<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, 2001
                                       or
                Transition Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934
                        For the transition period from to

                         Commission File Number 0-14492
                        FARMERS & MERCHANTS BANCORP, INC.

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

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

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

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

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



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

                         Common shares without par value
                                (Title of class)


                                (Title of class)

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

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

As of March 1, 2002, Registrant had outstanding 1,300,000 shares of common stock
at a market value of $117,000,000.
<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                                                         21

Item 3.           Legal Proceedings                                                  22

Item 4.           Submission of Matters to a Vote
                  of Security Holders                                                22

Item 5.           Market for Registrant's Common Equity

                  and Related Stockholder Matters                                    22

Item 6.           Selected Financial Data                                            22

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

Item 8.           Financial Statements and Supplementary Data                   23 - 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.          Financial Schedules and Reports on Form 8-K                   71 - 73
                  Schedule 1 - Schedule of Property and Equipment                    72
                  Schedule 2 - Schedule of Accumulated Depreciation  -
                                 Property and Equipment                              73

Signatures                                                                           74

Total Pages:                                                                         74
</TABLE>

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

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

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

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

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


                                       2
<PAGE>
During April of 1980 a second office was opened in Archbold, located in the
Lugbill Addition near Woodland Oaks. The Woodland office is a convenient branch
offering full banking services to those Archbold residents in the outlying area.

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

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

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

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

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

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

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


                                       3
<PAGE>
1994 was a very special year for The Farmers & Merchants State Bank. Earnings
were very strong, asset quality remained outstanding, and the bank expanded its
presence within its market area. The goals for 1994 were exceeded, with a new
high in assets of $406 million. With a growing interest to expand the bank's
market area and branch into Henry County, an application was submitted for a
Napoleon office. Once the application was approved, the bank wasted no time in
getting the building constructed. The full service Napoleon Office, with a
drive-up ATM, was conveniently located on St. Rt. 108 on the north edge of
Napoleon making it easily accessible for the residents of Henry County.

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

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

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

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

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

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

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

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

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

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


                                       4
<PAGE>
FM Investments, the brokerage department of The Farmers & Merchants State Bank,
opened for business in April 1999. The office for this department is located in
the Main Office, Archbold. Securities are offered through Raymond James
Financial Services, Inc.

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

In 2001 the new Defiance branch was opened in Defiance, Ohio. Construction of a
new operations facility located in Archbold, Ohio is scheduled to begin and be
completed in 2002.

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

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

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

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


                                       5
<PAGE>
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.

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

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

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

Stryker, Ohio                                        Sky Financial

West Unity, Ohio                                     National Bank of Montpelier

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

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

                                                     Community First Bank & Trust
                                                     National Bank of Montpelier

Montpelier, Ohio                                     Sky Financial

                                                     National Bank of Montpelier (2 offices)
                                                     First Federal Savings & Loan of Defiance

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


                                       6
<PAGE>
<TABLE>
<S>                                                  <C>
Swanton, Ohio                                        National City Bank
                                                     Fifth Third Bank
                                                     First Federal Savings & Loan of Delta
                                                     Key Bank

Defiance, Ohio                                       State Bank & Trust Company
                                                     First Federal Savings & Loan of Defiance
                                                     Sherwood State Bank
                                                     City Loan
                                                     American General
                                                     Employees Own Federal Credit Union
                                                     Fort Defiance Federal Credit Union
</TABLE>

SELECTED STATISTICAL AND FINANCIAL INFORMATION

EARNINGS SUMMARY

Farmers & Merchants Bancorp, Inc. reported net income of $6.8 million for 2001,
which is a decrease of $635 thousand over the 2000 net income of $7.4 million,
and virtually the same as 1999 net income of $6.8 million. The decrease in 2001
net income is primarily a result of an increase in operating expenses and the
write-off of a large credit. Earnings per share correspondingly decreased for
2001 to $5.20 per share compared to $5.69 per share and $5.23 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 1999 through 2001, 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>
                                                                      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          192.86%
     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>


                                        7
<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                       594,040
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>


                                       8
<PAGE>
<TABLE>
<S>                                                   <C>                <C>                    <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest Bearing Liabilities:
     Savings deposits                                 $ 97,922           $  4,805               4.91%
     Other time deposits                               304,666             17,494               5.74%
     Other borrowed money                               28,637              1,942               6.78%
     Federal funds purchased and securities
       sold under agreement to repurchase               20,670              1,268               6.13%
                                                      --------           --------
          Total Interest Bearing Liabilities           451,895           $ 25,509               5.64%
                                                                         ========               ====
Non-Interest Bearing Liabilities:
     Non-interest bearing demand deposits              100,590
     Other                                               5,102
                                                      --------
               Total Liabilities                       557,587
Stockholders' Equity                                    61,488
                                                      --------
Total Assets & Shareholders' Equity                   $619,075
                                                      ========
Interest/dividend income/yield                                           $ 48,890               8.38%
Interest expense/yield                                                     25,509               5.64%
                                                                         --------               ----
     Net Interest Spread                                                 $ 23,381               2.74%
                                                                         ========               ====
     Net Interest Margin                                                                        4.01%
                                                                                                ====
</TABLE>

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


                                       9
<PAGE>
<TABLE>
<S>                                                         <C>             <C>                 <C>
         LIABILITIES AND SHAREHOLDERS' EQUITY
         Interest Bearing Liabilities:
              Savings deposits                              $ 98,711        $  4,199            4.25%
              Other time deposits                            295,376          15,577            5.27%
              Other borrowed money                            16,503           1,029            6.24%
              Federal funds purchased and securities
                sold under agreement to repurchase             6,129             345            5.63%
                                                            --------        --------            ----
                   Total Interest Bearing Liabilities        416,719        $ 21,150            5.08%
                                                                            ========            ====
         Non-Interest Bearing Liabilities:
              Non-interest bearing demand deposits           110,064
              Other                                            1,544
                                                            --------
                        Total Liabilities                    528,327
         Stockholders' Equity                                 56,862
                                                            --------
         Total Assets & Shareholders' Equity                $585,189
                                                            ========
         Interest/dividend income/yield                                     $ 43,779            7.96%
         Interest expense/yield                                               21,150            5.08%
                                                                            --------            ----
              Net Interest Spread                                           $ 22,629            2.88%
                                                                            ========            ====
              Net Interest Margin                                                               4.11%
                                                                                                ====
</TABLE>

 (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>
                                                                   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>

                                       10
<PAGE>
<TABLE>
<CAPTION>
                                                                   2000 vs 1999
                                                       -------------------------------------
                                                        Net             Due to Change in
                                                       Change         Volume          Rate
                                                       -------        -------        -------
<S>                                                    <C>            <C>            <C>
         Interest Earned On:
              Loans                                    $ 5,425        $ 4,216        $ 1,209
              Taxable investment securities               (219)          (656)           437
              Tax-exempt investment securities            (121)          (146)            25
              Interest bearing deposits                      1             --              1

              Federal funds sold                            25             --             25
                                                       -------        -------        -------
                   Total Interest Earning Assets       $ 5,111        $ 3,414        $ 1,697
                                                       =======        =======        =======

         Interest Paid On:
              Savings deposits                         $   606        $   (39)       $   645
              Other time deposits                        1,917            533          1,384
              Other borrowed money                         913            823             90
              Federal funds sold and security
                repurchase agreements                      923            892             31
                                                       -------        -------        -------
                                                       $ 4,359        $ 2,209        $ 2,150
                                                       =======        =======        =======
</TABLE>

Interest income from fees on loans and leases decreased $2 million to $40.7
million for 2001 from $42.7 million for 2000. This compares with an increase of
$5.4 million for 2000 over 1999 interest income of $37.2 million. The decrease
for 2001 was primarily due to a decrease in commercial loan activity.

Net interest margin was 3.79% for 2001, 4.01% for 2000, and 4.11% for 1999. The
drop in interest margin was due to a higher proportion of the assets being
invested in available for sale securities that have a lower net interest margin
than the loan portfolio. Investment in available for sale securities as a
percentage of total assets was 25.3 percent for 2001 compared to 17.8 percent
for 2000, while the loan portfolio as a percent of total assets dropped from
75.5 percent for 2000 to 66.4 percent for 2001.

NON-INTEREST INCOME

Non-interest income for 2001 experienced a dramatic increase 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 and $139 thousand for 1999. Due to the
increased activity in mortgage loan activity, earned real estate point income
also increased substantially for 2001 to $606 thousand compared to $127 thousand
for 2000 and $306 thousand for 1999.

NON-INTEREST EXPENSE

While non-interest expense showed little change for 2000 of $14.6 million over
1999 levels of $14.3 million, non-interest expenses for 2001 demonstrated a
significant increase for 2001 rising to $17.2 million, a $2.9 million increase
or 17.2 percent increase over 2000. Virtually every category of non-interest
expense demonstrated an increase for 2001 over 2000.

Salaries and wages and employee benefits accounted for $851 thousand of this
increase. This increase was felt necessary in order to attract and retain
qualified personnel in today's competitive labor market.


                                       11
<PAGE>
Furniture and equipment expense increased $266 thousand to $1.4 million for 2001
compared to $1.1 million for 2000 and $1.2 million for 1999. The bulk of this
increase for 2001 is in depreciation expense, a non-cash expense. Due to data
processing and related equipment purchases, depreciation expense for furniture
and equipment was $975 thousand for 2001, a $165 thousand increase over
depreciation expense of $810 thousand for 2000. This compares to $981 thousand
in depreciation expense for 1999. Also due to the acquisition of equipment,
maintenance contract expense for maintaining the equipment in good working order
increased $92,000 for 2001 to $409 thousand compared to $ $317 thousand for 2000
and $223 thousand for 1999.

Mortgage servicing expense also increased substantially in 2001. Mortgage
servicing expense for 2001 amounted to $911 thousand, a $782 thousand increase
over mortgage servicing expense for 2000 expense of $129 thousand. Mortgage
servicing expense for 1999 amounted to $163 thousand. As was the case above for
mortgage servicing rights income, due to the increased activity in the mortgage
loan portfolio, the costs associated with the servicing of these loans increased
also.

FINANCIAL CONDITION

Average earning assets have again demonstrated consistent growth over the last
three years. Average earnings assets for 2001 were $620 million compared to $583
million for 2000 and $550 million for 1999. This growth in average earnings
assets represent a 6.3 percent and 6 percent increase for 2001 and 2000,
respectively. Almost all of the increase in assets for 2001 over 2000 has been
in the securities available for sale. Average interest bearing liabilities have
also showed steady increases rising $95.2 million from $451.2 million for 2000
to $546.4 million for 2001. This compares to an increase of $35 million from
$416.7 million for 1999, representing a 21.1 percent increase for 2001 and an
8.4 percent increase for 2000.

INVESTMENT SECURITIES

Security balances at December 31 are summarized below:

<TABLE>
<CAPTION>
                                                                (In Thousands)
                                                     --------------------------------------
                                                      2001            2000           1999
                                                     --------       --------       --------
<S>                                                  <C>            <C>            <C>
         U.S. Treasury and Government agencies       $ 92,622       $ 61,115       $ 44,921
         Mortgage-backed securities                    21,409          7,863          9,827
         State and local governments                   50,819         32,157         31,246
         Corporate debt securities                      7,091          9,196          9,627
         Commercial paper                                 974          2,908          7,330
         Equity securities                                 47             20             20
                                                     --------       --------       --------
                                                     $172,963       $113,259       $102,971
                                                     ========       ========       ========
</TABLE>

The following table sets forth (dollars in thousands) the maturities of
investment securities at December 31, 2001 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.


                                       12
<PAGE>
<TABLE>
<CAPTION>
                                                                    Maturities
                                               --------------------------------------------------
                                                                               After One Year
                                                  Within One Year             Within Five Years
                                               ---------------------        ---------------------
                                                Amount          Yield        Amount          Yield
                                               -------          ----        -------          ----
<S>                                            <C>              <C>         <C>              <C>
     U.S. Treasury                             $ 3,399          6.39%       $ 1,516          6.50%
     U.S. Government agency                     23,302          4.54%        61,955          5.36%
     Mortgage-backed securities                  5,048          4.00%        11,220          4.99%
     State and local governments                 6,625          5.24%        19,704          5.91%
     Taxable state and local governments         1,902          6.03%         8,817          5.53%
     Corporate debt securities                   4,019          5.63%         1,527          0.04%
     Commercial paper                              974          3.61%            --          3.68%
</TABLE>

<TABLE>
<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                  5,101          5.46%            --          0.00%
     State and local governments                11,297          6.55%           789          6.87%
     Taxable state and local governments         1,122          6.22%            --          0.00%
     Corporate debt securities                      --          0.00%         2,205          2.19%
     Commercial paper                               --          0.00%            --          0.00%
</TABLE>

At December 31, 2001 the Bank held no large block of any one investment
security, except for U.S. Treasury and other U.S. Government agencies. No one
holding in debt securities exceeded $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 $3.2 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)
                                 --------------------------------------------------------------------
                                   2001           2000           1999           1998           1997
                                 --------       --------       --------       --------       --------
<S>                              <C>            <C>            <C>            <C>            <C>
Loans:
     Commercial/industrial       $119,025       $ 96,990       $100,996       $ 81,253       $ 65,633
     Agricultural                  31,684         51,337         46,035         38,882         44,939
     Real estate mortgage         247,545        261,289        237,056        200,675        205,626
     Installment                   55,845         69,081         71,662         68,385         75,767
     IDB                            7,590          8,647          7,015          4,587          4,511
                                 --------       --------       --------       --------       --------
          Total Loans            $461,689       $487,344       $462,764       $393,782       $396,476
                                 ========       ========       ========       ========       ========
</TABLE>


                                       13
<PAGE>
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       $ 82,539       $ 32,181       $ 35,990       $150,710
     Real estate mortgage                       5,025         14,118        242,185        261,328
     Installment                               10,913         42,439          2,497         55,849
     Industrial Development Bonds               2,148            229          5,213          7,590
</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                                    $ 60,138           $201,195
     Commercial and industrial                        62,557             88,152
     Consumer, Master Card and overdrafts             55,143              1,321
     Industrial Development Bonds                      7,590                 --
</TABLE>

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

<TABLE>
<CAPTION>
                                                           (In Thousands)
                               -------------------------------------------------------------------
                                 2001           2000           1999           1998           1997
                               -------        -------        -------        -------        -------
<S>                            <C>            <C>            <C>            <C>            <C>
Nonaccrual loans               $ 5,353        $ 6,622        $ 6,504        $ 6,455        $ 2,890
Accruing loans past due
  90 days or more                5,408          2,577          2,264          1,988          1,396
                               -------        -------        -------        -------        -------
      Total                    $10,761        $ 9,199        $ 8,768        $ 8,443        $ 4,286
                               =======        =======        =======        =======        =======
</TABLE>

As of December 31, 2001, 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 $1.9
million for 2001 and $1.4 million for 2000. Any collections of interest on
non-accrual loans are included in interest income when collected. This amounted
to $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 $5.3 million of non-accrual loans as of December 31, 2001 are secured.

At December 31, 2000 the Bank has $10.7 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, 2001.


                                       14
<PAGE>
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, 2001, the Bank had loans outstanding to individuals and firms
engaged in the various fields of agriculture in the amount of $32 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.

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
2001, 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.


                                       15
<PAGE>
The following table presents a reconciliation of the allowance for loan losses:

<TABLE>
<CAPTION>
                                                                                  (In Thousands)
                                               ------------------------------------------------------------------------------------
                                                 2001               2000               1999               1998               1997
                                               --------           --------           --------           --------           --------
<S>                                            <C>                <C>                <C>                <C>                <C>
Loans                                          $461,689           $487,344           $462,764           $393,782           $396,476
                                               ========           ========           ========           ========           ========
Daily average of outstanding loans             $472,181           $475,035           $428,087           $408,291           $384,498
                                               ========           ========           ========           ========           ========

Allowance for loan losses-January 1            $  7,160           $  6,750           $  5,850           $  5,850           $  5,500
     Loans Charged Off:
          Commercial                              1,826                257                185                472                263
          Installment                             1,254              1,883              1,085              1,260              1,239
          Real estate mortgages                      54                233                304                 42                 29
                                               --------           --------           --------           --------           --------
                                                  3,134              2,373              1,574              1,774              1,531
                                               --------           --------           --------           --------           --------
     Loan Recoveries:
          Commercial                                421                358                493                540                384
          Installment                               191                923                331                339                364
          Real estate mortgages                       5                  6                 13                  3                 22
                                               --------           --------           --------           --------           --------
                                                    617              1,287                837                882                770
                                               --------           --------           --------           --------           --------
     Net Charge Offs                              2,517              1,086                737                892                761
                                               --------           --------           --------           --------           --------
     Privision for loan loss                      2,632              1,496              1,637                892              1,111
                                               --------           --------           --------           --------           --------
Allowance for loan losses-December 31          $  7,275           $  7,160           $  6,750           $  5,850           $  5,850
                                               ========           ========           ========           ========           ========
Ratio of net charge-offs to average
  loans outstanding                                0.53%              0.23%              0.17%              0.22%              0.20%
                                               ========           ========           ========           ========           ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                  % of Loans
                                                                   in Each
                                                  Amount         Category To
                                                  (000's)        Total Loans
                                                  ------           ------
<S>                                               <C>            <C>
         Balance at End of Period Applicable To:
          Commercial/industrial                   $4,235            32.83%
          Installment                              1,526            11.91%
          Real estate                              1,101            53.62%
          Unallocated                                413             1.64%
                                                  ------           ------
                                                  $7,275           100.00%
                                                  ======           ======
</TABLE>


                                       16
<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 Three        Over One
                                           Months Less       Year Less          Over
                             Under          Less Than       Than Three          Three
                         Three Months        One Year          Years            Years
                            -------          -------          -------          -------
<S>                      <C>               <C>              <C>                <C>
     Time deposits          $22,639          $33,118          $24,913          $ 1,066
</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, 2001:
  Average balance (In thousands)           $    38,377           $    75,765           $   118,393           $   318,326
  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%


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

SHORT-TERM BORROWINGS

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

RETURN ON ASSETS AND EQUITY

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

Stockholders' equity as of December 31, 2001 was $70 million compared to $65
million for 2000 and $57.9 million for 1999, a $5 million or 8.25 percent
increase. Dividends for 2001 increased by $.10 per share to $1.60 compared to
$1.50 per share and $1.40 per share for 2000 and 1999, 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>
                                          2001            2000            1999
                                          -----           -----           -----
<S>                                       <C>             <C>             <C>
         Return on average assets          1.02%           1.19%           1.16%
         Return on average equity          9.73%          12.02%          11.95%
         Dividend payout ratio            30.79%          26.38%          26.79%
         Equity to assets ratio           10.29%          10.23%           9.67%
</TABLE>


                                       17
<PAGE>
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.

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.


                                       18
<PAGE>
<TABLE>
<CAPTION>
                                                                           2001
                                                       ---------------------------------------------
                                                                                 Net Change
                                                       Average           ---------------------------
                                                       Balance            Amount            Percentage
                                                       --------          --------           ----------
<S>                                                    <C>               <C>                <C>
         Funding Uses:
            Loans                                      $472,181          $ (2,854)             -0.60%
            Taxable securities                          106,774            27,779              35.17%
            Tax exempt securities                        29,565             2,471               9.12%
            Interest bearing deposits                       120                20              20.00%
            Federal funds sold                           11,342             9,321             461.21%
                                                       --------          --------
                                                       $619,982          $ 36,737               6.30%
                                                       ========          ========

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

<TABLE>
<CAPTION>
                                                                    2000                               1998
                                            -------------------------------------------------        --------
                                            Average                     Net Change                   Average
                                            Balance            Amount              Percentage        Balance
                                            --------          --------                ----           --------
<S>                                         <C>               <C>                  <C>               <C>
Funding Uses:
   Loans                                    $475,035          $ 46,948               10.97%          $428,087
   Taxable securities                         78,995           (10,839)             -12.07%            89,834
   Tax exempt securities                      27,094            (3,012)             -10.00%            30,106
   Interest bearing deposits                     100                --                0.00%               100
   Federal funds sold                          2,021                 2                0.10%             2,019
                                            --------          --------                               --------
                                            $583,245          $ 33,099                6.02%          $550,146
                                            ========          ========                               ========

Funding Sources:
   Deposits:
        Noninterest bearing demand          $100,590          $ (9,474)              -8.61%          $110,064
        Savings                               97,922              (789)              -0.80%            98,711
        Other time                           304,666             9,290                3.15%           295,376
   Other borrowed money                       28,637            12,134               73.53%            16,503
   Federal funds purchased
      agreements to repurchase                20,670            14,541              237.25%             6,129
                                            --------          --------                               --------
                                            $552,485          $ 25,702                4.88%          $526,783
                                            ========          ========                               ========
</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 were attracted during 2001 and core deposits increased in
2001. Overall deposits increased almost $50 million to $566 million for 2001
compared to deposits at the end of 2000 of $516 million and $503 million for
1999. These increases represent 9.6 percent and 2.6 percent increases,
respectively.


                                       19
<PAGE>
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 2001 was 82.71
percent, 93 percent for 2000 and 92.13% for 1999. Because of the decline in the
overall economy, loan activity slowed during 2001. The reason for this drop in
loan to deposit ratio is a result of the weakened economy in 2001 and the uneasy
feelings about the future, and as a result, loan activity slowed. With the
decrease in loan activity, the Bank's management chose to invest these funds in
primarily in government agency and municipal securities. This provided a good
return while leaving the Bank in a position to liquidate these investments with
little risk in the event of an upswing in loan activity.

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 $26.5 million at December 31, 2001 compared to $18.9
million at the end of 2001 and $7.3 million at the end of 1999. These funds
provided an additional $7.6 million in liquidity for 2001.

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 decreased by $13.4 million to
$17.4 million at December 31m 2001 due to repayments. This compares to increased
borrowings in 2000 of $5.7 million to $30.7 million at December 31, 2000, and
borrowings of $25 million at the end of 1999.

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,
2001 for each major category of interest-earning assets (at amortized cost) and
interest-bearing liabilities:


                                       20
<PAGE>
<TABLE>
<CAPTION>
                                                0-90             90-365            1-5             Over 5
                                                Days              Days            Years             Years            Total
                                             ---------         ---------        ---------         ---------        ---------
<S>                                          <C>               <C>              <C>               <C>              <C>
Interest bearing deposit                     $     146         $      --        $      --         $      --        $     146
Investment securities                           15,587            36,671          102,178            18,527          172,963
Loans                                          140,933           185,659           83,847            65,038          475,477
                                             ---------         ---------        ---------         ---------        ---------
     Total Rate Sensitive Assets               156,666           222,330          186,025            83,565          648,586
                                             ---------         ---------        ---------         ---------        ---------

Deposits                                       142,110           167,354          256,693                --          566,157
Federal funds purchased and
  agreements to repurchase                      26,539                --               --                --           26,539
Other borrowings                                 1,099               889            9,740             5,682           17,410
                                             ---------         ---------        ---------         ---------        ---------
     Total Rate Sensitive Liabilities          169,748           168,243          266,433             5,682          610,106
                                             ---------         ---------        ---------         ---------        ---------

Gap                                          $ (13,082)        $  54,087        $ (80,408)        $  77,883        $  38,480
                                             =========         =========        =========         =========        =========
</TABLE>

OTHER MATTERS

The Financial Accounting Standards Board issued several new pronouncements
during 2001. Statement of Financial Accounting Standards No. 141 entitled
Business Combinations deals with the accounting treatment when two companies are
combined. Under prior rules two methods were appropriate, the
pooling-of-interest method or the purchase method. Statement No. 141 now permits
only method, the purchase method to be used. 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.

Statement of Financial Accounting Standards No. 142 entitled Goodwill and Other
Intangible Assets deals with the accounting and reporting of acquired goodwill
and other intangible assets. For the same reasons as discussed above for SFAS
No. 141, management does anticipate this pronouncement having a material impact
on the financial statements

Statement of Financial Accounting Standards No. 143 entitled Accounting for
Asset Retirement Obligations addresses the financial accounting and reporting
procedures for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs, and applies to legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development or normal operations of long-lived
assets. According to the pronouncement, a legal obligation is an obligation that
a party is required to settle as a result of an existing or enacted law,
statute, ordinance, or written or oral contract. Again, it is not expected that
this pronouncement will have a material impact on the financial statements of
Farmers & Merchants Bancorp, Inc.

Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets supercedes Statement No. 121 Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, and the accounting and
reporting provisions of APB Opinion No. 30 Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for
the disposal of a segment of a business. Again, it is not anticipated that this
pronouncement will have a material impact on the financial accounting and
reporting practices of Farmers & Merchants Bancorp, Inc.

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


                                       21
<PAGE>
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 plans to
construct a new $4 million operations center to accommodate the growth that has
taken place at the Bank.

Current locations of retail banking services are:

     Branch                                                 Location
----------------                                  --------------------------
Archbold, Ohio                                    1313 South Defiance Street

Wauseon, Ohio                                     1130 North Shoop Avenue
                                                  119 North Fulton Street

Stryker, Ohio                                     300 South Defiance Street

West Unity, Ohio                                  200 West Jackson Street

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

Delta, Ohio                                       101 Main Street

Montpelier, Ohio                                  225 West Main Street
                                                  1150 East Main Street

Napoleon, Ohio                                    2255 Scott Street

Swanton, Ohio                                     7 Turtle Creek Circle

Defiance, Ohio                                    1175 Hotel Drive

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


                                       22
<PAGE>
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>              <C>
        2001         High            $105.00             $115.00             $105.00          $130.00
                     Low              $85.00              $85.00              $90.00           $90.00

        2000         High            $115.00             $115.00             $115.00          $120.00
                     Low              $80.00              $80.00              $85.00           $85.00
</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>
<CAPTION>
                              1st Quarter        2nd Quarter          3rd Quarter        4th Quarter               Total
                              -----------        -----------          -----------        -----------            -----------
<S>                           <C>                <C>                  <C>                <C>                    <C>
         2001                   $.35               $.35                $.35                $.55                    $1.60
         2000                   $.35               $.35                $.35                $.45                    $1.50
</TABLE>

SELECTED FINANCIAL DATA

Selected financial data is presented on pages 58 and 59 of the Annual Report to
shareholders for the year ended December 31, 2001 and are incorporated herein by
reference.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Report of Independent Accountants


                                       23
<PAGE>
MESSAGE FROM MANAGEMENT:

The year 2001 was challenging for the Farmers & Merchants Bancorp, Inc. Total
income showed an increase of approximately 3.03% with total expenses increasing
about 6.00%. Net income has shown a decrease of approximately 10% due primarily
to a substantial charge off in the commercial loan portfolio. This charge off
along with the slowdown in the economy and eleven interest rate cuts by the
Federal Reserve, resulting in a 4.75% reduction of New York Prime Rate, has
caused your Bancorp to not have a year to which we have been accustomed. As a
result of Fed actions, the Bancorp's net interest margin has dropped well below
our goal of 4.00%; however, with astute pricing, the margin has increased since
the first of the year. Nonetheless, the Bancorp still had a strong year, with
substantial progress being made on numerous customer-focused initiatives. Some
of these came at the expense of current earnings, but were necessary to address
the competitive realities of the financial services industry and to position the
Farmers & Merchants Bancorp, Inc. for future growth.

During the past year, we have continued to expand our customer base. That along
with loan development has been our main priority. The success of the Bancorp is
in no small part due to our ability to maintain a loan to deposit ratio in the
low to mid eighty (80) percentile. However, we have not and will not sacrifice
quality for quantity and will continue to make loans using sound underwriting
policies and procedures. Mortgage lending was very strong in 2001 with our
lenders putting in many extra hours to satisfy our customers' needs. We are
positioned to pursue this market aggressively in the coming year, realizing
asset quality must remain a high priority. Plus, it is important that credit
standards are not relaxed and our lenders are following the same "blueprint" in
granting and administering credit.

Among the events of 2001, the September 11th attacks were obviously the most
noteworthy. For the Bancorp, completion of the Defiance Office and the
introduction of F&M Online "Internet Banking" were the major accomplishments.
The Defiance Office opened July 30th which now puts the F&M in all four
Northwest Ohio counties, a goal that was formulated shortly after opening our
first branch, the Wauseon North Shoop Avenue Office. David Kunesh, Branch
Manager, Sue Cuevas, Assistant Branch Manager, and their staff are doing an
excellent job of competing in the Defiance Market. If you have not stopped in
our newest office, please do so at your earliest convenience. F&M Online
"Internet Banking" was introduced March 1st by E-Commerce Officer, Jay Budde. To
date we have approximately 1500 personal users and 60 businesses. To learn more
about F&M Online Internet Banking or to try a demonstration, visit our home page
at www.fm-bank.com or call us today. Construction of the Operations Center will
be the major project for 2002. We expect a completion date early in the first
quarter of 2003. The new center will free much needed space at the Main Office
for new services and expanding services to better serve our customers.

Looking ahead, Farmers & Merchants Bancorp expects to do business in a
challenging economic environment. How long the slowdown will continue is not
known; undoubtedly, it has affected everyone in our industry. We have a long
history of successfully managing our credit quality through phases of a business
cycle. The Bancorp has a broad array of products and services available to meet
our customers varied needs. While enjoying diversified revenue streams, we are
not overly dependent on any one business. Our understanding professionals, using
our internal operating guidelines, will be working together as never before to
deliver value to customers and, by extension, to our shareholders.

We would like to express our appreciation for the input and support of our Board
of Directors, Advisory Boards, loyal employees and customers, and the
cooperation of the communities we serve, and finally, the continued confidence
of our shareholders. We look forward to the opportunities and challenges of
2002.

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



                                       24
<PAGE>
                                    CONTENTS

                    Audited Consolidated Financial Statements

                        FARMERS & MERCHANTS BANCORP, INC.

                 And wholly owned subsidiaries December 31, 2001



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 - 55

Five Year Summary                                                        56

Quarterly Financial Data                                                 57

Selected Financial Data by Management                                    58 - 60

Market Risk                                                              61

Trading Market for the Company's Stock                                   61

Independent Auditors' Report                                             62

Management Report                                                        63

2001 Promotional Highlights                                              64 - 67



                                       25
<PAGE>
DIRECTORS

EUGENE D. BERNATH
Chairman of the Board
The Farmers & Merchants State Bank

DEXTER L. BENECKE
President
Viking Trucking, Inc.
Vice President
SanJan, Inc.

JERRY L. BOYERS
President
Edifice Construction
Management

JOE E. CROSSGROVE
President/Chief Executive
Officer
The Farmers & Merchants State Bank

ROBERT G. FREY
President
E. H. Frey & Sons, Inc.

JULIAN GIOVARELLI
President
GIO Sales, Inc.

JACK C. JOHNSON
President
Hawk's Clothing, Inc.
Partner
REJO Partnership

DEAN E. MILLER
President
MBC Holdings, Inc.

DALE L. NAFZIGER
Vice President
Homestead Ice Cream Co.

ANTHONY J. RUPP
President
Rupp Furniture Co.

DAVID P. RUPP, JR.
Attorney
Plassman, Rupp, Hensal &
Short

JAMES C. SANEHOLTZ
President
Saneholtz-McKarns, Inc.

MAYNARD SAUDER
Chairman
Sauder Woodworking Co.

MERLE J. SHORT
Farmer
President
Promow, Inc.

STEVEN J. WYSE
President
SteelinQ Systems, Inc.

DIRECTOR EMERITUS
LEE E. GRAFFICE
CHARLES E. LUGBILL
HAROLD H. PLASSMAN
JAMES L. PROVOST
KENNETH E. STAMM
ROBERT H. STOTZER
ROBERT V. WHITMER


ARCHBOLD MAIN OFFICE

EUGENE D. BERNATH
Chairman of the Board

JOE E. CROSSGROVE
President
Chief Executive Officer

MAYNARD SAUDER
Vice President

DEAN E. MILLER
Vice President

EDWARD A. LEININGER
Executive Vice President
Sr. Commercial Loan Officer
Chief Operating Officer

REX D. RICE
Executive Vice President
Chief Lending Officer

BARBARA J. BRITENRIKER
Vice President
Comptroller & Chief
Financial Officer

ALLEN G. LANTZ
Vice President
Branch Administrator

GEORGE JELEN
Asst. Vice President
Secondary Market Officer
Loan Underwriter

RANDAL H. SCHROEDER
Asst. Vice President
Chief Operations Officer

MICHAEL D. CULLER
Asst. Vice President
Chief Agri Finance Officer

DIANN K. MEYER
Asst. Vice President
Human Resource Officer

KENT E. ROTH
Auditor
Security Officer

MARILYN K. JOHNSON
Asst. Cashier
Compliance & CRA Officer

JUDITH A. WARNCKE
Asst. Cashier
Marketing Officer

J. SCOTT MILLER
Asst. Cashier
Agri Finance Officer

JANE C. BRUNER
Asst. Cashier
Operations Supervisor


                                       26
<PAGE>
BRETT J. KAHRS
Asst. Cashier
Senior Investment Executive

KELBY J. SCHMUCKER
Asst. Cashier
Credit Analyst

GLORIA J. LAUBER
Asst. Cashier
Mortgage Loan Director

KERRY S. FOX
Asst. Cashier
Loan Review Officer

LYDIA A. HUBER
Executive Administrative Assistant
Asst. Corporate Secretary

ARCHBOLD WOODLAND
OFFICE

DEBORAH L. SHINABERY
Asst. Vice President
Branch Manager

ARTHUR J. SHORT
Asst. Cashier
Asst. Branch Manager

ARCHBOLD ADVISORY BOARD

BRUCE C. LAUBER
President
Lauber Manufacturing Co.

JO ELLEN HORNISH
President
Hornish Brothers, Inc.

MICHAEL D. KREBS
President
Laub Auto Parts, Inc.

GENE SCHAFFNER
Farmer

GEORGE F. STOTZER
Partner
Stotzer Do-It Center

LARRY M. WENDT
Farmer

President of Board of Directors
Ridgeville Telephone

WAUSEON SHOOP OFFICE

GLORIA GUNN
Asst. Vice President
Branch Manager

SUSAN DIERINGER
Asst. Cashier
Asst. Branch Manager

JERRY A. BORTON
Assistant Cashier
Agri Finance Officer

SUSAN C. PIKE
Asst. Cashier
Credit Card Service
Representative

WAUSEON DOWNTOWN
OFFICE

CAROL J. ENGLAND
Asst. Vice President
Branch Manager
Corporate Secretary

JEAN E. HORWATH
Asst. Cashier
Asst. Branch Manager

WAUSEON ADVISORY BOARD

RICHARD L. ELROD
President
Mustang Corporation

WARREN A. KAHRS
President
Kahrs Tractor Sales, Inc.

JOSEPH H. KOLB
Owner
Kolb & Son

SANDRA K. BARBER
Fulton County Recorder
Chairman, Ohio Lottery Commission

DR. KENNETH H. KLING
Owner
Fulton County Vision Services

STRYKER OFFICE

RONALD D. SHORT
Asst. Vice President
Branch Manager

PATTI L. ROSEBROCK
Asst. Cashier
Asst. Branch Manager

STRYKER ADVISORY
BOARD

FRED W. GRISIER
Retired
Grisier Funeral Home

RICHARD E. RAKER
Retired
Raker Oil Company

STEVEN PLANSON
Farmer

WILLIAM J. BRENNER
Attorney


                                       27
<PAGE>
WEST UNITY OFFICE

LEWIS D. HILKERT
Vice President
Branch Manager

PATRICIA R. BURKHOLDER
Assistant Cashier
Assistant Branch Manager

WEST UNITY ADVISORY
BOARD

BEN G. WESTFALL
President
Westfall Realty, Inc.

TED W. MANEVAL
Farmer

R. BURDELL COLON
President
Rup-Col., Inc.

CHARLES W. KLINGER
Pharmacist
Klinger Pharmacy

DELTA OFFICE

CYNTHIA K. KNAUER
Asst. Vice President
Branch Manager

BETH A. BAY
Asst. Branch Manager

DELTA ADVISORY BOARD

TERRY J. KAPER
Attorney
Barber, Kaper, Stamm & Robinson

ROBERT E. GILDERS
Chairman
GB Manufacturing

EUGENE BURKHOLDER
President
Falor Farm Center

AL KREUZ
Retired Fulton County
Commissioner

DONALD G. GERDES
Human Resource Manager
Worthington Steel, Delta

BRYAN EAST HIGH OFFICE

DAVID C. FRAZER
Assistant Vice President
Branch Manager

CAROL L. CHURCH
Assistant Cashier
Assistant Branch Manager

BRYAN SOUTHTOWNE OFFICE

MICHAEL T. SMITH
Assistant Vice President
Branch Manager

RUTH M. FORD
Asst. Cashier
Asst. Branch Manager

RICHARD S. BRUCE
Assistant Vice President
Commercial Loan Officer

BRYAN ADVISORY BOARD

RUSTY BRUNICARDI
President/Chief Executive Officer
Community Hospital of Williams Co., Inc.

D. ROBERT SHAFFER
Farmer

DR. C NICHOLAS WALZ
President
Bryan Medical Group

PAUL R. MANLEY
Director of Intercompany Synergies
Sauder Woodworking Co.

GARRY COURTNEY
President/CEO
C.E. Electronics

MONTPELIER WEST MAIN
OFFICE

LANCE D. NOFZIGER
Asst. Cashier
Branch Manager

JEANNIE L. VONDEYLEN
Asst. Branch Manager

MONTPELIER EASTSIDE
OFFICE

KELLY L. BENTLEY
Asst. Cashier
Branch Manager

BARRY R. VONDEYLEN
Asst. Branch Manager

MONTPELIER ADVISORY
BOARD

GREGORY D. SHOUP
President
Peltcs Lumber Co., Inc.

RICHARD S. DYE
Self-employed

ROBERT D. MERCER
President
Bob Mercer Realty and
Auctions


                                       28
<PAGE>
GEORGE B. RINGS
Pharmacist
Rings Pharmacy

NAPOLEON OFFICE

STEPHEN E. JACKSON
Asst. Vice President
Branch Manager

DIANA J. DENNIE
Asst.  Cashier
Asst.  Branch Manager

MICHAEL F. SCHNITKEY
Asst.  Cashier
Agri Finance Officer

GARY W. SPENCER
Asst. Vice President
Commercial Loan Officer

NAPOLEON ADVISORY BOARD

BARBARA C. SCHIE
Office Manager
Fulton Anesthesia Associates, Inc.

DAVID M. DAMMAN
Farm Drainage Contractor
Farmer

JAMES J. VAN POPPEL
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

SWANTON ADVISORY
BOARD

ANTHONY G. FRY
Member
Select Stone
LLC

DANIEL P. MCQUADE
Attorney
The McQuades Co., LPA

LISA J. MITCHELL
Owner/Manager
Swanton Health Care Center

NORMAN ZEITER
President/Owner
Swanton Welding Co.

DEFIANCE OFFICE

DAVID A. KUNESH
Assist. Vice President
Branch Manager

LILLIAN SUE CUEVAS
Asst. Cashier
Asst. Branch Manager


                                       29
<PAGE>
January 11, 2002



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, 2001 and 2000 and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for the years ended December 31, 2001, 2000 and 1999. 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, 2001 and 2000,
and the results of its consolidated operations and cash flows for the years
ended December 31, 2001, 2000 and 1999 in conformity with accounting principles
generally accepted in the United States of America.

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


                                       30
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.
                           Consolidated Balance Sheets
                           December 31, 2001 and 2000

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                        (In Thousands)
                                                                                ------------------------------
                                                                                  2001                  2000
                                                                                --------              --------
<S>                                                                             <C>                   <C>
Cash and due from banks                                                         $ 17,842              $ 17,951
Interest bearing deposits with banks                                                 146                   100
Federal funds sold                                                                    --                   370
Securities available for sale at fair value                                      172,963               113,259
Federal Home Loan Bank stock                                                       3,178                 2,973
Loans, less allowance for loan losses of $7,275
    for 2001 and $7,160 for 2000                                                 453,836               479,587
Loans held for resale                                                             13,788                   328
Finance lease receivable                                                             619                   730
Bank premises and equipment-net                                                   12,332                10,354
Accrued interest and other assets                                                  8,922                 9,508
                                                                                --------              --------
TOTAL ASSETS                                                                    $683,626              $635,160
                                                                                ========              ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
      Deposits:
            Demand                                                              $ 41,991              $ 40,729
            NOW accounts                                                          84,763                52,850
            Savings                                                              111,213               110,393
            Time                                                                 328,190               312,491
                                                                                --------              --------
                 Total Deposits                                                  566,157               516,463
      Federal funds purchased                                                      5,595                    --
      Securities sold under agreement to repurchase                               20,944                18,903
      Other borrowings                                                            17,410                30,786
      Dividend payable                                                               715                   585
      Accrued interest and other liabilities                                       2,455                 3,435
                                                                                --------              --------
                 Total Liabilities                                               613,276               570,172
                                                                                --------              --------
SHAREHOLDERS' EQUITY:

      Common stock, no par value - authorized 1,500,000
        shares; issued  and outstanding 1,300,000 shares                          12,677                12,677
      Undivided profits                                                           56,092                51,416
      Accumulated other comprehensive income                                       1,581                   895
                                                                                --------              --------
                 Total Shareholders' Equity                                       70,350                64,988
                                                                                --------              --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                      $683,626              $635,160
                                                                                ========              ========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

                                       31
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.
                        Consolidated Statements of Income
              for the years ended December 31, 2001, 2000 and 1999


<TABLE>
<CAPTION>
                                                                          (In Thousands)(Except for Per Share Amounts)
                                                                   ----------------------------------------------------------
                                                                      2001                    2000                    1999
                                                                   ----------              ----------              ----------
<S>                                                                <C>                     <C>                     <C>
INTEREST INCOME:
     Interest and fees on loans                                    $   40,728              $   42,661              $   37,236
     Interest and Dividends on Investment Securities:
          U.S. Treasury and government agency                           4,981                   3,829                   3,754
          State and local governments                                   1,798                   1,513                   1,645
          Corporate debt securities                                       528                     544                     849
          Dividends                                                       206                     209                     187
     Interest on federal funds sold                                       473                     130                     105
     Interest on deposits in banks                                        231                       4                       3
                                                                   ----------              ----------              ----------
               Total Interest Income                                   48,945                  48,890                  43,779
                                                                   ----------              ----------              ----------
INTEREST EXPENSE:
     Deposits                                                          22,947                  22,299                  19,776
     Borrowed funds                                                     2,501                   3,210                   1,374
                                                                   ----------              ----------              ----------
               Total Interest Expense                                  25,448                  25,509                  21,150
                                                                   ----------              ----------              ----------
               Net Interest Income                                     23,497                  23,381                  22,629
PROVISION FOR LOAN LOSSES                                               2,632                   1,496                   1,637
                                                                   ----------              ----------              ----------
NET INCOME AFTER PROVISION
     FOR LOAN LOSS                                                     20,865                  21,885                  20,992
                                                                   ----------              ----------              ----------
OTHER INCOME:
     Service charges on deposit accounts                                1,899                   1,745                   1,524
     Other service charges and fees                                     2,110                   1,420                   1,435
     Mortgage servicing rights income                                   1,722                     113                     139
     Net securities gains (losses)                                        228                      --                      31
                                                                   ----------              ----------              ----------
               Total Other Income                                       5,959                   3,278                   3,129
                                                                   ----------              ----------              ----------
OTHER EXPENSES:
     Salaries and wages                                                 7,059                   6,542                   5,885
     Pension and other employee benefits                                1,937                   1,603                   1,536
     Occupancy expense (net)                                              482                     432                     542
     Furniture and equipment                                            1,444                   1,178                   1,272
     Data processing fees                                               1,001                     758                     766
     Franchise taxes                                                      842                     772                     629
     Mortgage servicing rights expense                                    911                     129                     163
     Other operating expense                                            3,500                   3,240                   3,528
                                                                   ----------              ----------              ----------
               Total Other Expenses                                    17,176                  14,654                  14,321
                                                                   ----------              ----------              ----------
INCOME BEFORE INCOME TAXES                                              9,648                  10,509                   9,800
INCOME TAXES                                                            2,892                   3,118                   3,007
                                                                   ----------              ----------              ----------
NET INCOME                                                         $    6,756              $    7,391              $    6,793
                                                                   ==========              ==========              ==========

NET INCOME PER SHARE - BASIC                                       $     5.20              $     5.69              $     5.23
                                                                   ==========              ==========              ==========

WEIGHTED AVERAGE SHARES OUTSTANDING                                 1,300,000               1,300,000               1,300,000
                                                                   ==========              ==========              ==========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.


                                       32
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.

           Consolidated Statements of Changes in Shareholder's Equity
              for the years ended December 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                        (In Thousands)
                                                                   -----------------------------------------------------------
                                                                                                    Accumulated
                                                                                                       Other
                                                                    Common          Undivided      Comprehensive
                                                                    Stock            Profits           Income          Total
                                                                   --------         --------         --------         --------
<S>                                                                <C>              <C>              <C>              <C>
BALANCE AT DECEMBER 31, 1998                                       $ 12,677         $ 41,002         $  1,671         $ 55,350
     Comprehensive income:
          Net income for 1999                                            --            6,793               --            6,793
          Other comprehensive income net of tax:
               Unrealized gain (loss) on Available-For-Sale
                 securities (net of tax effect of ($1,253))              --               --           (2,454)          (2,454)
          Reclassification adjustment (net of tax) for                   --               --
               Available-For-Sale securities sold                                                          20               20
                                                                                                                      --------
               Total comprehensive income                                                                                4,359
     Cash dividends ($1.40 per share)                                    --           (1,820)              --           (1,820)
                                                                   --------         --------         --------         --------

BALANCE AT DECEMBER 31, 1999                                         12,677           45,975             (763)          57,889
     Comprehensive income:
          Net income for 2000                                            --            7,391               --            7,391
          Other comprehensive income net of tax:
               Unrealized loss on Available-For-Sale
                 securities (net of tax effect of $853)                  --               --            1,658            1,658
                                                                                                                      --------
               Total comprehensive income                                                                                9,049
     Cash dividends ($1.50 per share)                                    --           (1,950)              --           (1,950)
                                                                   --------         --------         --------         --------

BALANCE AT DECEMBER 31, 2000                                         12,677           51,416              895           64,988
     Comprehensive income:
          Net income for 2001                                            --            6,756                             6,756
          Other comprehensive income net of tax:
               Unrealized gain on Available-For-Sale
                 securities (net of tax effect of $431)                  --                               836              836
          Reclassification adjustment (net of tax) for
               Available-For-Sale securities sold                                                        (150)            (150)
                                                                                                                      --------
               Total comprehensive income                                                                                7,442
     Cash dividends ($1.60 per share)                                    --           (2,080)              --           (2,080)
                                                                   --------         --------         --------         --------

BALANCE AT DECEMBER 31, 2001                                       $ 12,677         $ 56,092         $  1,581         $ 70,350
                                                                   ========         ========         ========         ========
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.

                                       33
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.
                      Consolidated Statements of Cash Flows
              for the years ended December 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                                (In Thousands)
                                                                           -----------------------------------------------------
                                                                              2001                 2000                  1999
                                                                           ---------             ---------             ---------
<S>                                                                        <C>                   <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                                            $   6,756             $   7,391             $   6,793
     Adjustments to Reconcile Net Income to Net Cash
       Provided by Operating Activities:
          Depreciation                                                         1,282                 1,096                 1,243
          Amortization of servicing rights                                       911                   129                   163
          Amortization of securities premiums/discounts                          278                   222                   413
          Provision for loan losses                                            2,632                 1,496                 1,637
          Provision for deferred income taxes                                    365                   (55)                 (172)
          (Gain) loss on sale equipment and other assets                          21                   (80)                 (114)
          (Gain) loss on sale of securities                                     (228)                   --                   (31)
          Originations of mortgage loans held for sale                      (141,754)              (21,553)              (33,426)
          Proceeds from mortgage loans held for sale                         128,293                21,727                33,542
          Net change in other assets/liabilities                              (2,027)               (2,807)                  633
                                                                           ---------             ---------             ---------
               Net Cash Provided (Used) by Operating Activities               (3,471)                7,566                10,681
                                                                           ---------             ---------             ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of bank premises and equipment                                  (3,469)               (1,276)               (1,991)
     Proceeds from sale of bank premises and equipment                           195                    15                    --
     Maturity proceeds of available-for-sale securities                       46,212                28,427                36,635
     Sale proceeds of available-for-sale securities                           10,882                    --                17,114
     Purchase of available-for-sale securities                              (116,015)              (36,660)              (32,314)
     Net (increase) decrease in loans and leases                              23,230               (25,585)              (57,863)
                                                                           ---------             ---------             ---------
               Net Cash (Used) by Investing Activities                       (38,965)              (35,079)              (38,419)
                                                                           ---------             ---------             ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Net increase in deposits                                                 49,694                13,297                (9,017)
     Net change in short-term borrowings                                       7,636                11,560                19,427
     Proceeds from other borrowings                                            5,000                27,000                    --
     Payments on other borrowings                                            (18,377)              (21,253)               (1,201)
     Payment of dividends                                                     (1,950)               (2,015)               (1,820)
                                                                           ---------             ---------             ---------
               Net Cash Provided by Financing Activities                      42,003                28,589                 7,389
                                                                           ---------             ---------             ---------
               Net Change in Cash and Cash Equivalents                          (433)                1,076               (20,349)
CASH AND CASH EQUIVALENTS - JANUARY 1                                         18,421                17,345                37,694
                                                                           ---------             ---------             ---------
CASH AND CASH EQUIVALENTS - DECEMBER 31                                    $  17,988             $  18,421             $  17,345
                                                                           =========             =========             =========

RECONCILIATION OF CASH AND CASH EQUIVALENTS:
     Cash and due from banks                                               $  17,842             $  17,951             $  17,245
     Interest bearing deposits                                                   146                   100                   100
     Federal funds sold                                                           --                   370                    --
                                                                           ---------             ---------             ---------
                                                                           $  17,988             $  18,421             $  17,345
                                                                           =========             =========             =========
SUPPLEMENTARY CASH FLOWS DISCLOSURES:
     Cash paid during the year for:
          Interest (net of amount capitalized)                             $  25,665             $  25,155             $  21,357
          Income taxes                                                         3,480                 4,334                 2,024
</TABLE>

See Accompanying Notes to Consolidated Financial Statements.


                                       34
<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.



                                       35
<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.


                                       36
<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 2001 was $1.707 million, while servicing
                  assets amortized during 2001 was $911 thousand. Capitalized
                  mortgage servicing rights are included in other assets and
                  totaled $1.666 million and $870 thousand at December 31, 2001
                  and 2000, respectively. No valuation allowance is required.


                                       37
<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.


                                       38
<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, 2001 and 2000 were $8.1
                  million and $4.8 million, respectively.

NOTE 3. INVESTMENT SECURITIES

                  The amortized cost and estimated market values of investments
                  in securities as of December 31, are detailed below. Fair
                  market values are based on quoted market prices or dealer
                  quotes.

<TABLE>
<CAPTION>
                                                          (In Thousands)
                                                          --------------
                                                               2001
                                                               ----
                                          Gross         Gross         Gross        Gross
                                        Amortized     Unrealized    Unrealized     Market
                                          Cost          Gains         Losses       Value
                                          ----          -----         ------       -----
<S>                                     <C>           <C>           <C>           <C>
Available-for-Sale:
       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>


                                       39
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


NOTE 3. INVESTMENT SECURITIES (Continued)


<TABLE>
<CAPTION>
                                                      (In Thousands)
                                                      --------------
                                                           2000
                                                           ----
                                        Gross        Gross         Gross         Gross
                                      Amortized    Unrealized   Unrealized       Market
                                        Cost         Gains        Losses         Value
                                        ----         -----        ------         -----
<S>                                   <C>          <C>           <C>          <C>

Available-for-Sale:
     U.S. Treasury                    $  7,821      $    100      $     --      $  7,921
     U.S. Government agency             52,540           778           124        53,194
     Mortgage-backed securities          7,924             5            66         7,863
     State and local governments        31,438           771            52        32,157
     Corporate debt securities           9,251            --            55         9,196
     Commercial paper                    2,908            --            --         2,908
     Equity securities                      20            --            --            20
                                      --------      --------      --------      --------

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

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

<TABLE>
<CAPTION>
                                              (In Thousands)
                                              --------------
                                         2001       2000       1999
                                         ----       ----       ----
<S>                                     <C>        <C>        <C>
Gross realized gains                    $ 228      $  --      $  38

Gross realized losses                      --         --          7
                                        -----      -----      -----

       Net Realized Gains (Losses)      $ 228      $  --      $  31
                                        =====      =====      =====
</TABLE>

         The amortized cost and estimated market value of debt securities at
         December 31, 2001, 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                        $ 45,269      $ 45,737
 After one year through five years       104,738       107,226
After five years through ten years        17,520        17,698
After ten years                            2,995         2,255
                                        --------      --------

      Total                             $170,522      $172,916
                                        ========      ========
</TABLE>


                                       40
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


NOTE 3. INVESTMENT SECURITIES (Continued)

         Investments with a carrying value of $106.6 million and $95.4 million
         at December 31, 2001 and 2000, 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)
                                                     --------------
Loans:                                             2001            2000
------                                             ----            ----
<S>                                             <C>             <C>
      Real estate                               $ 247,545       $ 261,289
      Commercial and industrial                   119,025          96,990
      Agricultural (excluding real estate)         31,684          51,337
      Consumer and other loans                     54,992          68,429
      Overdrafts                                      853             652
      Industrial Development Bonds                  7,590           8,647
                                                ---------       ---------
                                                  461,689         487,344
      Less: Deferred loan fees and costs             (578)           (597)
                                                ---------       ---------
                                                  461,111         486,747
      Less: Allowance for loan losses              (7,275)         (7,160)
                                                ---------       ---------

            Loans - Net                         $ 453,836       $ 479,587
                                                =========       =========
</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                               $  5,025      $ 14,118      $242,185
Commercial and industrial                   82,539        32,181        35,990
Consumer, Master Card and overdrafts        10,913        42,439         2,497
Industrial Development Bonds                 2,148           229         5,213
                                          --------      --------      --------

                                          $100,625      $ 88,967      $285,885
                                          ========      ========      ========
</TABLE>


                                       41
<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, 2001:

<TABLE>
<CAPTION>
                                               (In Thousands)
                                               --------------
                                            Fixed       Variable
                                            Rate          Rate
                                            ----          ----
<S>                                       <C>           <C>
Real estate                               $ 60,138      $201,195
Commercial and industrial                   62,557        88,152
Consumer, Master Card and overdrafts        55,143         1,321
Industrial Development Bonds                 7,590            --
</TABLE>

         $139 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 $16.3 and $14.9 million at
         December 31, 2001 and 2000, 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 2001 were $57.5
         million and repayments were $56.1 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, 2001 there were $3.3 million of undisbursed loans in
         process.

         Loans for which the Bank is providing collection services is $191.7,
         $163.5 and $158.2 million for 2001, 2000 and 1999, respectively.
         Servicing assets recognized during 2001 amounted to $1.7 million and
         amortization of servicing assets amounted to $911 thousand. 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
         allowance for impairment has been provided.

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

<TABLE>
<CAPTION>
                                                    (In Thousands)
                                                    --------------
                                           2001          2000          1999
                                           ----          ----          ----
<S>                                      <C>           <C>           <C>
Allowance for Loan Losses:
       Balance at beginning of year      $ 7,160       $ 6,750       $ 5,850
       Provision for loan loss             2,632         1,496         1,637
       Recoveries                            617         1,287           837
       Loans charged off                  (3,134)       (2,373)       (1,574)
                                         -------       -------       -------

                                         $ 7,275       $ 7,160       $ 6,750
                                         =======       =======       =======
</TABLE>


                                       42
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


NOTE 5. LOANS (Continued)


         As of December 31, 2001 and 2000, the recorded investment in impaired
         loans amounted to approximately $16.2 and $9.3 million, respectively.
         The average recorded investment in impaired loans amounted to
         approximately $12.8 million, $8.6 million and $6.5 million for 2001,
         2000 and 1999, respectively. Of the loans that were considered impaired
         for 2001 and 2000, the recorded investment in impaired loans that have
         a related allowance determined in accordance with SFAS No. 114 was $5.1
         million and $6.5 million, respectively for which the related allowance
         for loan loss was $3.8 million and $3.4 million, respectively. As of
         December 31, 2001 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
         $257, $177 and $53 thousand for 2001, 2000 and 1999, 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)
                                      --------------
                                      2001        2000
                                      ----        ----
<S>                                  <C>         <C>
Gross investment in leases           $ 684       $ 820
Unearned income                        (65)        (90)
                                     -----       -----

       Finance Lease Receivable      $ 619       $ 730
                                     =====       =====
</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)
                                                 --------------
                                               2001           2000
                                               ----           ----
<S>                                          <C>            <C>
Land                                         $  2,601       $  2,614
Buildings                                      10,661          9,349
Furnishings                                     8,308          6,390
                                             --------       --------
                                               21,570         17,137
Less:  Accumulated depreciation                (9,238)        (7,999)
                                             --------       --------

      Bank Premises and Equipment (Net)      $ 12,332       $ 10,354
                                             ========       ========
</TABLE>

                                       43
<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)
                                           --------------
                                         2001          2000
                                         ----          ----
<S>                                    <C>           <C>
Time deposits under $100,000           $246,455      $238,946
Time deposits of $100,000 or more        81,735        73,545
                                       --------      --------

                                       $328,190      $312,491
                                       ========      ========
</TABLE>

         For each of the five years subsequent to December 31, 2001, maturities
         for time deposits having a remaining term of more than one year
         follows:

<TABLE>
<S>                             <C>
2003                            $ 135,698
2004                               56,378
2005                                4,239
2006 and thereafter                 1,818
</TABLE>

         Deposits to directors, executive officers companies in which they have
         a direct or indirect ownership as of December 31, 2001 and 2000
         amounted to $10.7 million and $14.7 million, respectively.

NOTE 9. REPURCHASE AGREEMENTS

         The Bank's policy requires qualifying securities as collateral for the
         underlying repurchase agreements. As of December 31, 2001 and 2000
         securities with a book value of $33.1 million and $25.2 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)
                                                            --------------
                                                          2001          2000
                                                          ----          ----
<S>                                                     <C>           <C>
Federal Home Loan Bank,  various  loans due  in
  monthly installments of $161 thousand including
  interest plus annual principal payments of $ 400
  thousand plus interest at fixed rates from 5.4%
  to 6.88%. Notes are secured by a blanket lien
  on 100% of the one  to four  family  residential
  mortgage portfolio and Federal Home Loan
  Bank Stock                                            $17,410       $30,786
                                                        -------       -------
</TABLE>


                                       44
<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>
2002                             $  2,463
2003                                7,309
2004                                1,875
2005                                1,713
2006                                1,634
2007 and thereafter                 2,416
                                 --------

                                 $ 17,410
                                 ========
</TABLE>

NOTE 11. FEDERAL INCOME TAXES

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

<TABLE>
<CAPTION>
                                              (In Thousands)
                                              --------------
                                             2001        2000
                                             ----        ----
<S>                                         <C>         <C>
Deferred Tax Assets:
     Allowance for loan losses              $2,187      $2,142
     Net unrealized loss on available-
       for-sale securities                      --          --
                                            ------      ------
                                             2,187       2,142
                                            ------      ------

Deferred Tax Liabilities:
     Accreted discounts on bonds               139          67
     FHLB stock dividends                      497         427
     Mortgage servicing rights                 567         297
     Other                                      50          52
     Net unrealized gain on available-
       for-sale securities                     814         461
                                            ------      ------
                                             2,067       1,304
                                            ------      ------

          Net Deferred Tax Asset            $  120      $  838
                                            ======      ======
</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.


                                       45
<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)
                                                --------------
                                       2001          2000          1999
                                       ----          ----          ----
<S>                                  <C>           <C>           <C>
Current:
      Federal                        $ 2,732       $ 3,173       $ 3,195
Deferred:
      Federal                            160           (55)         (188)
                                     -------       -------       -------

                                     $ 2,892       $ 3,118       $ 3,007
                                     =======       =======       =======
</TABLE>

<TABLE>
<CAPTION>
                                                (In Thousands)
                                                --------------
                                       2001          2000          1999
                                       ----          ----          ----
<S>                                  <C>           <C>           <C>
Income tax at statutory rates        $ 3,411       $ 3,485       $ 3,399
Tax effect:
      Tax exempt interest               (596)         (447)         (468)
      Costs attributable to tax
        exempt interest                   77            80            76
                                     -------       -------       -------

                                     $ 2,892       $ 3,118       $ 3,007
                                     =======       =======       =======
</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 $472,
         $410, and $363 thousand for 2001, 2000 and 1999, respectively.

NOTE 13. RELATED PARTY TRANSACTIONS

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


                                       46
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


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)
                                     --------------
                                    2001         2000
                                    ----         ----
<S>                               <C>          <C>
Commitments to extend credit      $81,654      $74,745
Credit card arrangements           23,809       19,515
Standby letters of credit           1,971          898
</TABLE>

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

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

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

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

NOTE 16. REGULATORY CAPITAL REQUIREMENTS

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


                                       47
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


NOTE 16. REGULATORY CAPITAL REQUIREMENTS (Continued)

         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, 2001, that
         the Bank meets all the capital adequacy requirements to which it is
         subject.

         As of December 31, 2001 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, 2001 and 2000 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, 2001:
  Total Risk-Based Capital
    (to Risk Weighted Assets)
      Consolidated                  $76,030        16.78%      $36,255         8.00%      $    --          N/A
      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%           --          N/A
      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%           --          N/A
      Farmers & Merchants
        State Bank                   57,625         8.39%       27,473         4.00%       34,341         5.00%
</TABLE>


                                       48
<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, 2000:
  Total Risk-Based Capital
   (to Risk Weighted Assets)
     Consolidated                  $69,581         15.6%      $35,680          8.0%      $    --          N/A
     Farmers & Merchants
       State Bank                   69,199         14.6%       37,920          8.0%       47,400         10.0%
  Tier 1 Capital
   (to Risk Weighted Assets)
     Consolidated                   63,977         14.3%       17,900          4.0%           --          N/A
     Farmers & Merchants
       State Bank                   53,274         11.3%       18,860          4.0%       28,290          6.0%
  Tier 1 Capital
   (to Adjusted Total Assets)
     Consolidated                   63,977         10.2%       25,090          4.0%           --          N/A
     Farmers & Merchants
       State Bank                   53,274          8.5%       25,070          4.0%       31,340          5.0%
</TABLE>

         (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 $14.3 million may be paid without prior regulatory
         approval. Regardless of formal regulatory restrictions, the Bank may
         not pay dividends that would result in its capital levels being reduced
         below the minimum requirements shown above.

NOTE 17. FAIR VALUE INFORMATION AND INTEREST RATE RISK

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


                                       49
<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, 2001 and 2000 are reflected
         below:

<TABLE>
<CAPTION>
                                                       2001                        2000
                                                       ----                        ----
                                               Book          Fair          Book          Fair
                                               Value         Value         Value         Value
                                               -----         -----         -----         -----
<S>                                           <C>           <C>           <C>           <C>
Financial Assets:
      Cash and cash equivalents               $ 17,842      $ 17,842      $ 17,951      $ 17,951
      Interest bearing deposits                    146           146           100           100
      Federal funds sold                            --            --           370           370
      Available-for-sale securities            172,963       172,963       113,259       113,259
      Federal Home Loan Bank                     3,178         3,178         2,973         2,973
      Net loans                                468,243       489,264       480,645       492,595
      Interest receivable                        6,287         6,287         5,077         5,077

Financial Liabilities:
      Deposits                                $566,157      $574,852      $516,463      $518,648
      Short-term borrowings:
         Federal funds purchased                 5,595         5,595            --            --
         Repurchase agreement sold              20,944        20,944        18,903        18,903
      Other borrowings                          17,410        17,766        30,786        31,313
      Interest payable                           1,921         1,921         1,784         1,784

Off-Balance-Sheet Financial Instruments:
      Commitments to extend credit             105,463       105,463        94,260        94,260
      Standby letters of credit                  1,971         1,971           898           898
</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.


                                       50
<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.


                                       51
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


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

                  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.

                  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.


                                       52
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.

             Notes to Consolidated Financial Statements (Continued)


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

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                     (In Thousands)
                                                                     --------------
                                                                    2001         2000
                                                                    ----         ----
<S>                                                                <C>          <C>
ASSETS:
       Cash                                                        $   773      $   706
       Related party receivables:
         Dividends                                                     715          300
         Note receivable                                            10,000       10,000
       Investment in subsidiaries                                   59,756       54,741
                                                                   -------      -------

TOTAL ASSETS                                                       $71,244      $65,747
                                                                   =======      =======

LIABILITIES:
       Accrued expenses                                            $   179      $   174
       Dividends payable                                               715          585
                                                                   -------      -------
             Total Liabilities                                         894          759
                                                                   -------      -------

SHAREHOLDERS' EQUITY:
       Common stock, no par value -
         1,500,000 shares authorized; 1,300,000 shares issued       12,677       12,677
       Undivided profits                                            56,092       51,416
       Accumulated other comprehensive income                        1,581          895
                                                                   -------      -------
             Total Shareholders' Equity                             70,350       64,988
                                                                   -------      -------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                         $71,244      $65,747
                                                                   =======      =======
</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)

                              STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                         (In Thousands)
                                                         --------------
                                                  2001        2000        1999
                                                  ----        ----        ----
<S>                                              <C>         <C>         <C>
INCOME:
       Equity in net income of subsidiaries      $6,409      $7,055      $6,451
       Interest income                              600         600         600
                                                 ------      ------      ------
             Total Income                         7,009       7,655       7,051
                                                 ------      ------      ------

EXPENSES:
       Miscellaneous                                 23          23          14
       Professional fees                             14          17          18
       Supplies                                       7           7           6
       Taxes                                         30          43          44
                                                 ------      ------      ------
             Total Expense                           74          90          82
                                                 ------      ------      ------

INCOME BEFORE INCOME TAXES                        6,935       7,565       6,969

INCOME TAXES                                        179         174         176
                                                 ------      ------      ------

NET INCOME                                       $6,756      $7,391      $6,793
                                                 ======      ======      ======
</TABLE>


                                       54
<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          Total
                                                               -----        -------         ------          -----
<S>                                                          <C>            <C>            <C>            <C>
BALANCE AT DECEMBER 31, 1998                                 $ 12,677       $ 41,002       $  1,671       $ 55,350
  Comprehensive income:
     Net income for 1999                                           --          6,793             --          6,793
     Other comprehensive income net of tax:
           Unrealized (loss) on Available-For-Sale
             securities (net of tax effect of ($1,253))            --             --         (2,454)        (2,454)
     Reclassification adjustment for available
       for sale securities sold (net of tax)                                                     20             20
                                                                                                          --------
           Total comprehensive income                                                                        4,359
  Dividends ($1.40 per share)                                      --         (1,820)            --         (1,820)
                                                             --------       --------       --------       --------
BALANCE AT DECEMBER 31, 1999                                   12,677         45,975           (763)        57,889
  Comprehensive income:
     Net income for 2000                                           --          7,391             --          7,391
     Other comprehensive income net of tax:
           Unrealized gain on Available-For-Sale
             securities (net of tax effect of $853)                --             --          1,658          1,658
                                                                                                          --------
           Total comprehensive income                                                                        9,049
  Dividends ($1.50 per share)                                      --         (1,950)            --         (1,950)
                                                             --------       --------       --------       --------
BALANCE AT DECEMBER 31, 2000                                   12,677         51,416            895         64,988
  Comprehensive income:
     Net income for 2001                                           --          6,756             --          6,756
     Other comprehensive income net of tax:
           Unrealized gain on Available-For-Sale
             securities (net of tax effect of $431)                --             --            836            836
     Reclassification adjustment for available
       for sale securities sold (net of tax)                                                   (150)          (150)
                                                                                                          --------
           Total comprehensive income                                                                        7,442
  Dividends ($1.60 per share)                                      --         (2,080)            --         (2,080)
                                                             --------       --------       --------       --------

BALANCE AT DECEMBER 31, 2001                                 $ 12,677       $ 56,092       $  1,581       $ 70,350
                                                             ========       ========       ========       ========
</TABLE>


                                       55
<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 CASH FLOWS

<TABLE>
<CAPTION>
                                                                      (In Thousands)
                                                                      --------------
                                                              2001         2000          1999
                                                              ----         ----          ----
<S>                                                         <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
       Net income                                           $ 6,756       $ 7,391       $ 6,793
       Adjustments to Reconcile Net Income
         to Net Cash Provided by Operating Activities:
             Equity in undistributed net income
               of subsidiaries                               (6,409)       (7,055)       (6,451)
             Changes in Operating Assets and
               Liabilities:
                     Accrued expenses                             5            (2)         (178)
                                                            -------       -------       -------
                              Net Cash Provided by
                                Operating Activities            352           334           164
                                                            -------       -------       -------

CASH FLOWS FROM INVESTING ACTIVITIES:
       Dividends from wholly-owned subsidiaries               1,665         1,718         1,640
                                                            -------       -------       -------

CASH FLOWS FROM FINANCING ACTIVITIES:
       Payment of dividends                                  (1,950)       (2,015)       (1,820)
                                                            -------       -------       -------

                             Net Change in Cash and
                               Cash Equivalents                  67            37           (16)

CASH AND CASH EQUIVALENTS -
  beginning of year                                             706           669           685
                                                            -------       -------       -------

CASH AND CASH EQUIVALENTS -
  END OF YEAR                                               $   773       $   706       $   669
                                                            =======       =======       =======
</TABLE>


                                       56
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.

                  Five-Year Summary of Consolidated Operations

<TABLE>
<CAPTION>
                                                 2001              2000              1999              1998              1997
                                                 ----              ----              ----              ----              ----
<S>                                          <C>               <C>               <C>               <C>               <C>
Summary of Income:
     Interest income                         $    48,945       $    48,890       $    43,779       $    42,888       $    40,158
     Interest expense                             25,448            25,509            21,150            22,085            21,139
                                             -----------       -----------       -----------       -----------       -----------
          Net Interest Income                     23,497            23,381            22,629            20,803            19,019
Provision for loan loss                            2,632             1,496             1,637               892             1,111
                                             -----------       -----------       -----------       -----------       -----------
Net interest income after
  provision for loan loss                         20,865            21,885            20,992            19,911            17,908
Other income (expense)                           (11,217)          (11,376)          (11,192)           (8,841)           (8,096)
                                             -----------       -----------       -----------       -----------       -----------
Net income before income taxes                     9,648            10,509             9,800            11,070             9,812
Income taxes                                       2,892             3,118             3,007             3,413             3,035
                                             -----------       -----------       -----------       -----------       -----------

Net income                                   $     6,756       $     7,391       $     6,793       $     7,657       $     6,777
                                             ===========       ===========       ===========       ===========       ===========

Per Share of Common Stock:
       Earnings per common share
         outstanding (Based on weighted
       average number of shares
       outstanding):
          Net income                         $      5.20       $      5.69       $      5.23       $      5.89       $      5.22
          Dividends                          $      1.60       $      1.50       $      1.40       $      1.40       $      1.25
          Weighted average number
            of shares outstanding              1,300,000         1,300,000         1,300,000         1,300,000         1,300,000
Year-end assets                              $   683,626       $   635,160       $   598,529       $   585,869       $   528,273
Average assets                                   663,469           619,075           585,189           553,277           510,163
Year-end capital                                  70,350            64,988            57,889            55,350            48,844
Average equity capital                            69,429            61,488            56,862            52,940            46,548
</TABLE>

See Independent Auditors' Report on Supplementary Information.


                                       57
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.

                            Quarterly Financial Data


<TABLE>
<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>


<TABLE>
<CAPTION>
                                                              Quarter Ended in 2000
                                                              ---------------------
                                          Mar 31            Jun 30            Sep 30           Dec 31
                                          ------            ------            ------           ------
<S>                                    <C>               <C>               <C>               <C>
  Summary of Income:
     Interest income                   $    11,642       $    10,578       $    12,421       $    14,249
     Interest expense                        5,776             5,095             6,655             7,983
                                       -----------       -----------       -----------       -----------
          Net Interest Income                5,866             5,483             5,766             6,266
Provision for loan loss                        167               183               630               516
                                       -----------       -----------       -----------       -----------
Net interest income after
  provision for loan loss                    5,699             5,300             5,136             5,750
Other income (expense)                      (2,952)           (2,822)           (2,947)           (2,655)
                                       -----------       -----------       -----------       -----------
Net income before income taxes               2,747             2,478             2,189             3,095
Income taxes                                   758               627               615             1,118
                                       -----------       -----------       -----------       -----------

Net income                             $     1,989       $     1,851       $     1,574       $     1,977
                                       ===========       ===========       ===========       ===========

Earnings Per Common Share              $      1.53       $      1.42       $      1.21       $      1.52
                                       ===========       ===========       ===========       ===========

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


                                       58


<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.

                      SELECTED FINANCIAL DATA BY MANAGEMENT


Key Ratios:

<TABLE>
<CAPTION>
                               1997       1998       1999       2000       2001
                              ------     ------     ------     ------     ------
<S>                           <C>        <C>        <C>        <C>        <C>
Return on average equity      14.56%     14.46%     11.95%     12.02%      9.73%
Return on average assets       1.33%      1.38%      1.16%      1.19%      1.02%
Loan to deposit ratio         86.31%     78.33%     92.13%     93.00%     82.71%
Capital to assets ratio        9.25%      9.45%      9.67%     10.23%     10.29%
</TABLE>



                [GRAPH]                                 [GRAPH]



                [GRAPH]                                 [GRAPH]






                                       59
<PAGE>
                        FARMERS & MERCHANTS BANCORP, INC.

                      SELECTED FINANCIAL DATA BY MANAGEMENT



<TABLE>
<CAPTION>
                              (In Thousands Except for Per Share Amounts)
                        --------------------------------------------------------
                          1997        1998        1999        2000        2001
                        --------    --------    --------    --------    --------
<S>                     <C>         <C>         <C>         <C>         <C>
Loans                   $397,295    $401,192    $456,617    $480,645    $468,243
Total Assets            $528,273    $585,869    $598,529    $635,160    $683,626
Shareholders' Equity    $ 48,844    $ 55,350    $ 57,889    $ 64,988    $ 70,350
Interest Income         $ 40,158    $ 42,888    $ 43,779    $ 48,890    $ 48,945
Interest Expense        $ 21,139    $ 22,085    $ 21,150    $ 25,509    $ 25,448
Net Interest            $ 19,019    $ 20,803    $ 22,629    $ 23,381    $ 23,497
Other Expense           $  8,096    $  8,841    $ 11,192    $ 11,376    $ 11,216
Federal Income Tax      $  3,035    $  3,413    $  3,007    $  3,118    $  2,892
Net Income              $  6,777    $  7,657    $  6,793    $  7,391    $  6,756
Net Income per Share    $   5.22    $   5.89    $   5.23    $   5.69    $   5.20
Dividends per Share     $   1.25    $   1.40    $   1.40    $   1.50    $   1.60
</TABLE>



                [GRAPH]                                 [GRAPH]



                [GRAPH]                                 [GRAPH]





                                       60
<PAGE>
                      SELECTED FINANCIAL DATA BY MANAGEMENT

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Farmers & Merchants Bancorp, Inc. has again continued its consistent pattern
of solid income and asset growth. Total interest income remained steady at $48.9
for both 2001 and 2000 compared to $43.8 million for 1999. Interest income from
loans decreased slightly from $42.6 million for 2000 to $40.7 million for 2001
while still higher than 1999 levels of $37.2 million. This is a result of the
loan portfolio decreasing from $480.6 million for 2000 to $468.2 million for
2001 representing a 2.6% decrease, and also as a result of decreasing interest
rates. Interest expense has also remained stable at $25.4 million compared to
$25.5 million for 2000 and $21.1 million for 1999 even though deposits have
risen from $516.4 million for 2000 to $566.1 million for 2001. As a result net
interest income also remained stable at $23.5 million for 2001 compared to $23.4
million for 2000 and $22.6 million for 1999.

Other income has increased to $5.6 million for 2001 compared to $3.3 million and
$3.1 million for 2000 and 1999, respectively. This increase was primarily a
result of an increase in mortgage servicing income that was a result of
refinancing of residential mortgages because of the fall in interest rates
during 2001. There was also an increase in other service charges such as
mastercard fees, profit on checks and miscellaneous customer service charges.

Operating expenses also increased in virtually every category as a result of
additional services required to accommodate the increased activity in loans and
deposits. Operating expenses for 2001 were $17.2 million compared to $14.6
million and $14.3 million for 2000 and 1999, respectively.

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 $136.3 million for 2001
representing 20.5% of total average assets. Of the $170.5 million of debt
securities in the portfolio as of December 31, 2001, $45.3 million or 26.5% of
the portfolio is expected to mature in 2002.

CAPITAL RESOURCES

Shareholders' equity was $70 million at December 31, 2001 compared to $65
million for 2000. 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, 2001, The Farmers & Merchants State Bank had a total risk-based
capital ratio of 15.2% and a 11.8% core capital to risk-based asset ratio which
are well in excess of regulatory guidelines. The bank's leverage ratio of 8.4%
is also substantially in excess of regulatory guidelines. These ratios compare
to 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.

To accommodate future growth and provide for space for the Company's bank
subsidiary's operations department, a $4 million construction project is
expected to commence in 2002.



                                       61
<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.

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

2000 -- by quarter                        1st        $ 80.00      $115.00
                                          2nd          80.00       115.00
                                          3rd          85.00       115.00
                                          4th          85.00       120.00
</TABLE>

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

<TABLE>
<CAPTION>
                                        Quarter        2001        2000
                                        -------      -------      -------
<S>                                     <C>          <C>          <C>
Dividends declared per share
                                          1st        $   .35      $   .35
                                          2nd            .35          .35
                                          3rd            .35          .35
                                          4th            .55          .45
</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.





                                       62
<PAGE>
January 11, 2002


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, 2001, 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, 2001, 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



                                       63
<PAGE>
                                MANAGEMENT REPORT
                             as of December 31, 2001

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, 2001, 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, 2001. 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, 2001.

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, 2001.


                                       64
<PAGE>
      DIRECTOR PLASSMAN RETIRES FROM BOARD

 Maynard Sauder, Harold Plassman, Eugene Bernath
    Merle Short, Joe Crossgrove, Robert Frey,
        Dale Nafziger, Julian Giovarelli
  Anthony Rupp, Jack Johnson, James Saneholtz,
          Jerry Boyers, Dexter Benecke

                                             WAUSEON DOWNTOWN EMPLOYEES
                                              DONATE TO HORSEBACK HAVEN

                                     Jean Horwath, AC/Wauseon Downtown Asst. Mgr
                                          presents check to Diane Timbrook,
                                            Director of Horseback Haven.







            WAUSEON HOMECOMING PARADE

Susan Dieringer, AC/Wauseon Shoop Asst. Mgr. and
       Becky Huddy, Shoop New Accts. Rep.
      and Moola Moola participating in the
           Wauseon Homecoming Parade.


                                   BRANCH ADMINISTRATOR & MANAGERS

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



                                       65
<PAGE>
                                        F & M DONATES TO OPPORTUNITY CENTER

                                    Lance Nofziger, AC/Montpelier W. Main Mgr.
                                     presents "Your Checking Account" packets
                                   to Williams County Opportunity Center teacher
                                                   Kaleb Moore.



       WILLIAMS CO. SENIOR CENTER BINGO

Connie Nickells, Bryan E. High Consumer Lender
 and Ruth Ford, AC/Bryan SouthTowne Asst. Mgr.
              with Bingo players



                                       F & M ONLINE INTERNET BANKING TEAM

                                     Leigh Boothman, Marketing Admin. Asst.;
                                   Marilyn Johnson, AC/Compliance/CRA Officer;
                                         Janet Conley, Operations Dept.
                                         Jay Budde, E-Commerce Officer;
                                 Randal Schroeder, AVP/Chief Operations Officer.




AGRI FINANCE OFFICERS ASSIST WITH FULTON
         CO. JR. LIVESTOCK SALE

     Michael Schnitkey, AC/Napoleon
   J. Scott Miller, AC/Archbold Main;
     Jerry Borton, AC/Wauseon Shoop





                                       66
<PAGE>
                 WILLIAMS COUNTY FAIR DONATION

          Lance Nofziger, AC/Montpelier W. Main Mgr.;
          Ronald Short, AVP/Stryker Mgr.; Allen Dean,
        Williams Co. Agricultural Society Board Member;
   Michael Smith, AVP/Bryan SouthTowne Mgr.; Lewis Hilkert,
VP/West Unity Mgr.; Kelly Bentley, AC/Montpelier Eastside Mgr.


                                               FULTON CO. FAIR GRAND CHAMPION
                                                         DAIRY STEER

                                            Daryl Nofziger, Archbold Equipment;
                                               Cynthia Knauer, AVP/Delta Mgr.;
                                               Terry Rufenacht, Tri Flo, Inc.;
                                            Gloria Gunn, AVP/Wauseon Shoop Mgr.;
                                                 and Jordon Bruner with his
                                                 Grand Champion Dairy Steer.




              SWANTON SCHOOLS MENTORING PROGRAM

 Debra Kauffman, AC/Swanton Asst. Mgr. assists Swanton Park
          Elementary student in Mentoring Program.





                                 RIBBON CUTTING CELEBRATION AT DEFIANCE OFFICE

                                Edward Leininger, EVP/Chief Operating Officer;
                                     David Kunesh, AVP/Defiance Mgr.; and
                               Joe Crossgrove, President/Chief Executive Officer





                                       67
<PAGE>
                                           CUSTOMER APPRECIATE DAY

                             Arthur Short, AC/Archbold Wodland Asst. Mgr. offers
                                David Grime a "Customer Appreciation" apple.




                SANTA CLAUS AT STRYKER OPEN HOUSE

Ronald Short, AVP/Stryker Mgr. and two young lads watch intently
               as Santa shows them his harmonica.



                                             EMPLOYEE CHRISTMAS PARTY

                                  David Frazer, AVP/Bryan E. High Mgr., and wife
                                      Nanci entertain during annual employee
                                                 Christmas Party.



           WEST UNITY STAFF CELEBRATES 20TH ANNIVERSARY

      Jackie Waggoner, Teller; Jean Gerig, Consumer Lender;
 Debra Marvin, Teller; Kelly Schaffner, Teller; Janice Cox, Sec.
 Donna Thompson, Teller; Diane Yeupell, Secretary; Cheryl Grine,
    Teller; Darolee Riegsecker, Teller; Bonnie Gruver, Teller
            Lewis Hilkert, VP/Mgr.; Douglas Bernath,
      Financial Advisor; Ellie Shinhearl, Sec. Supervisor;
     Sheri Rehklau, Sec.; Patricia Burkholder, AC/Asst. Mgr.






                                       68
<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                   69          Farmer                                        1978
                                             Chairman of the Board,
                                               Farmers & Merchants Bancorp, Inc.
                                               The Farmers & Merchants State Bank

Dexter Benecke                   59          President, Viking Trucking, Inc.              1999

Jerry L. Boyers                  68          President, Edifice Construction               1976
                                               Management

Joe E. Crossgrove                65          President, Chief Executive Officer            1992
                                               The Farmers & Merchants State Bank

Robert G. Frey                   62          President, E. H. Frey & Sons, Inc.            1987

Julian Giovarelli                70          President, GIO Sales, Inc.                    2000

Jack C. Johnson                  49          President, Hawk's Clothing, Inc.              1991
                                               Partner, REJO Partnership
                                               President, MBC Holdings, Inc.

Dean E. Miller                   58          President, MBC Holdings, Inc.                 1986

Anthony J. Rupp                  52          President, Rupp Furniture Co.                 2000

David P. Rupp Jr.                60          Attorney, Plassman, Rupp, Hensel              2001
                                               & Short

James C. Saneholtz               55          President, Saneholtz-McKarns, Inc.            1995
'
Maynard Sauder                   70          President, Sauder Woodworking Co.             1980

Merle J. Short                   61          Farmer, President of Promow, Inc.             1987

Steven J. Wyse                   57          President, SteelinQ Systems, Inc.             1991
</TABLE>


                                       69
<PAGE>
                               EXECUTIVE OFFICERS

<TABLE>
<CAPTION>
                                                    Principal Occupation
          Name                  Age                   for Past Five Years
---------------------------     ---          ----------------------------------------
<S>                             <C>          <C>                                         <C>
Eugene Bernath                   69          Farmer
                                             Chairman of the Board
                                             Farmers & Merchants State Bank

Joe E. Crossgrove                65          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                      42          Executive Vice President
                                             Chief Lending Officer

Edward Leininger                 45          Executive Vice President
                                             Commercial Loan Officer

Carol England                    61          Assistant Vice President
                                             Corporate Secretary
                                               Branch Manager

Barbara Britenriker              39          Assistant Vice President
                                             Chief Financial Officer
                                               Comptroller

Allen Lantz                      48          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
6, 2002 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 6, 2002, is incorporated herein by reference.



                                       70
<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
6, 2002 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
6, 2002 is incorporated herein by reference.





                                       71
<PAGE>
                                     PART IV

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

            (a)   The following documents are filed as part of this report:

<TABLE>
<CAPTION>
                                                                                  Annual Report
                                                                                  -------------
<S>                     <C>                                                       <C>
                  (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
                        2001 Annual Report Photos                                 Pages 64 - 67
                  (4)   Exhibits

                        (3.1)  Articles of Incorporation have been submitted
                               with previous 10-K reports.
                        (13.1) 2001 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
</TABLE>


         (f)      Other schedules required to be filed as part of this report.

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



                                       72
<PAGE>
                                    PART IV

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

                       SCHEDULE OF PROPERTY AND EQUIPMENT
                                 (In Thousands)

                                                                       Exhibit 1




<TABLE>
<CAPTION>
                                       Year Ended December 31, 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
                             =======      =======       =======      =======
</TABLE>


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

                             $17,137      $ 1,323       $   107      $18,353
                             =======      =======       =======      =======
</TABLE>


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

                             $15,578      $ 2,016       $   457       $17,137
                             =======      =======       =======       =======
</TABLE>




                                       73
<PAGE>
SCHEDULE OF ACCUMULATED DEPRECIATION - PROPERTY AND EQUIPMENT

                                                                       Exhibit 2



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

<TABLE>
<CAPTION>
                                         Year Ended December 31, 2000
                            ---------------------------------------------------
                            Beginning                                    Ending
                             Balance     Depreciation    Retirements    Balance
                            ---------    ------------    -----------    -------
<S>                         <C>          <C>             <C>            <C>
Land                         $  --          $  --          $  --        $  --
Building                       2,668            286             10        2,944
Equipment                      4,293            810             48        5,055
                             -------        -------        -------      -------

                             $ 6,961        $ 1,096        $    58      $ 7,999
                             =======        =======        =======      =======
</TABLE>


<TABLE>
<CAPTION>
                                         Year Ended December 31, 1999
                            ---------------------------------------------------
                            Beginning                                    Ending
                             Balance     Depreciation    Retirements    Balance
                            ---------    ------------    -----------    -------
<S>                         <C>          <C>             <C>            <C>

Land                         $  --          $  --          $  --        $  --
Building                       2,406            262           --          2,668
Equipment                      3,742            981            430        4,293
                             -------        -------        -------      -------

                             $ 6,148        $ 1,243        $   430      $ 6,961
                             =======        =======        =======      =======
</TABLE>






                                       74
<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.

                                Farmers & Merchants Bancorp, Inc.

                                By: /s/ Joe E. Crossgrove   Date: March 29, 2002
                                    -----------------------       --------------
                                Joe E. Crossgrove
                                Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<S>                                                   <C>
/s/ Joe E. Crossgrove         Date: March 29, 2002    /s/ Barbara Britenriker       Date: March 29, 2002
-----------------------------      ---------------    -----------------------------      ---------------
Joe E. Crossgrove, Director                           Barbara Britenriker
Chief Executive Officer                               Chief Accounting Officer

/s/ Eugene D. Bernath         Date: March 29, 2002    /s/ Kent Roth                 Date: March 29, 2002
-----------------------------      ---------------    -----------------------------      ---------------
Eugene D. Bernath                                     Kent Roth, Auditor
Director and Chairman

/s/ Dexter Benecke            Date: March 29, 2002    /s/ Anthony J. Rupp           Date: March 29, 2002
-----------------------------      ---------------    -----------------------------      ---------------
Dexter Benecke, Director                              Anthony J. Rupp, Director

/s/ Jerry Boyers              Date: March 29, 2002    /s/ David P. Rupp Jr.         Date: March 29, 2002
-----------------------------      ---------------    -----------------------------      ---------------
Jerry Boyers, Director                                David P. Rupp Jr., Director

/s/ Robert Frey               Date: March 29, 2002    /s/ James Saneholtz           Date: March 29, 2002
-----------------------------      ---------------    -----------------------------      ---------------
Robert Frey, Director                                 James Saneholtz, Director

/s/ Julian Giovarelli         Date: March 29, 2002    /s/ Maynard Sauder            Date: March 29, 2002
-----------------------------      ---------------    -----------------------------      ---------------
Julian Giovarelli, Director                           Maynard Sauder, Director

/s/ Jack C. Johnson           Date: March 29, 2002    /s/ Merle J. Short            Date: March 29, 2002
-----------------------------      ---------------    -----------------------------      ---------------
Jack C. Johnson, Director                             Merle J. Short, Director

/s/ Dean Miller               Date: March 29, 2002    /s/ Steven J. Wyse            Date: March 29, 2002
-----------------------------      ---------------    -----------------------------      ---------------
Dean Miller, Director                                 Steven J. Wyse, Director
</TABLE>




                                       75