<PAGE>

                       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, 2002
                                       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 405
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, 2003, Registrant had outstanding 1,300,000 shares of common stock
at a market value of $123,500,000.




                                       1

<PAGE>

                        FARMERS & MERCHANTS BANCORP, INC.

                                TABLE OF CONTENTS



<TABLE>
<CAPTION>
                                                                                   PAGE
<S>               <C>                                                            <C>
Form 10-K Items

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                                              21

Item 7.           Management's Discussion and Analysis
                  of Financial Condition and Results
                  of Operations                                                    7 - 19

Item 8.           Financial Statements and Supplementary Data                     22 - 67

Item 9.           Disagreements on Accounting and
                  Financial Disclosure                                                 68

Item 10.          Directors and Executive Officers
                  of the Registrant                                               68 - 69

Item 11.          Management Remuneration and Transactions                             69

Item 12.          Security Ownership of Certain
                  Beneficial Owners and Management                                     69

Item 13.          Certain Relationships and Related
                  Transactions                                                         70

Item 14.          Controls and Procedures                                              70

Item 15.          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

Certification                                                                     75 - 76

Exhibit 99.1                                                                           77

Exhibit 99.2                                                                           78

Total Pages:                                                                           78
</TABLE>


                                        i


<PAGE>

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 $7.5 million. 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>

During April of 1980 a second office was opened in Archbold, located in the
Lugbill Addition near Woodland Oaks. With resources of $83 million the decision
was made to open full service offices in Stryker and West Unity in 1981.

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.

New computerized proof equipment to capture the required data in today's complex
and competitive banking environment was also added during 1985, along with a new
division being added to the Operations Department in the creation of the Central
Information File Department. Plus, two new branches were opened for business,
the Delta office in June and the all-new Bryan E. High Street office in
December.

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>

With strong earnings, outstanding asset quality, and the bank expanding its
presence in the market area, 1994 was a very special year for The Farmers &
Merchants State Bank. 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. Also during that year, The Farmers & Merchants State
Bank again hit a new growth plateau. Year end assets were over $500 million.

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 million 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, there were 19 ATM
locations. Assets at the end of the fourth quarter were $598 million.

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.



                                       4

<PAGE>

In 2001 the new Defiance branch was opened in Defiance, Ohio and an ATM was
placed at the Bryan Eagles, Bryan, Ohio. With the Main office experiencing a
lack of office space, plans for a new operations facility were in progress. The
ATM was removed from Beck's Petro County Store, Ridgeville Corners.

During the first quarter of 2002, construction of the new operations center
began on the corner of Fulton County Rd. C and Clyde's Way, Archbold, Ohio.
Occupation of the center is planned for the first quarter of 2003.

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 275 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, Stryker, West Unity, Bryan, Delta and Napoleon,
Montpelier, Swanton, and Defiance. Two ATM's are also located at Sauder
Woodworking Co., Inc., a major employer in Archbold. Additional locations are at
Northwest State Community College, Archbold; Williams County Hospital, Bryan;
Fairlawn Haven Wyse Commons, Archbold; Repp Oil, Fayette; Delta Eagles, Bryan;
and Sauder Village Barn Restaurant, Archbold.

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. 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>

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
                                Midwest Community Federal Credit Union

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
                                Midwest Community Federal Credit Union

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)

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



                                       6

<PAGE>


<TABLE>
<S>                             <C>
Defiance, Ohio                  State Bank & Trust Company (4 offices)
                                First Federal Bank of the Midwest
                                Sherwood State Bank
                                City Loan
                                American General
                                Midwest Community Federal Credit Union
                                Fort Defiance Federal Credit Union
                                Sky Financial
</TABLE>


SELECTED STATISTICAL AND FINANCIAL INFORMATION

EARNINGS SUMMARY

Farmers & Merchants Bancorp, Inc. reported net income of $7.4 million for 2002,
which is an increase of $642 thousand over the 2001 net income of $6.8 million,
and virtually the same as 2000 net income of $7.4 million. Earnings per share
correspondingly increased for 2002 to $5.69 per share compared to $5.20 per
share and $5.69 per share for 2000 and 1999, respectively.

INTEREST INCOME

The following table presents net interest income, interest spread and net
interest margin for the three years 2000 through 2002, 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.

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

<TABLE>
<CAPTION>
                                                        2002
                                      -----------------------------------------
                                      Average         Interest/
                                      Balance         Dividends      Yield/Rate
                                      -------         ---------      ----------
<S>                                   <C>             <C>            <C>
        ASSETS
Interest Earning Assets:
  Loans (1)                           $476,981        $ 35,309           7.40%
  Taxable investment securities        134,990           6,410           4.75%
  Tax-exempt investment securities      39,812           1,622           4.07%
  Interest bearing deposits                823              25           3.04%
  Federal funds sold                     3,522              58           1.65%
                                      --------        ---------      ----------
    Total Interest Earning Assets      656,128        $ 43,424           6.62%
                                                      =========      ==========
Non-Interest Earning Assets:
  Cash and cash equivalents             15,873
  Other assets                          23,135
                                      ---------
      Total Assets                    $695,136
                                      =========
</TABLE>




                                       7

<PAGE>

<TABLE>
<S>                                                 <C>                  <C>                  <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest Bearing Liabilities:
  Savings deposits                                  $197,819             $  1,705                0.86%
  Other time deposits                                333,247               15,869                4.76%
  Other borrowed money                                17,773                  990                5.57%
  Federal funds purchased and securities
   sold under agreement to repurchase                 23,609                  415                1.76%
                                                    --------             --------
    Total Interest Bearing Liabilities               572,448             $ 18,979                3.32%
                                                                         ========              =======
Non-Interest Bearing Liabilities:
  Non-interest bearing demand deposits                40,485
  Other                                                7,708
                                                    --------
        Total Liabilities                            620,641
Stockholders' Equity                                  74,495
                                                    --------
        Total Liabilities and
         Shareholders' Equity                       $695,136
                                                    ========

Interest/dividend income/yield                                           $ 43,424                6.62%
Interest expense/yield                                                     18,979                3.32%
                                                                         --------              -------
  Net Interest Spread                                                    $ 24,445                3.30%
                                                                         ========              =======
  Net Interest Margin                                                                            3.73%
                                                                                               =======
</TABLE>



<TABLE>
<CAPTION>
                                                                     2001
                                              -----------------------------------------------------
                                               Average            Interest/
                                               Balance            Dividends              Yield/Rate
                                              --------            ---------              ----------
<S>                                           <C>                 <C>                    <C>
        ASSETS
Interest Earning Assets:
  Loans (1)                                   $472,181            $ 40,728                 8.63%
  Taxable investment securities                106,774               6,203                 5.81%
  Tax-exempt investment securities              29,565               1,310                 4.43%
  Interest bearing deposits                        120                 231               192.50%
  Federal funds sold                            11,342                 473                 4.17%
                                              --------            --------
    Total Interest Earning Assets              619,982            $ 48,945                 7.89%
                                                                  ========               =======
Non-Interest Earning Assets:
  Cash and cash equivalents                     22,847
  Other assets                                  20,640
                                              --------
        Total Assets                          $663,469
                                              ========
</TABLE>



                                       8

<PAGE>

<TABLE>
<S>                                              <C>                   <C>                    <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest Bearing Liabilities:
  Savings deposits                                  $179,610             $  4,898                 2.73%
  Other time deposits                                320,341               18,049                 5.63%
  Other borrowed money                                20,822                2,085                10.01%
  Federal funds purchased and securities
   sold under agreement to repurchase                 25,656                  416                 1.62%
                                                    --------             --------
     Total Interest Bearing Liabilities              546,429             $ 25,448                 4.66%
                                                                         ========              ========
Non-Interest Bearing Liabilities:
  Non-interest bearing demand deposits                42,170
  Other                                                5,440
                                                    --------
        Total Liabilities                            594,039
Stockholders' Equity                                  69,430
                                                    --------
        Total Liabilities and
         Shareholders' Equity                       $663,469
                                                    ========

Interest/dividend income/yield                                           $ 48,945                 7.89%
Interest expense/yield                                                     25,448                 4.66%
                                                                         --------              --------
  Net Interest Spread                                                    $ 23,497                 3.24%
                                                                         ========              ========
  Net Interest Margin                                                                             3.79%
                                                                                               ========
</TABLE>



<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
                                              ========
</TABLE>




                                       9

<PAGE>

<TABLE>
<CAPTION>
<S>                                                 <C>                 <C>                   <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest Bearing Liabilities:
  Savings deposits                                  $143,675             $  4,805                3.34%
  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               497,648             $ 25,509                5.13%
                                                                         ========              =======
Non-Interest Bearing Liabilities:
  Non-interest bearing demand deposits                54,837
  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                5.13%
                                                                         --------              -------
  Net Interest Spread                                                    $ 23,381                3.26%
                                                                         ========              =======
  Net Interest Margin                                                                            4.01%
                                                                                               =======
</TABLE>

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

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>
                                                               2002 vs 2001
                                                 ------------------------------------------------
                                                    Net                     Due to Change in
                                                  Change               Volume              Rate
                                                 -------             -------             -------
<S>                                              <C>                 <C>                 <C>
Interest Earned On:
  Loans                                          $(5,419)            $   355             $(5,774)
  Taxable investment securities                      207               1,340              (1,133)
  Tax-exempt investment securities                   312                 417                (105)
  Interest bearing deposits                         (206)                 21                (227)
  Federal funds sold                                (415)               (129)               (286)
                                                 -------             -------             -------
        Total Interest Earning Assets            $(5,521)            $ 2,005             $(7,526)
                                                 =======             =======             =======
Interest Paid On:
  Savings deposits                               $(3,193)            $   157             $(3,350)
  Other time deposits                             (2,180)                615              (2,795)
  Other borrowed money                            (1,095)               (170)               (925)
  Federal funds sold and security
   repurchase agreements                              (1)                (36)                 35
                                                 -------             -------             -------
                                                 $(6,469)            $   566             $(7,035)
                                                 =======             =======             =======
</TABLE>



                                       10

<PAGE>

<TABLE>
<CAPTION>
                                                                2001 vs 2000
                                                 -----------------------------------------------
                                                   Net                      Due to Change in
                                                  Change               Volume               Rate
                                                  ------               ------               ----
<S>                                              <C>                 <C>                 <C>
Interest Earned On:
  Loans                                          $(1,933)            $  (246)            $(1,687)
  Taxable investment securities                    1,421               1,614                (193)
  Tax-exempt investment securities                    (3)                109                (112)
  Interest bearing deposits                          227                  39                 188
  Federal funds sold                                 343                 389                 (46)
                                                 -------             -------             -------
        Total Interest Earning Assets            $    55             $ 1,905             $(1,850)
                                                 =======             =======             =======
Interest Paid On:
  Savings deposits                               $    93             $ 2,228             $(2,135)
  Other time deposits                                555                 883                (328)
  Other borrowed money                               143                (783)                926
  Federal funds sold and security                   --
   repurchase agreements                            (852)                 81                (933)
                                                 -------             -------             -------
                                                 $   (61)            $ 2,409             $(2,470)
                                                 =======             =======             =======
</TABLE>

Interest income from fees on loans and leases decreased $5.4 million to $35.3
million for 2002 from $40.7 million for 2001. This compares with a decrease of
$2 million for 2001 under 2000 interest income of $42.7 million. The decrease
for 2001 was primarily due to a decrease in commercial loan activity, while the
decrease for 2002 was primarily due to a drop in interest rates.

Net interest margin was 3.73 percent for 2002, 3.79% for 2001, and 4.01% for
2000. Although the interest rate earned on the bank's interest earning assets
dropped in 2002, there was a corresponding drop in the interest rate paid on
deposits resulting in a net interest margin approximately the same as for 2001.

NON-INTEREST INCOME

Non-interest income for 2002 of $5.8 million is just slightly less than that for
2001 of $5.9 million. Non-interest income for 2001 experienced a dramatic
increase over 2000 levels due to an increase in fixed rate mortgage loan
activity as a result of the favorable interest rates for such loans in 2001.
These types of loans are sold to investors while the Bank retains the mortgage
servicing rights on these loans. As a result, mortgage servicing rights income
increased $1.6 million for 2001 over 2000 mortgage servicing rights income of
$113 thousand. As a result of the refinancing activity in 2001, there was not as
much of this activity in 2002. As a result mortgage servicing rights for 2002
dropped to a level similar to that of 2000. Service charges on deposits and
other service charges increased for 2002 enough to offset the drop in mortgage
servicing rights income.

NON-INTEREST EXPENSE

Non-interest expense for 2002 increased approximately a half a million dollars
for 2002 over 2001 to $17.7 million, a 3.2 percent increase. This compares to an
increase of $2.9 million or 17.2 percent increase for 2001 over 2000.



                                       11

<PAGE>

FINANCIAL CONDITION

Average earning assets have again demonstrated consistent growth over the last
three years. Average earnings assets for 2002 were $656 million compared to $620
million for 2001 and $583 million for 2000. This growth in average earnings
assets represent a 5.83 percent and 6.3 percent for 2002 and 2001, respectively.
Almost all of the increase in assets for 2002 over 2001 has been in the
securities available for sale. Average interest bearing liabilities have also
showed steady increases rising $26 million in 2002 and an increase of $48.8
million in 2001.

INVESTMENT SECURITIES

Security balances at December 31 are summarized below:

<TABLE>
<CAPTION>
                                                                        (In Thousands)
                                                        ------------------------------------------------------
                                                                2002             2001             2000
                                                        ---------------    ---------------    -----------------
<S>                                                     <C>                 <C>                 <C>
U.S. Treasury and Government agencies                      $104,618            $ 92,622            $ 61,115
Mortgage-backed securities                                   16,618              21,409               7,863
State and local governments                                  55,860              50,819              32,157
Corporate debt securities                                     1,650               7,091               9,196
Commercial paper                                               --                   974               2,908
Equity securities                                                47                  47                  20
                                                           ========            ========            ========
                                                           $178,793            $172,962            $113,259
                                                           ========            ========            ========
</TABLE>

The following table sets forth (dollars in thousands) the maturities of
investment securities at December 31, 2002 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                                  $ 1,927               5.41%         $ 2,198               3.08%
U.S. Government agency                          42,313               4.13%          55,256               4.60%
Mortgage-backed securities                       3,227               1.70%           7,800               5.11%
State and local governments                      8,370               4.86%          20,160               5.95%
Taxable state and local governments                499               6.00%           8,243               5.58%
Corporate debt securities                          501               3.60%           1,114               3.68%
Commercial paper                                  --                 0.00%            --                 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                            --                 0.00%            --                 0.00%
Mortgage-backed securities                       5,095               4.90%            --                 0.00%
State and local governments                     14,758               5.84%             536               7.00%
Taxable state and local governments              1,118               6.22%            --                 0.00%
Corporate debt securities                         --                 0.00%            --                 0.00%
Commercial paper                                  --                 0.00%            --                 0.00%
</TABLE>



                                       12

<PAGE>

At December 31, 2002 the Bank held no large block of any one investment
security, except for U.S. Treasury and other U.S. Government agencies. One
holding in debt securities exceeded $3.4 million which was a FHLMC Agency note
maturing July 15, 2005. The Bank also holds stock in the Federal Home Loan Bank
of Cincinnati at a cost of $3.3 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)
                                   -----------------------------------------------------------------------------------------
                                    2002                  2001                2000              1999                   1998
                                   -----                  ----                ----              ----                   ----
<S>                                <C>                 <C>                 <C>                 <C>                 <C>
Loans:
  Commercial/industrial            $100,119            $ 96,992            $ 96,990            $100,996            $ 81,253
  Agricultural                       66,136              53,717              51,337              46,035              38,882
  Real estate mortgage              272,857             247,545             261,289             237,056             200,675
  Installment                        51,156              55,845              69,081              71,662              68,385
  IDB                                 7,810               7,590               8,647               7,015               4,587
                                   --------            --------            --------            --------            --------
        Total Loans                $498,078            $461,689            $487,344            $462,764            $393,782
                                   ========            ========            ========            ========            ========
</TABLE>


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            $ 87,449            $ 32,330            $ 46,476            $166,255
Real estate mortgage                            6,738              24,407             241,712             272,857
Installment                                     8,573              36,449               6,134              51,156
Industrial Development Bonds                    1,702               1,921               4,187               7,810
</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)
                                                                        --------------------------
                                                                            Fixed       Variable
                                                                            Rate          Rate
                                                                       ------------     ---------
<S>                                                                    <C>              <C>
Real estate                                                             $   62,940      $ 216,531
Commercial and industrial                                                   70,509         95,208
Consumer, Master Card and overdrafts                                        49,591          1,565
Industrial Development Bonds                                                 7,810           --
</TABLE>

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


<TABLE>
<CAPTION>
                                                                       (In Thousands)
                                     ---------------------------------------------------------------------------------
                                         2002           2001                2000              1999              1998
                                     ----------       ----------         -----------        --------           ------
<S>                                <C>                <C>                <C>                <C>                <C>
Nonaccrual loans                   $ 6,014            $ 5,353            $ 6,622            $ 6,504            $ 6,455
Accruing loans past due
  90 days or more                    2,589              5,408              2,577              2,264              1,988
                                   -------            -------            -------            -------            -------
        Total                      $ 8,603            $10,761            $ 9,199            $ 8,768            $ 8,443
                                   =======            =======            =======            =======            =======
</TABLE>



                                       13
<PAGE>

As of December 31, 2002, 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 non-performing, many continue to pay
interest irregularly or at less than original contractual rates. Interest income
that would have been recorded under the original terms of these loans was $1.5
million for 2002 and $1.9 million for 2001. Any collections of interest on
non-accrual loans are included in interest income when collected. This amounted
to $195 for 2002, $257 thousand for 2001 and $177 for 2000.

Loans are placed on non-accrual 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 million of non-accrual loans as of December 31, 2002 are secured.

At December 31, 2002 the Bank has $8.6 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, 2002.

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, 2002, the Bank had loans outstanding to individuals and firms
engaged in the various fields of agriculture in the amount of $66 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 that
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.



                                       14


<PAGE>

Actual charge-off of loan balances is 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.

As can be seen from the table below, charge-offs increased to $3.1 million for
2002, and the provision was $2.6 million. Both of these amounts are up
significantly over prior years. Credit losses in the installment loan and real
estate loan portfolio have remained fairly steady even given the downturn in the
economy. The increase was primarily the result of one large commercial credit in
which $1,500,000 of the note was written off and another $1.75 million of this
loan was added to the reserve for loan losses.

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

<TABLE>
<CAPTION>
                                                                      (In Thousands)
                                          ---------------------------------------------------------------------
                                             2002            2001             2000          1999         1998
                                          --------        --------          --------      --------     --------
<S>                                       <C>             <C>               <C>           <C>          <C>
Loans                                     $498,078        $461,689          $487,344      $462,764     $393,782
                                          ========        ========          ========      ========     ========

Daily average of outstanding loans        $475,035        $472,181          $475,035      $428,087     $408,291
                                          ========        ========          ========      ========     ========
Allowance for loan losses-January 1       $  7,275        $  7,160          $  6,750      $  5,850     $  5,850
  Loans Charged Off:
     Commercial                              2,987           1,826               257           185          472

     Installment                             1,050           1,254             1,883         1,085        1,260

     Real estate mortgages                     215              54               233           304           42
                                          --------        --------          --------      --------     --------
                                             4,252           3,134             2,373         1,574        1,774
                                          --------        --------          --------      --------     --------
  Loan Recoveries:
     Commercial                                801             421               358           493          540
     Installment                               366             191               923           331          339
     Real estate mortgages                      16               5                 6            13            3
                                          --------        --------          --------      --------     --------
                                             1,183             617             1,287           837          882
                                          --------        --------          --------      --------     --------
Net Charge Offs                              3,069           2,517             1,086           737          892
                                          --------        --------          --------      --------     --------
Provision for loan loss                      2,194           2,632             1,496         1,637          892
                                          --------        --------          --------      --------     --------
Allowance for loan losses-December 31     $  6,400        $  7,275          $  7,160      $  6,750     $  5,850
                                          ========        ========          ========      ========     ========
Ratio of net charge-offs to average
 loans outstanding                            0.65%           0.53%             0.23%         0.17%        0.22%
                                          ========        ========          ========      ========     ========
</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                            $3,170                1.91%
  Installment                                       1,140                2.23%
  Real estate                                       1,306                0.48%
  Unallocated                                         784                0.16%
                                                ---------             --------
                                                   $6,400                4.61%
                                                =========             ========
</TABLE>



                                       15

<PAGE>

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 One
                                                     Over Three      Year Less         Over
                                         Under        Less Than      Than Three       Three
                                      Three Months     One Year        Years          Years
                                      ------------     --------        -----          -----
<S>                                   <C>            <C>            <C>            <C>
Time deposits                          $ 33,595       $  40,446     $  14,979      $  1,079
</TABLE>

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, 2002:
  Average balance (In thousands)               $   40,485      $   93,084       $   104,735      $   333,247
  Average rate                                       0.00%           1.18%             1.32%            4.53%

December 31, 2001:
  Average balance (In thousands)               $   38,377      $   75,765       $   118,393      $   319,326
  Average rate                                       0.00%           2.00%             2.86%            5.67%


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%
</TABLE>

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 as of December 31, 2002 was $77.7 million compared to $70.3
million for 2001 and $65 million for 2000, a $7.4 million or 10.5 percent
increase. Dividends for 2002 increased by $.05 per share to $1.65 compared to
$1.60 per share and $1.50 per share for 2001 and 2000, respectively resulting in
the dividend payout ratios shown in the table below. Management and the Board of
Directors are continually reviewing this ratio. The dividends that 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>
                                        2002              2001             2000
                                        ----              ----             ----
<S>                                  <C>               <C>          <C>
Return on average assets                1.06%             1.02%            1.19%
Return on average equity                9.93%             9.73%           12.02%
Dividend payout ratio                  28.99%            30.79%           26.38%
Equity to assets ratio                 10.70%            10.29%           10.23%
</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.



                                       16

<PAGE>

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>
                                                                2002
                                           ---------------------------------------------------
                                                                            Net Change
                                           Average             -------------------------------
                                           Balance             Amount               Percentage
<S>                                       <C>                 <C>                  <C>
Funding Uses:
  Loans                                   $476,981            $  4,800                   1.02%
  Taxable securities                       134,990              28,216                  26.43%
  Tax exempt securities                     39,812              10,247                  34.66%
  Interest bearing deposits                    823                 703                 585.83%
  Federal funds sold                         3,522              (7,820)                -68.95%
                                          --------            --------
                                          $656,128            $ 36,146                   5.83%
                                          ========            ========
Funding Sources:
  Deposits:
    Noninterest bearing demand            $135,214            $ 93,044                 220.64%
    Savings                                104,735             (74,875)                -41.69%
    Other time                             333,247              12,906                   4.03%
  Other borrowed money                      17,773              (3,049)                -14.64%
  Federal funds purchased                                           --
   agreements to repurchase                 23,609              (2,047)                 -7.98%
                                          --------            --------
                                          $614,578            $ 25,979                   4.41%
                                          ========            ========
</TABLE>



                                       17

<PAGE>

<TABLE>
<CAPTION>
                                                                2001                                      2000
                                           ----------------------------------------------------          -------
                                                                          Net Change
                                           Average            ---------------------------------          Average
                                           Balance             Amount                 Percentage         Balance
                                           -------             ------                 ----------         -------
<S>                                      <C>                  <C>                    <C>              <C>
Funding Uses:
  Loans                                   $472,181            $ (2,854)                 -0.60%         $475,035
  Taxable securities                       106,774              27,779                  35.17%           78,995
  Tax exempt securities                     29,565               2,471                   9.12%           27,094
  Interest bearing deposits                    120                  20                  20.00%              100
  Federal funds sold                        11,342               9,321                 461.21%            2,021
                                          --------            --------                                 --------
                                          $619,982            $ 36,737                   6.30%         $583,245
                                          ========            ========                                 ========

Funding Sources:
  Deposits:
    Noninterest bearing demand            $ 42,170            $(58,420)                -58.08%         $100,590
    Savings                                179,610              81,688                  83.42%           97,922
    Other time                             320,341              15,675                   5.14%          304,666
  Other borrowed money                      20,822              (7,815)                -27.29%           28,637
  Federal funds purchased
   agreements to repurchase                 25,656               4,986                  24.12%           20,670
                                          --------            --------                                 --------
                                          $588,599            $ 36,114                   6.54%         $552,485
                                          ========            ========                                 ========
</TABLE>

LIQUIDITY

Historically, the primary source of liquidity has been core deposits that
include non-interest bearing demand deposits, NOW and money market accounts and
time deposits of individuals. Through marketing efforts and competitive interest
rates, new customers and additional deposits were attracted during 2002 although
not by as much as in 2001. Core deposits increased again in 2002. Overall
deposits increased almost $10.2 million to $576 million for 2002 compared to
deposits at the end of 2001 of $566 million and $516 million for 2000. These
increases represent 1.8 percent and 9.6 percent increases, respectively.

Again, historically, 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 2002 was 86.32
percent, 2001 was 82.71 percent, and 93 percent for 2000. Because of the decline
in interest rates, there was an increase in real estate loan activity which
increased the loan to deposit ratio slightly for 2002 over the 2001 ratio.

Short-term debt such as federal funds purchased and securities sold under
agreement to repurchase also provides the Company with liquidity. Short-term
debt for both federal funds purchased and securities sold under agreement to
repurchase amounted to $38.2 million at the end of 2002 compared to $26.5
million at December 31, 2001 and $18.9 million at the end of 2001. These funds
provided an additional $11.7 million in liquidity for 2002.

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 by $11.3 million to
$28.7 million at December 31, 2002. This compares to decreased borrowings during
2001 of $13.4 million to $17.4 million at December 31, 2001, and borrowings of
$30.8 million at the end of 2000.



                                       18

<PAGE>

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 that 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,
2002 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                   $     279     $    --         $    --          $    --         $     279
Investment securities                         20,205        44,064          93,509           21,015         178,793
Loans                                        177,844       186,323          67,868           65,804         497,839
                                           ---------     ---------       ---------        ---------       ---------
    Total Rate Sensitive Assets              198,328       230,387         161,377           86,819         676,911
                                           ---------     ---------       ---------        ---------       ---------

Deposits                                     150,863       224,522         200,988             --           576,373
Federal funds purchased and                     --
 agreements to repurchase                     38,200          --              --               --            38,200
Other borrowings                                 518         1,553          23,259            3,366          28,696
                                           ---------     ---------       ---------        ---------       ---------
    Total Rate Sensitive Liabilities         189,581       226,075         224,247            3,366         643,269
                                           ---------     ---------       ---------        ---------       ---------

Gap                                        $   8,747     $   4,312       $ (62,870)       $  83,453       $  33,642
                                           =========     =========       =========        =========       =========
</TABLE>

OTHER MATTERS

The Financial Accounting Standards Board issued several new pronouncements
during 2002. Statement of Financial Accounting Standards No. 145 entitled
Rescission of FASB Statements No. 4, 44, and 64, and Amendment of FASB State No.
13, and Technical Corrections will not have a material impact on the financial
statements of the Company.




                                       19
<PAGE>

Statement of Financial Accounting Standards No. 146 entitled Accounting for
Costs Associated with Exit or Disposal Activities was issued in 2002 and is
effective for exit or disposal activities initiated after December 31, 2002.
Management does anticipate this pronouncement having a material impact on the
financial statements.

Statement of Financial Accounting Standards No. 147 entitled Acquisitions of
Certain Financial Institutions removes financial institutions from the scope of
FASB 72 which dealt with the financial accounting and reporting procedures for
acquisitions of banking and thrift institutions accounted for by the purchase
method, and requires these types of transactions to be accounted in accordance
with FASB Statements No. 141, Business Combinations and No. 142, Goodwill and
Other Intangible Assets. Management believes that this pronouncement will not
have a material impact on Farmers & Merchants Bancorp's financial statements, as
the primary method of growth for the Company has been through opening new
branches in desired locations as opposed to acquiring existing banks.

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 in Archbold, Ohio on which it is
constructing a new $4 million operations center to accommodate the growth that
has taken place at the Bank. This facility was completed in February, 2003.

Current locations of retail banking services are:

<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

</TABLE>



                                       20
<PAGE>

<TABLE>
<S>                                             <C>
Montpelier, Ohio                                225 West Main Street
                                                1150 East Main Street
Napoleon, Ohio                                  2255 Scott Street
Swanton, Ohio                                   7 Turtle Creek Circle

Defiance, Ohio                                  1175 Hotel Drive
</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.

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>
        2002         High               $110.00             $115.00             $112.00              $115.00
                     Low                 $85.00              $95.00              $95.00               $95.00

        2001         High               $105.00             $115.00             $105.00              $130.00
                     Low                 $85.00              $85.00              $90.00               $90.00
</TABLE>

As of March 1, 2002, there were 1,718 record holders of common stock of the
company.

Dividends are paid quarterly. Per share dividends for the years ended 2001 and
2000 are as follows:

<TABLE>
                      1st Quarter        2nd Quarter         3rd Quarter        4th Quarter         Total
                      -----------        -----------         -----------        -----------        ---------
<S>                   <C>                <C>                 <C>                <C>                <C>
         2001            $.35               $.40                $.40                $.50             $1.65
         2001            $.35               $.35                $.35                $.55             $1.60
</TABLE>

SELECTED FINANCIAL DATA

Selected financial data is presented on pages 56 and 57 of the Annual Report to
shareholders for the year ended December 31, 2001 and are incorporated herein by
reference.



                                       21
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Report of Independent Accountants

















                                       22
<PAGE>


MESSAGE FROM MANAGEMENT:



As the year 2002 drew to a close, the management and associates of Farmers &
Merchants Bancorp, Inc. mirrored the nation in demonstrating the capacity for
meeting the challenges of change. The ability to remain focused on the company's
long-term goals while working through this period is a testament to the
dedication of our personnel and the fundamental strength of our organization.
Perhaps the start of this decade, in fact century, foretold of the turbulent
challenging times that would lie ahead. Remember the dire warning of the year
2000 rollover and the basic nonevent it turned out to be. Since the time change,
the new millennium has provided unending challenges. We have weathered the
terrorist attack on domestic soil, the lowest rate environment in over forty
years, accounting scandals that shake the public trust in private industry, and
drops in the stock market being compared to pre-depression times.

The last few years have reinforced the adage - "never say never". Predicting any
future trends or rate environment seems difficult. The mortgage activity these
past five months has provided a needed revenue source. The return of investor's
money back to banking has made most banks flush with deposits. As the stock
market begins its slow rebound, an eye will be kept on the deposit levels to
insure adequate liquidity in the system.

The current rate environment has hit our population living on fixed incomes the
hardest, especially the elderly. We have felt the pain of a tightened interest
margin, as have they of losing interest income. Risk management and strategic
planning have proven to be essential for maintaining success. While we are not
completely satisfied with our 2002 results, we have been able to weather the
turbulent times with positive dependable results.

During the course of 2002, we did move ahead with initiatives that we believe
will enhance shareholder value for years to come. Our guiding principles have
been twofold: 1) To build a financial services company that delivers a broad
range of high-value products through a sales culture that builds deep
relationships with our customers. 2) To create long-term shareholder value
through a diversified earnings stream, effective risk management and superior
technical and operational efficiencies. Farmers & Merchants Bancorp, Inc.
expects to achieve continued growth through relationship banking with customized
services and local decision making.

2003 brings with it renewed expectations of better times. Recovery, slow but
sure with the end of the second quarter reinforcing the structure for the
remainder of the year. What is missing from the historical comparison in the
first paragraph? Think back to the mid 70's and the prices of oil. The wild card
in all of this is the eminent threat of war. As all Americans, we stand ready to
face the challenges ahead.

Farmers & Merchants Bancorp, Inc. is looking ahead to a year of growth and
expanded opportunity. We are grateful for the contributions of our employees and
the support of our customers and friends. We hope the new year will bring peace
and prosperity for all.



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



                                       23
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.

                                    CONTENTS

                    Audited Consolidated Financial Statements

                 and wholly owned subsidiaries December 31, 2002


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

Table of Contents                                                     24

Board of Directors, Advisory Boards and Officers                 25 - 28

Independent Auditors' Report                                          29

Consolidated Balance Sheets                                           30

Consolidated Statements of Income                                     31

Consolidated Statements of Changes in Shareholders' Equity            32

Consolidated Statements of Cash Flows                                 33

Notes to Consolidated Financial Statements                       34 - 54

Five Year Summary                                                     55

Quarterly Financial Data                                              56

Selected Financial Data by Management                            57 - 59

Market Risk                                                           60

Trading Market for the Company's Stock                                61

Independent Auditors' Report                                          62

Management Report                                                     63

2002 Promotional Highlights                                      64 - 67

</TABLE>




                                       24
<PAGE>



<TABLE>
<CAPTION>

DIRECTORS
<S>                                             <C>                                  <C>
EUGENE D. BERNATH                               JAMES C. SANEHOLTZ                   BARBARA J. BRITENRIKER
Chairman of the Board                           President                            Senior Vice President
The Farmers & Merchants State Bank              Saneholtz-McKarns, Inc.              Comptroller
                                                                                     Chief Financial Officer
DEXTER L. BENECKE                               MAYNARD SAUDER
President                                       Chairman                             ALLEN G. LANTZ
Viking Trucking, Inc.                           Sauder Woodworking Co.               Senior Vice President
Vice President                                                                       Branch Administrator
SanJan, Inc.                                    MERLE J. SHORT
                                                Farmer                               GEORGE JELEN
JERRY L. BOYERS                                 President                            Vice President
President                                       Promow, Inc.                         Secondary Mortgage Director
Edifice Construction
Management                                      STEVEN J. WYSE                       RANDAL H. SCHROEDER
                                                President                            Vice President
JOE E. CROSSGROVE                               SteelinQ Systems, Inc.               Senior Operations Officer
President/Chief Executive
Officer                                         DIRECTOR EMERITUS                    MICHAEL D. CULLER
The Farmers & Merchants State Bank                                                   Vice President
                                                LEE E. GRAFFICE                      Senior Agri Finance Officer
ROBERT G. FREY                                  CHARLES E. LUGBILL
President                                       DALE L. NAFZIGER                     DIANN K. MEYER
E. H. Frey & Sons, Inc.                         HAROLD H. PLASSMAN                   Vice President
President                                       JAMES L. PROVOST                     Human Resource Director
Yoder & Frey, Inc.                              KENNETH E. STAMM
                                                ROBERT V. WHITMER                    KENT E. ROTH
JULIAN GIOVARELLI                                                                    Auditor
President                                                                            Security Officer
GIO Sales, Inc.                                 ARCHBOLD MAIN OFFICE
                                                                                     MARILYN K. JOHNSON
JACK C. JOHNSON                                 EUGENE D. BERNATH                    Asst. Vice President
President                                       Chairman of the Board                Compliance & CRA Officer
Hawk's Clothing, Inc.
Partner                                         JOE E. CROSSGROVE                    J. SCOTT MILLER
REJO Partnership                                President                            Asst. Vice President
                                                Chief Executive Officer              Agri Loan Officer
DEAN E. MILLER                                  Cashier
President                                                                            JUDITH A. WARNCKE
MBC Holdings, Inc.                              MAYNARD SAUDER                       Asst. Vice President
                                                Vice Chairman of the Board           Marketing Officer
ANTHONY J. RUPP
President                                       DEAN E. MILLER                       DOUGLAS A. BERNATH
Rupp Furniture Co.                              Vice President of the Board          Asst. Cashier
                                                                                     Financial Advisor
DAVID P. RUPP, JR.                              EDWARD A. LEININGER
Attorney                                        Executive Vice President             JANE C. BRUNER
Plassman, Rupp, Hensal,                         Chief Operating Officer              Asst. Cashier
Short & Hagans                                  Sr. Commercial Loan Officer          Operations Supervisor

                                                REX D. RICE                          JAY A. BUDDE
                                                Executive Vice President             Asst. Cashier
                                                Chief Lending Officer                E-Commerce Director






</TABLE>


                                       25
<PAGE>

<TABLE>
<S>                                        <C>                                        <C>
RUTH ANN DUNN                              ARCHBOLD ADVISORY BOARD                     WAUSEON ADVISORY BOARD
Asst. Cashier
Loan Document Administrator                BRUCE C. LAUBER                             RICHARD L. ELROD
                                           President                                   President
NANCY J. FIGY                              Lauber Manufacturing Co.                    Mustang Corporation
Asst. Cashier
Administrative Asst Agri Finance           MICHAEL D. KREBS                            WARREN A. KAHRS
                                           President                                   President
BRETT J. KAHRS                             Laub Auto Parts, Inc.                       Kahrs Tractor Sales, Inc.
Asst. Cashier
Senior Investment Executive                GENE SCHAFFNER                              JOSEPH H. KOLB
                                           Farmer                                      Owner
NORMA J. KAUFFMAN                                                                      Kolb & Son
Asst. Cashier                              GEORGE F. STOTZER
Deposit Administrator                      Partner                                     SANDRA K. BARBER
                                           Stotzer Do-It Center                        Fulton County Recorder
GLORIA J. LAUBER                                                                       Chairman, Ohio Lottery Commission
Asst. Cashier                              LARRY M. WENDT
Mortgage Loan Director                     Farmer                                      DR. KENNETH H. KLING
                                           President of Board of Directors             Owner
RYAN D. MILLER                             Ridgeville Telephone                        Fulton County Vision Services
Asst. Cashier
Commercial Lender
                                           WAUSEON SHOOP OFFICE                        STRYKER OFFICE
LILLIS F. NOWACZYK
Asst. Cashier                              GLORIA GUNN                                 RONALD D. SHORT
Consumer Loan Director                     Asst. Vice President                        Asst. Vice President
                                           Branch Manager                              Branch Manager
KELBY J. SCHUMUCKER
Asst. Cashier                              SUSAN DIERINGER                             PATTI L. ROSEBROCK
Credit Analyst                             Asst. Cashier                               Asst. Cashier
                                           Asst. Branch Manager                        Asst. Branch Manager
DIANE J. SWISHER
Asst. Cashier                              JERRY A. BORTON
Central Processing Supervisor              Assistant Vice President                    STRYKER ADVISORY
                                           Agri Loan Officer                           BOARD
LYDIA A. HUBER
Executive Administrative Assistant         SUSAN C. PIKE                               FRED W. GRISIER
Asst. Corporate Secretary                  Asst. Cashier                               Retired
                                           Credit Card Administrator                   Grisier Funeral Home

ARCHBOLD WOODLAND                                                                      STEVEN J. PLANSON
OFFICE                                     WAUSEON DOWNTOWN                            Farmer
                                           OFFICE
DEBORAH L. SHINABERY                       CAROL J. ENGLAND                            RICHARD E. RAKER
Asst. Vice President                       Asst. Vice President                        Retired
Branch Manager                             Branch Manager                              Raker Oil Company
                                           Corporate Secretary
ARTHUR J. SHORT                                                                        WILLIAM J. BRENNER
Asst. Cashier                              JEAN E. HORWATH                             Attorney
Asst. Branch Manager                       Asst. Cashier
                                           Asst. Branch Manager

</TABLE>



                                       26
<PAGE>


<TABLE>
<S>                                        <C>                                      <C>
WEST UNITY OFFICE                           EUGENE BURKHOLDER                         D. ROBERT SHAFFER
                                            President                                 Farmer
LEWIS D. HILKERT                            Falor Farm Center
Senior Vice President                                                                 PAUL R. MANLEY
Branch Manager                              AL KREUZ                                  Director of Intercompany
                                            Retired Fulton County                     Synergies
PATRICIA R. BURKHOLDER                      Commissioner                              Sauder Woodworking Co.
Assistant Cashier
Assistant Branch Manager                    DONALD G. GERDES                          GARRY COURTNEY
                                            Human Resource Manager                    President/CEO
                                            Worthington Steel, Delta                  C.E. Electronics
WEST UNITY ADVISORY
BOARD
                                            BRYAN EAST HIGH OFFICE                    MONTPELIER WEST MAIN
BEN G. WESTFALL                                                                       OFFICE
President                                   DAVID C. FRAZER
Westfall Realty, Inc.                       Assistant Vice President                  KELLY L. BENTLEY
                                            Branch Manager                            Asst. Cashier
TED W. MANEVAL                                                                        Branch Manager
Farmer                                      CAROL L. CHURCH
                                            Assistant Cashier                         JEANNIE L. VONDEYLEN
R. BURDELL COLON                            Assistant Branch Manager                  Asst. Branch Manager
President
Rup-Col., Inc.
                                            BRYAN SOUTHTOWNE OFFICE                   MONTPELIER EASTSIDE
CHARLES W. KLINGER                                                                    OFFICE
Pharmacist                                  MICHAEL T. SMITH
Klinger Pharmacy                            Assistant Vice President                  KELLY L. BENTLEY
                                            Branch Manager                            Asst. Cashier
MICHAEL L. RICHER                                                                     Branch Manager
Farmer                                      RUTH M. FORD
                                            Asst. Cashier                             BARRY R. VONDEYLEN
                                            Asst. Branch Manager                      Asst. Branch Manager
DELTA OFFICE
                                            RICHARD S. BRUCE                          MONTPELIER ADVISORY
CYNTHIA K. KNAUER                           Vice President                            BOARD
Asst. Vice President                        Commercial Loan Officer
Branch Manager                                                                        GREGORY D. SHOUP
                                                                                      President
BETH A. BAY                                 BRYAN ADVISORY BOARD                      Peltcs Lumber Co., Inc.
Asst. Cashier
Asst. Branch Manager                        RUSTY BRUNICARDI                          RICHARD S. DYE
                                            President/Chief Executive                 Self-employed
                                            Officer
DELTA ADVISORY BOARD                        Community Hospital of Williams            ROBERT D. MERCER
                                            Co., Inc.                                 President
TERRY J. KAPER                                                                        Bob Mercer Realty and
Attorney                                    DR. C. NICHOLAS WALZ                      Auctions
Barber, Kaper, Stamm & Robinson             President
                                            Bryan Medical Group                       GEORGE B. RINGS
ROBERT E. GILDERS                                                                     Pharmacist
Chairman                                                                              Rings Pharmacy
GB Manufacturing

</TABLE>




                                       27
<PAGE>


<TABLE>
<S>                                           <C>
NAPOLEON OFFICE                                SWANTON ADVISORY
                                               BOARD
STEPHEN E. JACKSON
Asst. Vice President                           ANTHONY G. FRY
Branch Manager                                 Member
                                               Select Stone
DIANA J. DENNIE                                LLC
Asst.  Cashier
Asst.  Branch Manager                          DANIEL P. MCQUADE
                                               Attorney
MICHAEL F. SCHNITKEY                           The McQuades Co., LPA
Asst.  Cashier
Agri Finance Officer                           LISA J. MITCHELL
                                               Owner/Manager
GARY W. SPENCER                                Swanton Health Care Center
Asst. Vice President
Commercial Loan Officer                        NORMAN ZEITER
                                               President/Owner
                                               Swanton Welding Co.
NAPOLEON ADVISORY BOARD

BARBARA C. SCHIE                               DEFIANCE OFFICE
Office Manager
Fulton Anesthesia Associates, Inc.             DAVID A. KUNESH
                                               Asst. Vice President
DAVID M. DAMMAN                                Branch Manager
Farm Drainage Contractor
Farmer                                         LILLIAN SUE CUEVAS
                                               Asst. Cashier
JAMES J. VAN POPPEL                            Asst. Branch Manager
President
Van Poppel Limited

DENNIS L. MEYER
Realtor
Reiser Realty


SWANTON OFFICE

BARRY N. GRAY
Asst. Vice President
Branch Manager

DEBRA J. KAUFFMAN
Asst. Cashier
Asst. Branch Manager


</TABLE>




                                       28
<PAGE>

January 10, 2003



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, 2002 and 2001 and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for the years ended December 31, 2002, 2001 and 2000. 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 auditing standards generally accepted
in the United States of America. 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, 2002 and 2001,
and the results of its consolidated operations and cash flows for the years
ended December 31, 2002, 2001 and 2000 in conformity with accounting principles
generally accepted in the United States of America.



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






                                       29
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.
                           Consolidated Balance Sheets
                           December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                     ASSETS
                                                                      (In Thousands)
                                                                  -----------------------
                                                                    2002           2001
                                                                  --------       --------
<S>                                                               <C>            <C>
Cash and due from banks                                           $ 18,508       $ 17,842
Interest bearing deposits with banks                                   279            146
Investment securities at market                                    178,793        172,963
Federal Home Loan Bank stock                                         3,328          3,178
Loans, less allowance for loan losses of $6,400
   for 2002 and $7,275 for 2001                                    491,021        453,836
Loans held for resale                                                6,076         13,788
Finance lease receivable                                               418            619
Bank premises and equipment-net                                     15,034         12,332
Accrued interest and other assets                                   13,029          8,922
                                                                  --------       --------
TOTAL ASSETS                                                      $726,486       $683,626
                                                                  ========       ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
   Deposits:
     Demand                                                       $ 43,808       $ 41,991
     NOW accounts                                                  103,316         84,763
     Savings                                                        99,657        111,213
     Time                                                          329,592        328,190
                                                                  --------       --------
      Total Deposits                                               576,373        566,157
   Federal funds purchased                                           9,570          5,595
   Securities sold under agreement to repurchase                    28,630         20,944
   Other borrowings                                                 28,696         17,410
   Dividend payable                                                    650            715
   Accrued interest and other liabilities                            4,829          2,455
                                                                  --------       --------
      Total Liabilities                                            648,748        613,276
                                                                  --------       --------

SHAREHOLDERS' EQUITY:
   Common stock, $500 par value - authorized 1,300,000
     shares; issued and outstanding 1,300,000 shares                12,677         12,677
   Undivided profits                                                61,345         56,092
   Accumulated other comprehensive income                            3,716          1,581
                                                                  --------       --------
      Total Shareholders' Equity                                    77,738         70,350
                                                                  --------       --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                        $726,486       $683,626
                                                                  ========       ========
</TABLE>



See Accompanying Notes to Consolidated Financial Statements.


                                       30

<PAGE>



                        FARMERS & MERCHANTS BANCORP, INC.
              Consolidated Statements of Income for the years ended
                        December 31, 2002, 2001 and 2000



<TABLE>
<CAPTION>
                                                                       (In Thousands) (Except for Per Share Amounts)
                                                                    2002                   2001                   2000
                                                                 ----------             ----------             ----------
INTEREST INCOME:
<S>                                                              <C>                    <C>                    <C>
     Interest and fees on loans                                  $   35,309             $   40,728             $   42,661
     Interest and Dividends on Investment Securities:
          U.S. Treasury and government agency                         5,378                  4,981                  3,829
          State and local governments                                 2,280                  1,798                  1,513
          Corporate debt securities                                     224                    528                    544
          Dividends                                                     150                    206                    209
     Interest on federal funds sold                                      58                    473                    130
     Interest on deposits in banks                                       25                    231                      4
                                                                 ----------             ----------             ----------
          Total Interest Income                                      43,424                 48,945                 48,890
                                                                 ----------             ----------             ----------
INTEREST EXPENSE:
     Deposits                                                        17,574                 22,947                 22,299
     Borrowed funds                                                   1,405                  2,501                  3,210
                                                                 ----------             ----------             ----------
          Total Interest Expense                                     18,979                 25,448                 25,509
                                                                 ----------             ----------             ----------
          Net Interest Income                                        24,445                 23,497                 23,381
PROVISION FOR LOAN LOSSES                                             2,194                  2,632                  1,496
                                                                 ----------             ----------             ----------
NET INCOME AFTER PROVISION
    FOR LOAN LOSS                                                    22,251                 20,865                 21,885
                                                                 ----------             ----------             ----------
OTHER INCOME:
     Service charges on deposit accounts                              2,032                  1,899                  1,745
     Other service charges and fees                                   2,216                  1,686                  1,308
     Gains (loss) on sale of loans                                    1,260                    424                    112
     Mortgage servicing rights income                                   292                  1,722                    113
     Net securities gains (losses)                                       76                    228                     --
                                                                 ----------             ----------             ----------
          Total Other Income                                          5,876                  5,959                  3,278
                                                                 ----------             ----------             ----------
OTHER EXPENSES:
     Salaries and wages                                               7,201                  7,059                  6,542
     Pension and other employee benefits                              2,140                  1,937                  1,603
     Occupancy expense (net)                                            444                    482                    432
     Furniture and equipment                                          1,566                  1,444                  1,178
     Data processing fees                                             1,022                  1,001                    758
     Franchise taxes                                                    815                    842                    772
     Mortgage servicing rights expense                                  902                    911                    129
     Other operating expense                                          3,650                  3,500                  3,240
                                                                 ----------             ----------             ----------
          Total Other Expenses                                       17,740                 17,176                 14,654
                                                                 ----------             ----------             ----------
INCOME BEFORE INCOME TAXES                                           10,387                  9,648                 10,509
INCOME TAXES                                                          2,989                  2,892                  3,118
                                                                 ----------             ----------             ----------
NET INCOME                                                       $    7,398             $    6,756             $    7,391
                                                                 ==========             ==========             ==========

NET INCOME PER SHARE - BASIC                                     $     5.69             $     5.20             $     5.69
                                                                 ==========             ==========             ==========
WEIGHTED AVERAGE SHARES OUTSTANDING                               1,300,000              1,300,000              1,300,000
                                                                 ==========             ==========             ==========
</TABLE>


See Accompanying Notes to Consolidated Financial Statements.


                                       31
<PAGE>

                        FARMERS & MERCHANTS BANCORP, INC.

           Consolidated Statements of Changes in Shareholders' Equity
              for the years ended December 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>
                                                                                            (In Thousands)
                                                                               ------------------------------------------
                                                                                                            Accumulated
                                                                                                               Other
                                                                                Common        Undivided     Comprehensive
                                                                                Stock          Profits          Income
                                                                               --------        --------        --------
<S>                                                                            <C>             <C>             <C>
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
  Comprehensive income:
     Net income for 2001                                                             --           6,756              --
     Other comprehensive income net of tax:
         Unrealized loss on Available-For-Sale
           securities (net of tax effect of $431)                                    --              --             836
     Reclassification adjustment for gain on sale of
         Available-For-Sale securities (net of tax)                                  --              --            (150)
  Cash dividends ($1.60 per share)                                                   --          (2,080)             --
                                                                               --------        --------        --------

BALANCE AT DECEMBER 31, 2001                                                     12,677          56,092           1,581
  Comprehensive income:
     Net income for 2002                                                             --           7,398
     Other comprehensive income net of tax:
         Unrealized gain on Available-For-Sale
          securities (net of tax effect of $1,126)                                   --                           2,185
     Reclassification adjustment for gain on sale of
         Available-For-Sale securities (net of tax)                                                                 (50)
  Cash dividends ($1.65 per share)                                                   --          (2,145)             --
                                                                               --------        --------        --------
BALANCE AT DECEMBER 31, 2002                                                   $ 12,677        $ 61,345        $  3,716
                                                                               ========        ========        ========
</TABLE>


See Accompanying Notes to Consolidated Financial Statements.


                                       32

<PAGE>





                        FARMERS & MERCHANTS BANCORP, INC.
            Consolidated Statements of Cash Flows for the years ended
                        December 31, 2002, 2001 and 2000



<TABLE>
<CAPTION>
                                                                                          (In Thousands)
                                                                            ------------------------------------------
                                                                              2002             2001             2000
                                                                            ---------        ---------       ---------
<S>                                                                         <C>              <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                $   7,398        $   6,756       $   7,391
  Adjustments to Reconcile Net Income to Net Cash
   Provided (Used) by Operating Activities:
     Depreciation                                                               1,345            1,282           1,096
     Amortization of servicing rights                                             902              911             129
     Amortization of securities premiums/discounts                              1,360              278             222
     Provision for loan losses                                                  2,194            2,632           1,496
     Provision for deferred income taxes                                          245              365             (55)
     (Gain) loss on sale of other                                                 (26)              21             (80)
     (Gain) loss on sale of securities                                            (76)            (228)             --
     Originations of mortgage loans held for sale                            (149,938)        (141,754)        (21,553)
     Proceeds from mortgage loans held for sale                               143,862          128,293          21,727
     Net change in other assets/liabilities                                     1,101           (2,027)         (2,807)
       Net Cash Provided (Used) by Operating Activities                     ---------        ---------       ---------
                                                                                8,367           (3,471)          7,566
                                                                            ---------        ---------       ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of premises, equipment, & other real estate                         (4,551)          (3,469)         (1,276)
  Proceeds from sale of premises, equipment,
     and other real estate                                                        424              195              15
  Purchase of life insurance contracts                                         (5,057)              --              --
  Maturity proceeds of available-for-sale securities                           65,280           46,212          28,427
  Sale proceeds of available-for-sale securities                                8,282           10,882              --
  Purchase of available-for-sale securities                                   (77,508)        (116,015)        (36,660)
  Net increase in loans and leases                                            (25,390)          23,230         (25,585)
                                                                            ---------        ---------       ---------
       Net Cash Used by Investing Activities                                  (38,520)         (38,965)        (35,079)
                                                                            ---------        ---------       ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase in deposits                                                     10,215           49,694          13,297
  Net change in short-term borrowings                                          11,661            7,636          11,560
  Proceeds from other borrowings                                               15,000            5,000          27,000
  Payments on other borrowings                                                 (3,714)         (18,377)        (21,253)
  Payment of dividends                                                         (2,210)          (1,950)         (2,015)
                                                                            ---------        ---------       ---------
     Net Cash Provided by Financing Activities                                 30,952           42,003          28,589
                                                                            ---------        ---------       ---------
     Net Change in Cash and Cash Equivalents                                      799             (433)          1,076
CASH AND CASH EQUIVALENTS - JANUARY 1                                          17,988           18,421          17,345
                                                                            ---------        ---------       ---------

CASH AND CASH EQUIVALENTS - DECEMBER 31                                     $  18,787        $  17,988       $  18,421
                                                                            =========        =========       =========
RECONCILIATION OF CASH AND CASH EQUIVALENTS:
  Cash and due from banks                                                   $  18,508        $  17,842       $  17,951
  Interest bearing deposits                                                       279              146             100
  Federal funds sold                                                               --               --             370
                                                                            ---------        ---------       ---------
                                                                            $  18,787        $  17,988       $  18,421
                                                                            =========        =========       =========
SUPPLEMENTARY CASH FLOWS DISCLOSURES:
  Cash paid during the year for:
     Interest (net of amount capitalized)                                   $  19,370        $  25,665       $  25,155
     Income taxes                                                               1,316            3,480           4,334
</TABLE>


See Accompanying Notes to Consolidated Financial Statements.



                                       33
<PAGE>

                        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 and accounts for 99% of the
                           consolidated revenues.

                           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.

                                       34
<PAGE>


                        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.

                                       35

<PAGE>

                        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 servicing assets
                           recognized during 2002 was $260 thousand, while
                           servicing assets amortized during 2002 was $901
                           thousand. Capitalized mortgage servicing rights are
                           included in other assets and totaled $1.025 million
                           and $1.666 million at December 31, 2002 and 2001,
                           respectively. The fair value of recognized servicing
                           assets was $1.9 million, fair value being determined
                           by the present value of expected future cash flows.
                           No valuation allowance is required.

                                       36

<PAGE>

                        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.

                                       37
<PAGE>

                        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, 2002 and 2001 were $9.2
                  million and $8.1 million, respectively.

                  The Company and its subsidiaries maintain cash balances with
                  high quality credit institutions. At times such balances may
                  be in excess of the federally insured limits.

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.

<TABLE>
<CAPTION>

                                                                  (In Thousands)
                                           -----------------------------------------------------------
                                                                      2002
                                           -----------------------------------------------------------
                                             Gross           Gross            Gross            Gross
                                           Amortized       Unrealized       Unrealized         Market
                                             Cost            Gains            Losses           Value
                                           --------         --------          ------          --------
Available-for-Sale:
<S>                                        <C>              <C>              <C>              <C>
     U.S. Treasury                         $  4,125         $     90         $     --         $  4,215
     U.S. Government agency                  97,569            2,834               --          100,403
     Mortgage-backed securities              16,123              495               --           16,618
     State and local governments             53,683            2,209               32           55,860
     Corporate debt securities                1,615               35               --            1,650
     Equity securities                           47               --               --               47
                                           --------         --------         ------           --------
                                           $173,162         $  5,663         $     32         $178,793
                                           ========         ========         ========         ========
</TABLE>



                                       38

<PAGE>

                       FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)

NOTE 3.           INVESTMENT SECURITIES (Continued)


<TABLE>
<CAPTION>
                                                                   (In Thousands)
                                           -----------------------------------------------------------
                                                                      2001
                                           -----------------------------------------------------------
                                             Gross           Gross            Gross            Gross
                                           Amortized       Unrealized       Unrealized         Market
                                             Cost            Gains            Losses           Value
                                           --------         --------          ------          --------
Available-for-Sale:
<S>                                        <C>              <C>              <C>              <C>
      U.S. Treasury                        $  4,915          $    123        $     --          $  5,038
      U.S. Government agency                 85,257             2,410              82            87,585
      Mortgage-backed securities             21,369               122              82            21,409
      State and local governments            50,256               806             243            50,819
      Corporate debt securities               7,751                86             746             7,091
      Commercial paper                          974                --              --               974
      Equity securities                          47                --              --                47
                                           --------          --------        --------          --------
                                           $170,569          $  3,547        $  1,153          $172,963
                                           ========          ========        ========          ========
</TABLE>

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



<TABLE>
<CAPTION>
                                                 (In Thousands)
                                    -----------------------------------------
                                     2002             2001             2000
                                    -------         ---------        --------
<S>                                 <C>             <C>              <C>
Gross realized gains                $    79         $     228        $     --
Gross realized losses                    (3)               --              --
                                    -------         ---------        --------
  Net Realized Gains                     76         $     228        $     --
                                    =======         =========        ========
</TABLE>


                  The amortized cost and estimated market value of debt
                  securities at December 31, 2002, 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                                        $ 56,838        $ 57,625
After one year through five years                         94,771          98,790
After five years through ten years                        20,970          21,761
After ten years                                              536             570
                                                        --------        --------

        Total                                           $173,115        $178,746
                                                        ========        ========
</TABLE>
<PAGE>
                       FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)



NOTE 3.           INVESTMENT SECURITIES (Continued)

                  Investments with a carrying value of $131 million and $106.6
                  million at December 31, 2002 and 2001, 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 since it
                  is not actively traded, and therefore, has no readily
                  determinable market value. 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)
                                                 ------------------------------
                                                    2002               2001
                                                 -----------        -----------
<S>                                              <C>                <C>
Loans:
   Real estate                                    $ 272,857          $ 247,545
   Commercial and industrial                        100,119             96,992
   Agricultural (excluding real estate)              66,136             53,717
   Consumer and other loans                          50,996             54,992
   Overdrafts                                           160                853
   Industrial Development Bonds                       7,810              7,590
                                                 -----------        -----------
                                                    498,078            461,689
   Less: Deferred loan fees and costs                  (657)              (578)
                                                 -----------        -----------
                                                    497,421            461,111
   Less: Allowance for loan losses                   (6,400)            (7,275)
                                                 -----------        -----------
        Loans - Net                               $ 491,021          $ 453,836
                                                 ===========        ===========
</TABLE>

The following is a maturity schedule by major category of loans including
available for sale loans:

<TABLE>
<CAPTION>
                                                                (In Thousands)
                                                ----------------------------------------------
                                                         Principal Payments Due Within
                                                ----------------------------------------------
                                                                   Two to            After
                                                   One Year      Five Years       Five Years
                                                -------------    ------------    -------------
<S>                                             <C>              <C>             <C>
Real estate loans                               $       6,738    $     24,407    $     241,712
Commercial and industrial loans                        87,449          32,330           46,476
Consumer, Master Card and overdrafts                    8,573          36,449            6,134
Industrial Development Bonds                            1,702           1,921            4,187
</TABLE>


                                       40
<PAGE>
                       FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)




NOTE 5.           LOANS (Continued)

                  The distribution of fixed rate loans and variable rate loans
                  by major loan category is as follows as of December 31, 2002:

<TABLE>
<CAPTION>
                                                           (In Thousands)
                                                    ---------------------------
                                                        Fixed       Variable
                                                         Rate         Rate
                                                    ------------  -------------
<S>                                                 <C>           <C>
Real estate loans                                   $    62,940   $    216,531
Commercial and industrial loans                          70,509         95,208
Consumer, Master Card and overdrafts                     49,591          1,565
Industrial Development Bonds                              7,810
</TABLE>





                  $133.7 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 $15.8 and $16.3
                  million at December 31, 2002 and 2001, 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 2002 were $124.5 million and
                  repayments were $125 million. In the opinion of management,
                  these loans do not involve more than normal risk of
                  collectibility or possess other unfavorable features.

                  As of December 31, 2002 and 2001 there were $10.4 million and
                  $3.3 million, respectively of undisbursed loans in process.

                  Loans for which the Bank is providing collection services is
                  $209.9, $191.7 and $163.5 million for 2002, 2001 and 2000,
                  respectively.

                  The following is an analysis of the allowance for loan loss:


<TABLE>
<CAPTION>
                                                         (In Thousands)
                                            -----------------------------------------
                                               2002           2001            2000
                                            ----------    -----------      ----------
<S>                                         <C>           <C>              <C>
Allowance for Loan Losses
    Balance at beginning of year            $    7,275     $    7,160     $    6,750
    Provision for loan loss                      2,194          2,632          1,496
    Recoveries                                   1,183            617          1,287
    Loans charged off                           (4,252)        (3,134)        (2,373)
                                            -----------    -----------    -----------
                                            $    6,400     $    7,275     $    7,160
                                            ===========    ===========    ===========
</TABLE>


                                       41
<PAGE>
                       FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)



NOTE 5.           LOANS (Continued)

                  As of December 31, 2002 and 2001, the recorded investment in
                  impaired loans amounted to approximately $17.9 and $16.2
                  million, respectively. The average recorded investment in
                  impaired loans amounted to approximately $5.5 million, $12.8
                  million and $8.6 million for 2002, 2001 and 2000,
                  respectively. Of the loans that were considered impaired for
                  2002 and 2001, the recorded investment in impaired loans that
                  have a related allowance determined in accordance with SFAS
                  No. 114 was $5.6 million and $5.1 million, respectively for
                  which the related allowance for loan loss was $2.4 million and
                  $3.8 million, respectively. As of December 31, 2002 there were
                  no commitments to lend additional funds to debtors whose loans
                  are not performing.

                  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 $195, $257 and $177 thousand
                  for 2002, 2001 and 2000, respectively.

                  Loans held for sale are residential mortgage loans that will
                  be sold to FREDDIE MAC. Fair market value has been determined
                  based upon the market in which the Bank normally operates and
                  includes consideration of all open positions, outstanding
                  commitments, and related fees paid. Gains or losses are
                  recognized at settlement dates and are determined by the
                  difference between the sales price and the carrying value.
                  Gains and losses are included in other income.

NOTE 6.           FINANCE LEASE RECEIVABLE

                  Finance leases as of December 31 are as follows:

<TABLE>
<CAPTION>
                                                                 (In Thousands)
                                                           --------------------------
                                                              2002            2001
                                                           ----------      ----------
<S>                                                        <C>             <C>
Gross investment in leases                                 $     460       $     684
Unearned income                                                  (42)            (65)
                                                           ----------      ----------
    Finance Lease Receivable                               $     418       $     619
                                                           ==========      ==========
</TABLE>

                  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)
                                                          -------------------------
                                                             2002           2001
                                                          ----------     ----------
<S>                                                       <C>            <C>
Land                                                      $   2,769      $   2,601
Buildings                                                    13,974         10,661
Furnishings                                                   8,470          8,308
                                                          ----------     ----------
                                                             25,213         21,570
Less: Accumulated depreciation                              (10,179)        (9,238)
                                                          ----------     ----------
     Banking Premises and Equipment (Net)                 $  15,034      $  12,332
                                                          ==========     ==========
</TABLE>

                                       42
<PAGE>
                       FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)



NOTE 8.           DEPOSITS

                  Time deposits at December 31 consist of the following:

<TABLE>
<CAPTION>
                                                            (In Thousands)
                                                     ----------------------------
                                                        2002              2001
                                                     ----------        ----------
<S>                                                  <C>               <C>
Time deposits under $100,000                         $  239,493        $  246,455
Time deposits of $100,000 or more                        90,099            81,735
                                                     ----------        ----------
                                                     $  329,592        $  328,190
                                                     ==========        ==========
</TABLE>

                  For each of the five years subsequent to December 31, 2002,
                  maturities for time deposits having a remaining term of more
                  than one year follows:

<TABLE>
<S>                               <C>
2002                              $ 213,882
2003                                 88,920
2004                                 22,492
2005                                  2,589
2006 and thereafter                   1,709
                                  ---------

                                  $ 329,592
                                  =========
</TABLE>

                  Deposits to directors, executive officers companies in which
                  they have a direct or indirect ownership as of December 31,
                  2002 and 2001 amounted to $14.5 million and $10.7 million,
                  respectively.

NOTE 9.           REPURCHASE AGREEMENTS

                  The Bank's policy requires qualifying securities as collateral
                  for the underlying repurchase agreements. As of December 31,
                  2002 and 2001 securities with a book value of $33.6 million
                  and $33.1 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)
                                           --------------------------
                                              2002            2001
                                           ----------      ----------
<S>                                        <C>             <C>
Federal Home Loan Bank, various
  loans due in monthly installments
  of $105 thousand plus annual
  payments of $400 thousand
  including 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                                $   28,696     $   17,410
                                           ==========     ==========
</TABLE>


                                       43
<PAGE>
                       FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)



NOTE 10.          OTHER BORROWINGS (Continued)

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


<TABLE>
<S>                                  <C>
2003                                 $    13,368
2004                                       2,656
2005                                       2,243
2006                                       1,967
2007                                       6,611
2008 and thereafter                        1,851
                                     -----------
                                     $    28,696
                                     ===========
</TABLE>

NOTE 11.          FEDERAL INCOME TAXES

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

<TABLE>
                                                  (In Thousands)
                                               ---------------------
                                                 2002         2001
                                               --------     --------
<S>                                            <C>          <C>
Deferred Tax Assets:
   Allowance for loan losses                   $  1,890     $  2,187
                                               --------     --------
Deferred Tax Liabilities:
   Accreted discounts on bonds                      193          139
   FHLB stock dividends                             564          497
   Mortgage servicing rights                        348          567
   Other                                             95           50
   Net unrealized gain on available-
    for-sale securities                           1,914          814
                                               --------     --------
                                                  3,114        2,067
                                               --------     --------
        Net Deferred Tax Asset (Liability)     $ (1,224)    $    120
                                               ========     ========
</TABLE>

                  The Company has not recorded a valuation allowance for
                  deferred tax assets because management believes that it is
                  more likely than not that they will be ultimately realized.


                                       44
<PAGE>
                       FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)




NOTE 11.          FEDERAL INCOME TAXES (Continued)

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


<TABLE>
<CAPTION>
                                                 (In Thousands)
                                    -----------------------------------------
                                       2002            2001           2000
                                    ----------     -----------     ----------
<S>                                 <C>            <C>             <C>
Current:
   Federal                          $    2,749     $     2,732     $    3,173

Deferred:
   Federal                                 240             160            (55)
                                    ----------     -----------     ----------
                                    $    2,989     $     2,892     $    3,118
                                    ==========     ===========     ==========
</TABLE>

<TABLE>
<CAPTION>
                                                        (In Thousands)
                                              ---------------------------------
                                               2002         2001         2000
                                              -------      -------      -------
<S>                                           <C>          <C>          <C>
Income tax at statutory rates                 $ 3,594      $ 3,411      $ 3,485
Tax effect:
        Tax exempt interest                      (685)        (596)        (447)
        Costs attributable to tax
          exempt interest, etc.                    80           77           80
                                              -------      -------      -------

                                              $ 2,989      $ 2,892      $ 3,118
                                              =======      =======      =======
</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 $509, $472, and $410 thousand for 2002, 2001
                  and 2000, respectively.




                                       45
<PAGE>
                       FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


NOTE 13.          RELATED PARTY TRANSACTIONS

                  The Bank has conducted transactions with its officers and
                  directors as set forth in Notes 5 and 8.

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, is as follows:


<TABLE>
<CAPTION>
                                                       (In Thousands)
                                                  -------------------------
                                                     2002           2001
                                                  ----------     ----------
<S>                                               <C>            <C>
Commitments to extend credit                      $   92,035     $   81,654
Credit card arrangements                              23,582         23,809
Standby letters of credit                              2,706          1,971
</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.

                  The Bank was committed in the amount of $561 thousand for the
                  completion of the new operations center as of December 31,
                  2002.

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

                  Nearly 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. Most 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.

                  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.




                                       46
<PAGE>
                       FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)




NOTE 16.          REGULATORY CAPITAL REQUIREMENTS

                  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, 2002, that the Bank meets all the
                  capital adequacy requirements to which it is subject.

                  As of December 31, 2002 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, 2002 and 2001 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, 2002:
    Total Risk-Based Capital
     (to Risk Weighted Assets)

         Consolidated                         $ 83,851     16.51%    $ 40,750       8.00%      $ 50,938     10.00%
         Farmers & Merchants
           State Bank                           79,702     15.44%      41,300       8.00%        51,626     10.00%

    Tier 1 Capital
     (to Risk Weighted Assets)
         Consolidated                           74,008     14.53%      20,375       4.00%        30,563      6.00%
         Farmers & Merchants
           State Bank                           63,302     12.26%      20,650       4.00%        30,976      6.00%

    Tier 1 Capital
     (to Adjusted Total Assets)
         Consolidated                           74,008     10.19%      29,059       4.00%        43,589      5.00%
         Farmers & Merchants
           State Bank                           63,302      8.84%      28,636       4.00%        35,794      5.00%
</TABLE>


                                       47
<PAGE>
                       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, 2001:
    Total Risk-Based Capital
     (to Risk Weighted Assets)
         Consolidated                         $ 76,030     16.78%    $ 36,255       8.00%      $ 45,319     10.00%
         Farmers & Merchants
           State Bank                           73,717     15.16%      38,900       8.00%        48,625     10.00%

    Tier 1 Capital
     (to Risk Weighted Assets)
         Consolidated                           68,769     15.17%      18,127       4.00%        27,191      6.00%
         Farmers & Merchants
           State Bank                           57,625     11.85%      19,451       4.00%        29,177      6.00%

    Tier 1 Capital
     (to Adjusted Total Assets)
         Consolidated                           68,769     10.01%      27,488       4.00%        34,360      5.00%
         Farmers & Merchants
           State Bank                           57,625      8.39%      27,473       4.00%        34,341      6.00%
</TABLE>

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

                  The Bank is restricted as to the amount of dividends that 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 $15.5
                  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, 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.



                                       48
<PAGE>
                       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,
                  2002 and 2001 are reflected below:

<TABLE>
<CAPTION>
                                                              (In Thousands)
                                            ----------------------------------------------------
                                                      2002                      2001
                                            ------------------------- --------------------------
                                               Book          Fair        Book           Fair
                                               Value         Value       Value          Value
                                            -----------   ----------- -----------    -----------
<S>                                         <C>            <C>         <C>            <C>
Financial Assets:
    Cash and cash equivalents                $  18,508     $  18,508   $  17,842      $  17,842
    Interest bearing deposits                      279           279         146            146
    Available-for-sale securities              178,793       178,793     172,963        172,963
    Federal Home Loan Bank                       3,328         2,899       3,178          3,178
    Net loans                                  497,515       525,585     468,243        489,264
    Interest receivable                          5,963         5,963       6,287          6,287

Financial Liabilities:
    Deposits                                 $ 576,373     $ 584,707   $ 566,157      $ 574,852
    Short-term borrowings:
      Federal funds purchased                    9,570         9,570       5,595          5,595
      Repurchase agreement sold                 28,630        28,630      20,944         20,944
    Other borrowings                            28,696        29,028      17,410         17,766
    Interest payable                             1,530         1,530       1,921          1,921

Off-Balance-Sheet Financial Instruments
    Commitments to
     extend credit                           $ 115,617     $ 115,617   $ 105,463      $ 105,463
    Standby letters of credit                    2,706         2,706       1,971          1,971
</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.


                                       49
<PAGE>
                       FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)




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

                           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.

                           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 that
                           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.

                           OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS

                           The amounts shown under carrying value represent
                           accruals or deferred fees arising from the related
                           off-balance-sheet financial instruments. Fair value
                           for off-balance-sheet financial instruments are based
                           fees currently charged to enter into similar
                           arrangements, taking into account the remaining terms
                           of the agreements and the counterparties' credit
                           standing.




                                       50
<PAGE>
                       FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)




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

                           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.

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


<TABLE>
<CAPTION>
                                   BALANCE SHEETS

                                                                    (In Thousands)
                                                                 --------------------
                                                                   2002        2001
                                                                 --------    --------
<S>                                                              <C>         <C>
ASSETS:
   Cash                                                          $    655    $    773
   Related party receivables:
    Dividends                                                         325         715
    Note receivable                                                10,000      10,000
   Investment in subsidiaries                                      67,553      59,756
                                                                 --------    --------
TOTAL ASSETS                                                     $ 78,533    $ 71,244
                                                                 ========    ========

LIABILITIES:
   Accrued expenses                                              $    145    $    179
   Dividends payable                                                  650         715
                                                                 --------    --------
       Total Liabilities                                              795         894
                                                                 --------    --------

SHAREHOLDERS' EQUITY:
   Common stock, no par value -
    1,500,000 shares authorized; 1,300,000 shares issued           12,677      12,677
   Undivided profits                                               61,345      56,092
   Accumulated other comprehensive income                           3,716       1,581
                                                                 --------    --------
       Total Shareholders' Equity                                  77,738      70,350
                                                                 --------    --------
TOTAL LIABILITIES AND
   SHAREHOLDERS' EQUITY                                          $ 78,533    $ 71,244
                                                                 ========    ========
</TABLE>


                                       51
<PAGE>
                       FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)




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

<TABLE>
<CAPTION>
                            STATEMENTS OF INCOME

                                                        (In Thousands)
                                              -----------------------------------
                                                2002         2001          2000
                                              --------     --------      --------
<S>                                           <C>          <C>           <C>
INCOME:
   Equity in net income of subsidiaries       $  7,075     $  6,409      $  7,055
   Interest income                                 600          600           600
                                              --------     --------      --------
        Total Income                             7,675        7,009         7,655
                                              --------     --------      --------

EXPENSES:
   Miscellaneous                                    35           23            23
   Professional fees                                20           14            17
   Supplies                                          8            7             7
   Taxes                                            68           30            43
                                              --------     --------      --------
        Total Expenses                             131           74            90
                                              --------     --------      --------

INCOME BEFORE INCOME TAXES                       7,544        6,935         7,565

INCOME TAXES                                       147          179           174
                                              --------     --------      --------

NET INCOME                                    $  7,397     $  6,756      $  7,391
                                              ========     ========      ========

</TABLE>



                                       52
<PAGE>
                       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, 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
 Dividends ($1.50 per share)                                 -            (1,950)           -
                                                        --------        --------        -------
BALANCE AT DECEMBER 31, 2000                              12,677          51,416            895
 Comprehensive income:
   Net income for 2001                                       -             6,756            -
   Other comprehensive income net of tax:
    Unrealized loss on Available-For-Sale
       securities (net of tax effect of $431)                -               -              836
   Reclassification adjustment for gain on sale of
    Available-For-Sale securities (net of tax)                                             (150)
 Dividends ($1.60 per share)                                 -            (2,080)           -
                                                        --------        --------        -------
BALANCE AT DECEMBER 31, 2001                              12,677          56,092          1,581
 Comprehensive income:
   Net income for 2002                                       -             7,397            -
   Other comprehensive income net of tax:
    Unrealized loss on Available-For-Sale
       securities (net of tax effect of $1,126)              -               -            2,185
   Reclassification adjustment for gain on sale of
    Available-For-Sale securities (net of tax)                                              (50)
 Dividends ($1.65 per share)                                 -            (2,145)           -
                                                        --------        --------        -------
BALANCE AT DECEMBER 31, 2002                            $ 12,677        $ 61,344        $ 3,716
                                                        ========        ========        ========
</TABLE>


                                       53
<PAGE>
                       FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)




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

<TABLE>
<CAPTION>
                                STATEMENT OF CASH FLOWS

                                                                (In Thousands)
                                                      -----------------------------------
                                                        2002         2001          2000
                                                      --------     --------      --------
<S>                                                   <C>          <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                         $  7,397     $  6,756      $  7,391
   Adjustments to Reconcile Net Income
    to Net Cash Provided by Operating Activities:
        Equity in undistributed net income
         of subsidiaries                                (7,075)      (6,409)       (7,055)
        Changes in Operating Assets and
         Liabilities:
            Accrued expenses                               271            5            (2)
                                                      --------     --------      --------
                 Net Cash Provided by
                  Operating Activities                     593          352           334
                                                      --------     --------      --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Dividends from wholly-owned subsidiaries              1,500        1,665         1,718
                                                      --------     --------      --------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Payment of dividends                                 (2,210)      (1,950)       (2,015)
                                                      --------     --------      --------
                 Net Change in Cash and
                  Cash Equivalents                        (117)          67            37

CASH AND CASH EQUIVALENTS -
 beginning of year                                         773          706           669
                                                      --------     --------      --------

CASH AND CASH EQUIVALENTS -
 END OF YEAR                                          $    656     $    773      $    706
                                                      ========     ========      ========
</TABLE>



                                       54
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.

                  Five-Year Summary of Consolidated Operations

<TABLE>
<CAPTION>
                                                 2002            2001             2000           1999           1998
                                              ----------      ----------       ----------     ----------     ----------
<S>                                           <C>             <C>              <C>            <C>            <C>
Summary of Income:
   Interest income                            $   43,424      $   48,945       $   48,890     $   43,779     $   42,888
   Interest expense                               18,979          25,448           25,509         21,150         22,085
                                              ----------      ----------       ----------     ----------     ----------
       Net Interest Income                        24,445          23,497           23,381         22,629         20,803
Provision for loan loss                            2,194           2,632            1,496          1,637            892
                                              ----------      ----------       ----------     ----------     ----------
Net interest income after
 provision for loan loss                          22,251          20,865           21,885         20,992         19,911
Other income (expense)                           (11,864)        (11,217)         (11,376)       (11,192)        (8,841)
                                              ----------      ----------       ----------     ----------     ----------
Net income before
 income taxes                                     10,387           9,648           10,509          9,800         11,070
Income taxes                                       2,989           2,892            3,118          3,007          3,413
                                              ----------      ----------       ----------     ----------     ----------
       Net income                             $    7,398      $    6,756        $   7,391     $    6,793     $    7,657
                                              ==========      ==========        =========     ==========     ==========


Per Share of Common Stock:
   Earnings per common share
    outstanding (Based on weighted
    average number of shares
    outstanding):
       Net income                             $     5.69      $     5.20        $    5.69     $     5.23     $     5.89
       Dividends                              $     1.65      $     1.60        $    1.50     $     1.40     $     1.40
       Weighted average number
        of shares outstanding                  1,300,000       1,300,000        1,300,000      1,300,000      1,300,000


Year-end assets                               $  726,486      $  683,626       $  635,160     $  598,529     $  585,869
Average assets                                   695,137         663,469          619,075        585,189        553,277
Year-end equity capital                           77,738          70,350           64,988         57,889         55,350
Average equity capital                            74,495          69,429           61,488         56,862         52,940
</TABLE>



                                       55
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.

                            Quarterly Financial Data

<TABLE>
<CAPTION>
                                                            Quarter Ended in 2002
                                        -----------------------------------------------------------
                                          Mar 31           Jun 30          Sep 30           Dec 31
                                        ----------      ----------      ----------       ----------
<S>                                     <C>             <C>             <C>              <C>
Summary of Income:
   Interest income                      $   11,200      $   10,662      $   10,881       $   10,681
   Interest expense                          5,016           4,883           4,688            4,392
                                        ----------      ----------      ----------       ----------
       Net Interest Income                   6,184           5,779           6,193            6,289
Provision for loan loss                        656             393             537              608
                                        ----------      ----------      ----------       ----------
Net interest income after
 provision for loan loss                     5,528           5,386           5,656            5,681
Other income (expense)                      (2,955)         (3,230)         (3,234)          (2,445)
                                        ----------      ----------      ----------       ----------
Net income before                            2,573           2,156           2,422            3,236
 income taxes                                  670             543             641            1,135
                                        ----------      ----------      ----------       ----------

Net Income                              $    1,903      $    1,613      $    1,781       $    2,101
                                        ==========      ==========      ==========       ==========

Earnings per Common Share               $     1.46      $     1.24      $     1.37       $     1.62
                                        ==========      ==========      ==========       ==========

Average common shares outstanding        1,300,000       1,300,000       1,300,000        1,300,000
                                        ==========      ==========      ==========       ==========

<CAPTION>
                                                            Quarter Ended in 2001
                                        -----------------------------------------------------------
                                          Mar 31           Jun 30          Sep 30           Dec 31
                                        ----------      ----------      ----------       ----------
<S>                                     <C>             <C>             <C>              <C>
Summary of Income:
   Interest income                      $   12,711      $   12,686      $   12,029       $   11,519
   Interest expense                          6,886           6,541           6,178            5,843
                                        ----------      ----------      ----------       ----------
       Net Interest Income                   5,825           6,145           5,851            5,676
Provision for loan loss                        184             486             152            1,810
                                        ----------      ----------      ----------       ----------
Net interest income after
 provision for loan loss                     5,641           5,659           5,699            3,866
Other income (expense)                      (2,891)         (2,677)         (3,100)          (2,549)
                                        ----------      ----------      ----------       ----------
Net income before income taxes               2,750           2,982           2,599            1,317
Income taxes                                   832             851             713              496
                                        ----------      ----------      ----------       ----------

Net Income                              $    1,918      $    2,131      $    1,886       $      821
                                        ==========      ==========      ==========       ==========

Earnings per Common Share               $     1.48      $     1.64      $     1.45       $     0.63
                                        ==========      ==========      ==========       ==========

Average common shares outstanding        1,300,000       1,300,000       1,300,000        1,300,000
                                        ==========      ==========      ==========       ==========
</TABLE>


                                       56
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.

                      SELECTED FINANCIAL DATA BY MANAGEMENT

<TABLE>
<CAPTION>
Key Ratios:
                                       1998             1999             2000            2001             2002
                                     --------         --------         --------        --------         --------
<S>                                  <C>              <C>              <C>             <C>              <C>
Return on average equity               14.46%           11.95%           12.02%           9.73%            9.93%
Return on average assets                1.38%            1.16%            1.19%           1.02%            1.06%
Loan to deposit ratio                  78.33%           92.13%           93.00%          82.71%           86.32%
Capital to assets ratio                 9.45%            9.67%           10.23%          10.29%           10.70%
</TABLE>


                                    [CHARTS]








                                       57
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.

                      SELECTED FINANCIAL DATA BY MANAGEMENT

<TABLE>
<CAPTION>
                                                        (In Thousands Except for Per Share Amounts)
                                           ----------------------------------------------------------------------
                                              1998           1999           2000            2001          2002
                                           ----------     ----------     ----------     ----------     ----------
<S>                                        <C>            <C>            <C>            <C>            <C>
Loans                                      $  401,192     $  456,617     $  480,645     $  468,243     $  497,515
Total Assets                               $  585,869     $  598,529     $  635,160     $  683,626     $  726,486
Shareholders' Equity                       $   55,350     $   57,889     $   64,988     $   70,350     $   77,738
Interest Income                            $   42,888     $   43,779     $   48,890     $   48,945     $   43,424
Interest Expense                           $   22,085     $   21,150     $   25,509     $   25,448     $   18,979
Net Interest                               $   20,803     $   22,629     $   23,381     $   23,497     $   24,445
Other Expense                              $    8,841     $   11,192     $   11,376     $   11,216     $   11,864
Federal Income Tax                         $    3,413     $    3,007     $    3,118     $    2,892     $    2,989
Net Income                                 $    7,657     $    6,793     $    7,391     $    6,756     $    7,398
Net Income per Share                       $     5.89     $     5.23     $     5.69     $     5.20     $     5.69
Dividends per Share                        $     1.40     $     1.40     $     1.50     $     1.60     $     1.65
</TABLE>





                                    [CHARTS]







                                       58
<PAGE>
                      SELECTED FINANCIAL DATA BY MANAGEMENT



FINANCIAL CONDITION AND RESULTS OF OPERATIONS

While the economic situation in the United States has been generally flat at
best during 2002, Farmers & Merchants Bancorp, Inc. has experienced yet another
year of solid growth both in terms of net income and assets. Interest rates have
experienced a dramatic drop over the past year. As a result, total interest
income dropped from $48.9 million for 2001 and 2000 to $43.4 for 2002. This drop
is from a reduction in interest income on loans, even though the loan portfolio
grew from $468 million at the end of 2001 to $497 million at the end of 2002.
But while the interest that the Company has collected has decreased due to a
drop in interest rates, the interest that the Company had to pay also
demonstrated a significant decrease. Total interest expense dropped to just
under $19 million compared to $25.4 and $25.5 million for 2001 and 2000
respectively. The net result of all of this is that net interest income,
interest income less interest expense, increased by almost $1 million to $24.4
million for 2002 compared to $23.5 million for 2001 and $23.4 million for 2000.

The Company was able to reduce the provision for loan loss for 2002 to $2.2
million compared to $2.6 and $1.5 million for 2001 and 2000, respectively. The
Bank has worked hard to improve loan quality while making credit available to
all of those who are in need and worthy. The reserve for loan losses, an
estimate of loans currently in the loan portfolio that might become
uncollectible was established at $6.4 million as of December 31, 2002 or 1.3
percent of the total loan portfolio compared to $7.3 million as of December 31,
2001 or 1.5 percent of the loan portfolio at December 31, 2001. This drop is a
result of better loan quality, but also the write-off of a significant credit
during 2002.

Operating expenses for 2002 were $17.7 million a 3.3 percent growth over 2001
operating expenses of $17.2 million. Operating expenses for 2001 climbed $2.5
million from 2000 levels of $14.6 million.

The net result has been an increase in net income for the Company over 2001 to
just under $7.4 million compared to $6.75 million for 2001, and even with the
net income of $7.4 million for 2000.

LIQUIDITY

Maintaining sufficient funds to meet depositor and borrower needs on a daily
basis continue to be among management's top priorities. This is accomplished not
only by the immediately liquid resources of cash, due from banks and federal
funds sold, but also by the Company's available for sale securities portfolio.
The average aggregate balance of these assets was $195 million during 2002
compared to $159 million for 2001 representing 28.1 percent and 24 percent of
total average assets, respectively. Of the almost $179 million of debt
securities in the portfolio as of December 31, 2002, $57.6 million or 32 percent
of the portfolio is expected to mature in 2003.

CAPITAL RESOURCES

Shareholders' equity was $77.7 million as of December 31, 2002 compared $70
million at December 31, 2001. 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, 2002, The Farmers & Merchants State Bank had a total risk-based
capital ratio of 15.4% and a 12.2% core capital to risk-based asset ratio that
are well in excess of regulatory guidelines. The bank's leverage ratio of 8.8%
is also substantially in excess of regulatory guidelines. These ratios compare
to 5.1%, 11.9% and 8.4% respectively for 2001, and 14.6%, 11.3% and 8.5%,
respectively for 2000.

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


                                       59
<PAGE>

MARKET RISK

Market risk is the exposure to loss resulting from changes in interest rates and
equity prices. The primary market risk to which The Company is subject is
interest rate risk. The majority of the Company's interest rate risk arises from
the instruments, positions and transactions entered into for purposes other than
trading such as loans, available for sale securities, interest bearing deposits,
short term borrowings and long term borrowings. Interest rate risk occurs when
interest bearing assets and liabilities reprice at different times as market
interest rates change. For example, if fixed rate assets are funded with
variable rate debt, the spread between asset and liability rates will decline or
turn negative if rates increase.

Interest rate risk is managed within an overall asset/liability framework for
the Company. The principal objectives of asset/liability management are to
manage sensitivity of net interest spreads and net income to potential changes
in interest rates. Funding positions are kept within predetermined limits
designed to ensure that risk-taking is not excessive and that liquidity is
properly managed. The Company employs a sensitivity analysis in the form of a
net interest income to help in this analysis as presented below:


<TABLE>
<CAPTION>
                                  0-90 Days      90-365 Days      1-5 Years        Over 5 Years         Total
                                  ---------      -----------      ---------        ------------      ---------
<S>                               <C>            <C>              <C>              <C>               <C>
Interest Bearing Dep              $     279      $    --          $    --          $    --           $     279
Investment Securities                20,205         44,064           93,509           21,015           178,793
Loans                               177,844        186,323           67,868           65,804           497,839
                                  ---------      -----------      ---------        ------------      ---------
  Total Rate
  Sensitive Assets                  198,328        230,387          161,377           86,819           676,911
                                  ---------      -----------      ---------        ------------      ---------

Deposits                            150,863        224,522          200,988             --             576,373
Fed Funds Purchased &                    --
Agreements to repurchase             38,200           --               --               --              38,200
Other borrowings                        518          1,553           23,259            3,366            28,696
                                  ---------      -----------      ---------        ------------      ---------
  Total Rate
  Sensitive Liabilities             189,581        226,075          224,247            3,366           643,269
                                  ---------      -----------      ---------        ------------      ---------

GAP                               $   8,747      $   4,312        $ (62,870)       $  83,453         $  33,642
                                  =========      ===========      =========        ============      =========
</TABLE>








                                       60

<PAGE>

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
                            -------            ----------           ----------
<S>                         <C>                <C>                  <C>
2002-- by quarter             1st              $   85.00            $  110.00
                              2nd                  95.00               115.00
                              3rd                  95.00               112.00
                              4th                  95.00               115.00

2001-- by quarter             1st              $   85.00            $  105.00
                              2nd                  85.00               115.00
                              3rd                  90.00               105.00
                              4th                  90.00               130.00
</TABLE>


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

<TABLE>
<CAPTION>
                                                                     Quarter              2002                 2001
                                                                     -------            ----------           -----------
<S>                                                                  <C>                <C>                  <C>
Dividends declared per share
                                                                       1st                $   .35               $  .35
                                                                       2nd                    .40                  .35
                                                                       3rd                    .40                  .35
                                                                       4th                    .50                  .55
</TABLE>

There are no conditions that currently exist that would indicate that dividends
comparable to those paid in the last two years could not be paid in the
foreseeable future.








                                       61

<PAGE>

January 10, 2003


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

                          INDEPENDENT AUDITORS' REPORT

We have examined management's assertion included in the accompanying Management
Report that The Farmers & Merchants State Bank maintained 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 in accordance with
accounting principles generally accepted in the United States of America as of
December 31, 2002, based upon criteria established in "Internal Control -
Integrated Framework" issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The management of The Farmers & Merchants State Bank
is responsible for maintaining effective internal control over financial
reporting. Our responsibility is to express an opinion on management's assertion
based upon our examination.

Our examination was made in accordance with attestation standards established by
the American Institute of Certified Public Accountants and, accordingly,
included obtaining an understanding of the internal control over financial
reporting, testing and evaluating the design and operating effectiveness of
internal control, and performing 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, misstatements due to
error or fraud 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 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 assertion 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
in accordance with accounting principles generally accepted in the United States
of America as of December 31, 2002, 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



                                       62

<PAGE>

                                MANAGEMENT REPORT
                             as of December 31, 2002




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, 2002, 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, 2002. 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, 2002.

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, 2002.




                                       63

<PAGE>
                   [Photo]

            WAUSEON SHOOP MANAGERS

       AVP/Branch Mgr. Gloria Gunn and
Asst. Cashier/Asst. Branch Mgr. Sue Dieringer




                                                  [Photo]
                                        DINING AT GREAT BEAR LODGE

                                      From Left: Super 55 tour guest,
                          Carol England, AVP/Downtown Branch Mgr., Duane England







                  [Photo]
       WOODLAND BRANCH "POPCORN" DAY
James Snyder and AVP/Mgr. Deborah Shinabery




                                                 [Photo]
                                             F & M DONATES TO
                                       QUADCO REHABILITATION CENTER

                          AVP/Stryker Branch Mgr. Ronald Short presents check to
                                          Quadco Representatives




                                       64
<PAGE>

                                                       [Photo]
                                          DELTA MANAGERS SELLING TICKETS AT
                                            DELTA CHICKEN FESTIVAL DINNER

                                          AVP/Branch Mgr. Cynthia Knauer and
                                      Asst. Cashier/Asst. Branch Mgr. Beth Bay





                       [Photo]
         F & M EMPLOYEES STAFF WILLIAMS CO.
                BEEF PRODUCERS STAND

   St. VP/West Unity Branch Mgr. Lewis Hilkert and
Vickie Grimm, Bryan SouthTowne Secretarial Supervisor


                                     [Photo]
                       BRYAN SOUTHTOWNE BRANCH CELEBRATES
                                10TH ANNIVERSARY

                      Seated from left: Marie Wolff, Asst.
                        Teller Supervisor; Vickie Grimm,
               Secretarial Supervisor; Becky VanArsdalen, Teller;
                               Erin Hallet, Teller
    Standing from left: Cherri Andres, Teller; Linda Coy, New Accounts Rep.;
  Richard Bruce, VP/Commercial Loan Officer; Michael Smith, AVP/Mgr; Ruth Ford,
 Asst. Cashier/Asst. Mgr.; Michelle Robarge, Commercial Loan Secretary, Michelle
                             Nape, Teller Supervisor



                   [Photo]
          WILLIAMS COUNTY BUSINESS &
          INDUSTRY SHOW F & M BOOTH

AVP/Bryan E. High Branch Mgr. David Frazer and
         Children, McKenzie and Mason





                                       65

<PAGE>
                           [Photo]
             MONTPELIER W. MAIN BRANCH CELEBRATES
                       10TH ANNIVERSARY

     Jeannie VonDeylen, W. Main Asst. Mgr; Kelly Bentley,
Asst. Cashier/Montpelier Mgr.; Barry VonDeylen, Eastside Asst.
                             Mgr.


                                                    [Photo]
                                 NAPOLEON BRANCH CHRISTMAS CARD CLUB OPEN HOUSE
                                 VP/Sr. Agri Finance Officer Michael Culler and
                                    AVP/Napoleon Branch Mgr. Stephen Jackson


                            [Photo]
                   SWANTON STAFF READY FOR
                  CHRISTMAS CLUB OPEN HOUSE

Front from left: Kathy Keller, Asst. Teller Supervisor; Hoilyn
   McKibben, Teller; Debra Kauffman, Asst. Cashier/Asst Mgr.
Back from left: Vicky Bratton, Loan Secretary; Judy Carpenter,
    Teller Supervisor; Barry Gray, AVP/Mgr.; Carrol Muston,
            New Accounts Rep.; Joanne Pero, Teller



                                            [Photo]
                                DEFIANCE OFFICE 1ST ANNIVERSARY

               From left: Stephanie Eckert, Teller; Cheri Helberg, Loan Support;
               Krystie Landversicht, Teller; L. Sue Cuevas, Asst. Cashier/Asst.
                      Mgr.; David Kunesh, AVP/Mgr.; Cathy Wiedman, Teller
                              Supervisor; Tiffany Browns, Teller







                                       66

<PAGE>
                                             [Photo]
                                        DIRECTORS EMERITUS

                   Front from left: Robert Whitmer, Lee Graffice, Dale Nafziger
                 Back from left: Harold Plassman, Kenneth Stamm, Charles Lugbill




                           [Photo]
                DIRECTOR DALE NAFZIGER RETIRES

Seated from left: Eugene Bernath, Chairman of the Board, Dale
       Nafziger, Joe Crossgrove, President/CEO/Cashier
  Standing from left: Maynard Sauder, Vice Chairman and Dean
                    Miller, Vice President

                                                       [Photo]
                                          TELLERS RECEIVE HONOR ROLL AWARDS

                                          From left: Deb Felix, Main Office
                                     Teller Supervisor; Edward Leinger, Exec. VP


                            [Photo]
               BRANCH ADMINISTRATOR AND MANAGERS



   Front from left: Kelly Bentley, AC/Montpelier W. Main and
    Eastside Mgr.; Carol England, AVP/Wauseon Downtown Mgr.;
                 Cynthia Knauer, AVP/Delta Mgr.
    Middle from left: Barry Gray, AVP/Swanton Mgr.; Deborah
      Shinabery, AVP/Archbold Woodland Mgr.; Gloria Gunn,
   AVP/Wauseon Shoop Mgr.; David Kunesh, AVP/ Defiance Mgr.;
Back from left: Ronald Short AVP/Stryker Mgr.; Stephen Jackson,
    AVP/Napoleon Mgr.; David Frazer, AVP/Bryan E. High Mgr.;
   Michael Smith, AVP/Bryan SouthTowne Mgr.; Allen Lantz, Sr.
 VP/Branch Administrator, Lewis Hilkert, Sr. VP/West Unity Mgr.



                                                [Photo]
                                        F&M AG APPRECIATION DAY

                      AVP/Agri Loan Officer Scott Miller and Max Wyse, Inventory
                                    Controller at Pettisville Grain






                                       67

<PAGE>

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                   70            Farmer                                              1978
                                               Chairman of the Board,
                                                 Farmers & Merchants Bancorp, Inc.
                                                 The Farmers & Merchants State Bank

Dexter Benecke                   60            President, Viking Trucking, Inc.                    1999

Jerry L. Boyers                  69            President, Edifice Construction                     1976
                                                 Management

Joe E. Crossgrove                66            President, Chief Executive Officer                  1992
                                                 The Farmers & Merchants State
                                                 Bank

Robert G. Frey                   63            President, E. H. Frey & Sons, Inc.                  1987

Julian Giovarelli                71            President, GIO Sales, Inc.                          2000

Jack C. Johnson                  50            President, Hawk's Clothing, Inc.                    1991
                                                 Partner, REJO Partnership

Dean E. Miller                   59            President, MBC Holdings, Inc.                       1986

Anthony J. Rupp                  53            President, Rupp Furniture Co.                       2000

David P. Rupp Jr.                61            Attorney, Plassman, Rupp, Hensel,                   2001
                                                 Short & Hagans

James C. Saneholtz               56            President, Saneholtz-McKarns, Inc.                  1995
`
Maynard Sauder                   71            Chairman, Sauder Woodworking Co.                    1980

Merle J. Short                   62            Farmer, President of Promow, Inc.                   1987

Steven J. Wyse                   58            President, SteelinQ Systems, Inc.                   1991
</TABLE>



                                       68

<PAGE>

                               EXECUTIVE OFFICERS


<TABLE>
<CAPTION>
                                                       Principal Occupation
          Name                  Age                     for Past Five Years
---------------------------     ---            -----------------------------------------
<S>                             <C>            <C>
Eugene Bernath                  70             Farmer
                                               Chairman of the Board
                                               Farmers & Merchants State Bank

Joe E. Crossgrove               66             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                     43             Executive Vice President
                                               Chief Lending Officer

Edward Leininger                46             Executive Vice President
                                               Commercial Loan Officer

Carol England                   62             Assistant Vice President
                                               Corporate Secretary
                                               Branch Manager

Barbara Britenriker             40             Senior Vice President
                                               Chief Financial Officer
                                               Comptroller

Allen Lantz                     49             Vice President
                                               Branch Administrator
</TABLE>

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
5, 2003 is incorporated herein by reference.

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 5, 2003, is incorporated herein by reference.



                                       69

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRANSACTIONS WITH MANAGEMENT AND OTHER

There are no transactions to report.


CERTAIN BUSINESS RELATIONSHIPS

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
5, 2003 is incorporated herein by reference.

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 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
5, 2003 is incorporated herein by reference.


ITEM 14. CONTROLS AND PROCEDURES

As of December 31, 2002, an evaluation was performed under the supervision and
with the participation of the Company's management, including the CEO and CFO,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures. Based on that evaluation, the Company's management,
including the CEO and CFO, concluded that the Company's disclosure controls and
procedures are effective as of December 31, 2002. There have been no significant
changes in the Company's internal controls or in other factors that could
significantly affect the internal controls subsequent to December 31, 2002


                                       70


<PAGE>

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL SCHEDULES AND REPORTS ON FORM 8-K

<TABLE>
<S>                        <C>                                                                   <C>
                  (a)      The following documents are filed as part of this report:

                                                                                                 Annual Report
                                                                                                 -------------
                  (1)      Financial Statements
                           Report of Independent Accountants                                     Page 29
                           Consolidated Balance Sheets                                           Page 30
                           Consolidated Statements of Income                                     Page 31
                           Consolidated Statements of Changes in
                           Shareholders' Equity                                                  Page 32
                           Consolidated Statements of Cash Flows                                 Page 33
                           Notes to Consolidated Financial Statements                            Pages 34 - 55
                  (2)      Financial Statement Schedules
                           Five Year Summary of Operations                                       Page 56
                  (3)      Other Information
                           Selected Financial Data by Management                                 Pages 58 - 60
                           Trading Market for the Company's Stock                                Page 61
                           Independent Auditors' Report                                          Page 62
                           Management Report                                                     Page 63
                           2002 Annual Report Photos                                             Pages 64 - 67
                  (4)      Exhibits
                           (3.1)    Articles of Incorporation have been
                                    submitted with previous 10-K reports.
                           (13.1)   2002 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.

         (g)      Certification Statements                                                       Pages 75-76

                                                                                                    Form 10-K
                                                                                                    ---------
                  Schedule of Property and Equipment                                                 Page 72
                  Schedule of Accumulated Depreciation - Property and Equipment                      Page 73
</TABLE>




                                       71


<PAGE>

PART IV

ITEM 15. EXHIBITS, FINANCIAL SCHEDULES AND REPORTS ON FORM 8-K



                       SCHEDULE OF PROPERTY AND EQUIPMENT
                                 (In Thousands)


                                                                      Schedule 1

<TABLE>
<CAPTION>
                                             Year Ended December 31, 2002
                               -------------------------------------------------------------
                                Beginning                                           Ending
                                 Balance      Additions         Retirements         Balance
                                 -------      ---------         -----------         -------
<S>                             <C>          <C>               <C>                <C>
Land                            $  2,601     $      167        $      -           $  2,768
Building                          10,661          3,314               -             13,975
Equipment                          8,308            601               439            8,470
                                --------     ----------        ----------         --------

                                $ 21,570     $    4,082        $      439         $ 25,213
                                ========     ==========        ==========         ========

<CAPTION>

                                             Year Ended December 31, 2001
                               -------------------------------------------------------------
                                Beginning                                           Ending
                                 Balance       Additions        Retirements         Balance
                                 -------      ---------         -----------         -------
<S>                             <C>          <C>               <C>                <C>
Land                            $  2,614     $         13      $      26          $ 2,601
Building                           9,349            1,312             -            10,661
Equipment                          6,390            1,980             62            8,308
                                --------     ------------      ---------          -------

                                $ 18,353    $       3,305      $      88          $21,570
                                ========     ============      =========          =======

<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>


                                       72
<PAGE>


SCHEDULE OF ACCUMULATED DEPRECIATION - PROPERTY AND EQUIPMENT


                                                                      Schedule 2


<TABLE>
<CAPTION>
                                                                           Year Ended December 31, 2002
                                                              ---------------------------------------------------------
                                                               Beginning                                        Ending
                                                               Balance     Depreciation      Retirements        Balance
                                                               -------     ------------      -----------       --------
<S>                                                           <C>          <C>               <C>                <C>
Land                                                          $  -         $      -          $      -           $ -
Building                                                         3,250            317               -             3,567
Equipment                                                        5,988           1,028             404            6,612
                                                              --------     -----------       ---------         --------
                                                              $  9,238     $     1,345       $     404         $ 10,179
                                                              ========     ==========        =========         ========

<CAPTION>
                                                                           Year Ended December 31, 2001
                                                              ---------------------------------------------------------
                                                               Beginning                                        Ending
                                                               Balance     Depreciation      Retirements        Balance
                                                               -------     ------------      -----------       --------
<S>                                                           <C>          <C>               <C>                <C>
Land                                                          $  -         $      -          $      -           $ -
Building                                                         2,944            306               -             3,250
Equipment                                                        5,055            976               43            5,988
                                                              --------     -----------       ---------         --------
                                                              $  7,999     $     1,282       $      43          $ 9,238
                                                              ========     ==========        =========         ========

<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>







                                       73
<PAGE>

                        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.

<TABLE>
<S><C>
                                                                  Farmers & Merchants Bancorp, Inc.

                                                                  By:  s/s Joe E. Crossgrove  Date:  March 28, 2003
                                                                       ---------------------         --------------
                                                                  Joe E. Crossgrove
                                                                  Chief Executive Officer
</Table>

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>
/s/ Joe E. Crossgrove                 Date: March 28, 2003      /s/ Barbara Britenriker          Date:  March 28, 2003
-----------------------------------         --------------      -------------------------------         --------------
Joe E. Crossgrove, Director                                     Barbara Britenriker
Chief Executive Officer                                         Chief Financial Officer

/s/ Eugene D. Bernath                 Date: March 28, 2003      /s/ Kent Roth                    Date:  March 28, 2003
-----------------------------------         ------------------  -------------------------------         --------------
Eugene D. Bernath                                               Kent Roth, Auditor
Director and Chairman

/s/ Dexter Benecke                    Date: March 28, 2003      /s/ Anthony J. Rupp              Date:  March 28, 2003
-----------------------------------         --------------      -------------------------------         --------------
Dexter Benecke, Director                                        Anthony J. Rupp, Director

/s/ Jerry Boyers                      Date: March 28, 2003      /s/ David P. Rupp Jr.            Date:  March 28, 2003
-----------------------------------         ------------------  -------------------------------         --------------
Jerry Boyers, Director                                          David P. Rupp Jr., Director

/s/ Robert Frey                       Date: March 28, 2003      /s/ James Saneholtz              Date:  March 28, 2003
-----------------------------------         ------------------  -------------------------------         --------------
Robert Frey, Director                                           James Saneholtz, Director

/s/ Julian Giovarelli                 Date: March 28, 2003      /s/ Maynard Sauder               Date:  March 28, 2003
-----------------------------------         ------------------  -------------------------------         --------------
Julian Giovarelli, Director                                     Maynard Sauder, Director

/s/ Jack C. Johnson                   Date: March 28, 2003      /s/ Merle J. Short               Date:  March 28, 2003
-----------------------------------         ------------------  -------------------------------         --------------
Jack C. Johnson, Director                                       Merle J. Short, Director

/s/ Dean Miller                       Date: March 28, 2003      /s/ Steven J. Wyse               Date:  March 28, 2003
-----------------------------------         ------------------  -------------------------------         --------------
Dean Miller, Director                                           Steven J. Wyse, Director
</TABLE>



                                       74
<PAGE>

                       FARMERS & MERCHANTS BANCORP, INC.

CERTIFICATION

I, Joe E. Crossgrove certify that:

1. I have reviewed this annual report on Form 10-K of Farmers & Merchants
Bancorp, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date March 28, 2003


                              /s/ Joe E. Crossgrove
                       ----------------------------------
                               Joe E. Crossgrove
                             Chief Executor Officer


                                       75

<PAGE>
                       FARMERS & MERCHANTS BANCORP, INC.



CERTIFICATION

I, Barbara Britenriker certify that:

1. I have reviewed this annual report on Form 10-K of Farmers & Merchants
Bancorp, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated
in this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date March 28, 2003
                             /s/ Barbara Britenriker
                          -------- ---------------------
                               Barbara Britenriker
                             Chief Financial Officer



                                       76