors met twenty-six times during the 2000 calendar year. All but two of
the current directors of the Corporation attended at least seventy-five percent
of the meetings of the Board. James Provost was in attendance at sixty-seven
percent of the meetings and Steve Wyse was in attendance at sixty-nine percent
of the meetings. Average attendance at Board meetings held during the year was
eighty-seven percent.

Directors received, as directors' fees, $300 for each board meeting, plus a
bonus of $600 for 2000.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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
Saturday, April 7, 2001, is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRANSACTIONS WITH MANAGEMENT AND OTHER

There are no transactions to report.

CERTAIN BUSINESS RELATIONSHIPS

No family relationships exist between any executive officers of the Bank.

LOANS TO RELATED PARTIES

This information is presented on page 40, Note 5 of the Annual Report to
shareholders, and is incorporated herein by reference.

CERTAIN BUSINESS RELATIONSHIPS

The company retained the law firm of Plassman, Rupp, Hensal and Short in 1988.
One of the principals, Harold Plassman was a member of the Board of Directors
during 2000. David P. Rupp Jr. who is a nominee for the Board of Directors for
2001 is also an attorney with Plassman, Rupp, Hensal and Short. During 2000 the
company paid fees to Plassman, Rupp, Hensal and Short for routine legal
services. It is the company's intention to retain the law firm in 2001.




                                       70

<PAGE>   72


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
                  (a)      The following documents are filed as part of this report:

                                                                                                 Annual Report
                                                                                                 -------------
<S>                                                                                              <C>
                  (1)      Financial Statements
                           Report of Independent Accountants                                     Page 28
                           Consolidated Balance Sheets                                           Page 29
                           Consolidated Statements of Income                                     Page 30
                           Consolidated Statements of Changes in
                           Shareholders' Equity                                                  Page 31
                           Consolidated Statements of Cash Flows                                 Page 32
                           Notes to Consolidated Financial Statements                            Pages 33 - 53
                  (2)      Financial Statement Schedules
                           Independent Auditors' Report on Additional
                           Information                                                           Page 54
                           Five Year Summary of Operations                                       Page 55
                  (3)      Other Information
                           Trading Market for the Company's Stock                                Page 56
                           Selected Financial Data by Management                                 Page 57
                           Independent Auditors' Report                                          Page 58
                           Management Report                                                     Page 59
                           Selected Financial Data by Management                                 Pages 38 - 39
                           2000 Annual Report Photos                                             Pages 62 - 65
                  (4)      Exhibits
                           (3.1)    Articles of Incorporation have been
                                    submitted with previous 10-K reports.
                           (13.1)   2000 Annual Report to Shareholders (contained herein)
                           (23.1)   Notice of Annual Meeting and Proxy Statement
         (b)      Reports on Form 8-K
                  None
         (c)      Exhibits required by Item 601.
                  None required
         (d)      Schedules required by Regulation S-X
                  The Condensed Financial Information of the Registrant required
                  by this report are included in the Annual Report to
                  Shareholders, Note 18, pages 50 through 53.
         (e)      Signatures                                                                     Page 74

         (f)      Other schedules required to be filed as part of this report.
<CAPTION>
                                                                                                 Form 10-K
                                                                                              --------------
<S>                                                                                           <C>
                  Schedule of Property and Equipment                                             Page 72
                  Schedule of Accumulated Depreciation - Property and Equipment                  Page 73
</TABLE>



                                       71

<PAGE>   73


PART IV

ITEM 14. EXHIBITS, FINANCIAL SCHEDULES AND REPORTS ON FORM 8-K




                       SCHEDULE OF PROPERTY AND EQUIPMENT
                                 (In Thousands)


                                                                       Exhibit 1

<TABLE>
<CAPTION>
                                                 Year Ended December 31, 2000
                                       -----------------------------------------------
                                       Beginning                               Ending
                                        Balance     Additions   Retirements    Balance
                                       ---------   ----------   -----------   --------
<S>                                   <C>            <C>        <C>           <C>
Land                                  $ 1,983        $   656    $    25        $ 2,614
Building                                9,123            251         25          9,349
Equipment                               6,031            416         57          6,390
                                      -------        -------    -------        -------
                                      $17,137        $ 1,323    $   107        $18,353
                                      =======        =======    =======        =======
</TABLE>

<TABLE>
<CAPTION>


                                                 Year Ended December 31, 1999
                                       -----------------------------------------------
                                       Beginning                               Ending
                                        Balance     Additions   Retirements    Balance
                                       ---------   ----------   -----------   --------
<S>                                   <C>          <C>          <C>           <C>
Land                                  $ 1,681        $   302    $     -        $ 1,983
Building                                8,030          1,093          -          9,123
Equipment                               5,867            621        457          6,031
                                      -------        -------    -------        -------
                                      $15,578        $ 2,016    $   457        $17,137
                                      =======        =======    =======        =======
</TABLE>

<TABLE>
<CAPTION>
                                                 Year Ended December 31, 1998
                                       -----------------------------------------------
                                       Beginning                               Ending
                                        Balance     Additions   Retirements    Balance
                                       ---------   ----------   -----------   --------
<S>                                   <C>          <C>          <C>           <C>
Land                                  $ 1,472        $   209    $     -        $ 1,681
Building                                7,398            676         44          8,030
Equipment                               4,606          1,827        566          5,867
                                      -------        -------    -------        -------
                                      $13,476        $ 2,712    $   610        $15,578
                                      =======        =======    =======        =======
</TABLE>




                                       72

<PAGE>   74


          SCHEDULE OF ACCUMULATED DEPRECIATION - PROPERTY AND EQUIPMENT


                                                                       Exhibit 2

<TABLE>
<CAPTION>
                                             Year Ended December 31, 2000
                                   -----------------------------------------------
                                   Beginning                               Ending
                                    Balance    Depreciation  Retirements   Balance
                                   ---------   ------------  -----------   -------
<S>                                <C>         <C>           <C>           <C>
Land                                $    -      $    -       $    -        $     -
Building                             2,668         286           10          2,944
Equipment                            4,293         810           48          5,055
                                   -------     -------      -------        -------
                                    $6,961      $1,096       $   58        $ 7,999
                                   =======     =======      =======        =======
</TABLE>

<TABLE>
<CAPTION>
                                             Year Ended December 31, 1999
                                   -----------------------------------------------
                                   Beginning                               Ending
                                    Balance    Depreciation  Retirements   Balance
                                   ---------   ------------  -----------   -------
<S>                                <C>         <C>           <C>           <C>
Land                                $    -      $    -       $    -        $     -
Building                             2,406         262            -          2,668
Equipment                            3,742         981          430          4,293
                                   -------     -------      -------        -------
                                    $6,148      $1,243       $  430        $ 6,961
                                   =======     =======      =======        =======
</TABLE>
<TABLE>
<CAPTION>
                                             Year Ended December 31, 1998
                                   -----------------------------------------------
                                   Beginning                               Ending
                                    Balance    Depreciation  Retirements   Balance
                                   ---------   ------------  -----------   -------
<S>                                <C>         <C>           <C>           <C>
Land                                $    -       $   -       $    -        $    -
Building                             2,234         216           44          2,406
Equipment                            3,577         727          562          3,742
                                   -------     -------      -------        -------
                                    $5,811       $ 943       $  606        $ 6,148
                                   =======     =======      =======        =======
</TABLE>

                                       73








<PAGE>   75


                        FARMERS & MERCHANTS BANCORP, INC.


Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, hereunto duly authorized.

                          Farmers & Merchants Bancorp, Inc.

                          By:  /s/ Joe E. Crossgrove          Date:   3/14/01
                               ----------------------------         ------------
                          Joe E. Crossgrove
                          Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<S>                                       <C>                        <C>                                <C>
/s/ Joe E. Crossgrove                     Date: 3/14/01              /s/ Barbara Britenriker            Date:  3/14/01
----------------------------------------                             ---------------------------------
Joe E. Crossgrove, Director                                          Barbara Britenriker
Chief Executive Officer                                              Chief Accounting Officer

/s/ Eugene D. Bernath                     Date: 3/14/01              /s/ Kent Roth                      Date:  3/14/01
----------------------------------------                             ---------------------------------
Eugene D. Bernath                                                    Kent Roth, Auditor
Director and Chairman

/s/ Dexter Benecke                        Date: 3/14/01              /s/ Anthony J. Rupp                Date:  3/14/01
----------------------------------------                             ---------------------------------
Dexter Benecke, Director                                             Anthony J. Rupp, Director

/s/ Jerry Boyers                          Date: 3/14/01              /s/ David P. Rupp Jr.              Date:  3/14/01
----------------------------------------                             ---------------------------------
Jerry Boyers, Director                                               David P. Rupp Jr., Director

/s/ Robert Frey                           Date: 3/14/01              /s/ James Saneholtz                Date:  3/14/01
----------------------------------------                             ---------------------------------
Robert Frey, Director                                                James Saneholtz, Director

/s/ Julian Giovarelli                     Date: 3/14/01              /s/ Maynard Sauder                 Date:  3/14/01
----------------------------------------                             ---------------------------------
Julian Giovarelli, Director                                          Maynard Sauder, Director

/s/ Jack C. Johnson                       Date: 3/14/01              /s/ Merle J. Short                 Date:  3/14/01
----------------------------------------                             ---------------------------------
Jack C. Johnson, Director                                            Merle J. Short, Director

/s/ Dean Miller                           Date: 3/14/01              /s/ Steven J. Wyse                 Date:  3/14/01
----------------------------------------                             ---------------------------------
Dean Miller, Director                                                Steven J. Wyse, Director

/s/ Dale L. Nafziger                      Date: 3/14/01
----------------------------------------
Dale L. Nafziger, Director
</TABLE>




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