10-Q

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

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:  000-26099

FARMERS & MERCHANTS BANCORP

(Exact name of registrant as specified in its charter)

Delaware	94-3327828
(State or other jurisdiction of incorporation or organization)	(I.R.S.  Employer Identification No.)

111 W. Pine Street, Lodi, California	95240
(Address of principal Executive offices)	(Zip Code)

Registrant's telephone number, including area code (209) 367-2300

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer  ☐	Accelerated filer  ☒	Non-accelerated filer  ☐	Smaller Reporting Company ☐
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐    No ☒

Number of shares of common stock of the registrant 792,387 outstanding as of April 29, 2016.

FARMERS & MERCHANTS BANCORP

FORM 10-Q

TABLE OF CONTENTS

PART I. - FINANCIAL INFORMATION		Page
	Item 1 - Financial Statements
	Consolidated Balance Sheets (Unaudited) as of March 31, 2016, December 31, 2015 and March 31, 2015.	3
	Consolidated Statements of Income (Unaudited) for the Three Months Ended March 31, 2016 and 2015.	4
	Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended March 31, 2016 and 2015.	5
	Consolidated Statements of Changes in Shareholders' Equity (Unaudited) for the Three Months Ended March 31, 2016 and 2015.	6
	Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2016 and 2015.	7
	Notes to the Consolidated Financial Statements (Unaudited)	8
	Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations	33
	Item 3 - Quantitative and Qualitative Disclosures About Market Risk	53
	Item 4 - Controls and Procedures	56
PART II. - OTHER INFORMATION
	Item 1 - Legal Proceedings	57
	Item 1A – Risk Factors	57
	Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	57
	Item 3 - Defaults Upon Senior Securities	57
	Item 4 – Mine Safety Disclosures	57
	Item 5 - Other Information	57
	Item 6 - Exhibits	58
Signatures		58
Index to Exhibits		58

31(a) Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31(b) Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32 Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FARMERS & MERCHANTS BANCORP
Consolidated Balance Sheets
(in thousands except share data)
Assets	March 31, 2016 (Unaudited)		December 31, 2015		March 31, 2015 (Unaudited)
Cash and Cash Equivalents:
Cash and Due from Banks	$	41,659	$	49,913	$	33,746
Interest Bearing Deposits with Banks		32,057		9,533		110,190
Total Cash and Cash Equivalents		73,716		59,446		143,936
Investment Securities:
Available-for-Sale		341,771		369,137		365,184
Held-to-Maturity		61,535		61,396		63,463
Total Investment Securities		403,306		430,533		428,647
Loans & Leases:		1,993,071		1,996,359		1,705,320
Less: Allowance for Credit Losses		44,129		41,523		38,940
Loans & Leases, Net		1,948,942		1,954,836		1,666,380
Premises and Equipment, Net		26,344		26,575		26,693
Bank Owned Life Insurance		56,371		55,898		54,454
Interest Receivable and Other Assets		84,319		88,057		93,925
Total Assets	$	2,592,998	$	2,615,345	$	2,414,035
Liabilities
Deposits:
Demand	$	637,140	$	711,029	$	578,820
Interest Bearing Transaction		409,360		377,594		340,045
Savings and Money Market		725,823		707,885		699,308
Time		484,141		481,024		493,600
Total Deposits		2,256,464		2,277,532		2,111,773
Subordinated Debentures		10,310		10,310		10,310
Interest Payable and Other Liabilities		63,778		75,668		50,664
Total Liabilities		2,330,552		2,363,510		2,172,747
Shareholders' Equity
Preferred Stock:  No Par Value,  1,000,000 Shares Authorized, None Issued or Outstanding		-		-		-
Common Stock:  Par Value $0.01, 7,500,000 Shares Authorized, 792,387, 790,787 and 785,782 Shares Issued and Outstanding at March 31, 2016, December 31, 2015 and March 31, 2015, Respectively		8		8		8
Additional Paid-In Capital		82,004		81,164		78,569
Retained Earnings		177,240		170,068		159,236
Accumulated Other Comprehensive Income		3,194		595		3,475
Total Shareholders' Equity		262,446		251,835		241,288
Total Liabilities and Shareholders' Equity	$	2,592,998	$	2,615,345	$	2,414,035

The accompanying notes are an integral part of these unaudited consolidated financial statements

3

FARMERS & MERCHANTS BANCORP
Consolidated Statements of Income  (Unaudited)
(in thousands except per share data)	Three Months Ended March 31,
	2016			2015
Interest Income
Interest and Fees on Loans & Leases	$	21,894		$	19,127
Interest on Deposits with Banks		46			58
Interest on Investment Securities:
Taxable		1,602			1,586
Exempt from Federal Tax		484			522
Total Interest Income		24,026			21,293
Interest Expense
Deposits		828			712
Borrowed Funds		4			-
Subordinated Debentures		88			80
Total Interest Expense		920			792
Net Interest Income		23,106			20,501
Provision for Credit Losses		2,600			600
Net Interest Income After Provision for Credit Losses		20,506			19,901
Non-Interest Income
Service Charges on Deposit Accounts		814			898
Net (Loss) Gain on Sale of Investment Securities		(289	)		1
Increase in Cash Surrender Value of Life Insurance		474			464
Debit Card and ATM Fees		835			777
Net Gain on Deferred Compensation Investments		291			765
Other		596			1,759
Total Non-Interest Income		2,721			4,664
Non-Interest Expense
Salaries and Employee Benefits		11,706			10,099
Net Gain on Deferred Compensation Investments		291			765
Occupancy		741			639
Equipment		857			732
Marketing		299			136
FDIC Insurance		316			284
Gain on Sale of ORE		(5,684	)		-
Other		3,493			1,563
Total Non-Interest Expense		12,019			14,218
Income Before Income Taxes		11,208			10,347
Provision for Income Taxes		4,036			3,944
Net Income	$	7,172		$	6,403
Basic Earnings Per Common Share	$	9.06		$	8.15

The accompanying notes are an integral part of these unaudited consolidated financial statements

4

FARMERS & MERCHANTS BANCORP
Consolidated Statements of Comprehensive Income (Unaudited)
(in thousands)	Three Months Ended March 31,
	2016			2015
Net Income	$	7,172		$	6,403
Other Comprehensive Income
Increase in Net Unrealized Gain on Available-for-Sale Securities		4,195			1,627
Deferred Tax Expense Related to Unrealized Gains		(1,764	)		(684	)
Reclassification Adjustment for Realized Gains on Available-for-Sale Securities Included in Net Income		289			(1	)
Deferred Tax Benefit Related to Reclassification Adjustment		(121	)		-
Change in Net Unrealized Gain on Available-for-Sale Securities, Net of Tax		2,599			942
Total Other Comprehensive Income		2,599			942
Comprehensive Income	$	9,771		$	7,345

The accompanying notes are an integral part of these unaudited consolidated financial statements

5

FARMERS & MERCHANTS BANCORP
Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
(in thousands except share data)	Common Shares Outstanding		Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income, net		Total Shareholders' Equity
Balance, January 1, 2015		784,082	$	8	$	77,804	$	152,833	$	2,533	$	233,178
Net Income				-		-		6,403		-		6,403
Issuance of Common Stock		1,700		-		765		-		-		765
Change in Net Unrealized Gains on Securities Available-for-Sale, net of tax				-		-		-		942		942
Balance, March 31, 2015		785,782	$	8	$	78,569	$	159,236	$	3,475	$	241,288
Balance, January 1, 2016		790,787	$	8	$	81,164	$	170,068	$	595	$	251,835
Net Income				-		-		7,172		-		7,172
Issuance of Common Stock		1,600		-		840		-		-		840
Change in Net Unrealized Gains on Securities Available-for-Sale, net of tax				-		-		-		2,599		2,599
Balance, March 31, 2016		792,387	$	8	$	82,004	$	177,240	$	3,194	$	262,446

The accompanying notes are an integral part of these unaudited consolidated financial statements

6

FARMERS & MERCHANTS BANCORP
Consolidated Statements of Cash Flows (Unaudited)
	Three Months Ended
(in thousands)	March 31, 2016			March 31, 2015
Operating Activities:
Net Income	$	7,172		$	6,403
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Provision for Credit Losses		2,600			600
Depreciation and Amortization		478			363
Net Amortization of Investment Security Premiums & Discounts		370			375
Net Loss (Gain) on Sale of Investment Securities		289			(1	)
Net Gain on Sale of Other Real Estate		(5,684	)		-
Net Change in Operating Assets & Liabilities:
Net Decrease in Interest Receivable and Other Assets		5,371			1,872
Net Decrease in Interest Payable and Other Liabilities		(3,759	)		(1,965	)
Net Cash Provided by Operating Activities		6,837			7,647
Investing Activities:
Purchase of Investment Securities Available-for-Sale		(118,395	)		(19,814	)
Proceeds from Sold, Matured or Called Securities Available-for-Sale		141,589			22,629
Purchase of Investment Securities Held-to-Maturity		(1,012	)		(205	)
Proceeds from Matured or Called Securities Held-to-Maturity		863			587
Net Loans & Leases Paid, Originated or Acquired		3,244			6,895
Principal Collected on Loans & Leases Previously Charged Off		50			2,968
Additions to Premises and Equipment		(247	)		(1,235	)
Purchase of Other Investments		(5,131	)		(361	)
Proceeds from Sale of Other Real Estate		7,540			-
Net Cash Provided by Investing Activities		28,501			11,464
Financing Activities:
Net (Decrease) Increase in Deposits		(21,068	)		47,700
Net Cash Provided by Financing Activities		(21,068	)		47,700
Increase in Cash and Cash Equivalents		14,270			66,811
Cash and Cash Equivalents at Beginning of Period		59,446			77,125
Cash and Cash Equivalents at End of Period	$	73,716		$	143,936
Supplementary Data
Cash Payments Made for Income Taxes	$	261		$	85
Issuance of Common Stock to the Bank's Non-Qualified Retirement Plans	$	840		$	765
Interest Paid	$	962		$	737

The accompanying notes are an integral part of these unaudited consolidated financial statements

7

FARMERS & MERCHANTS BANCORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Significant Accounting Policies

Farmers & Merchants Bancorp (the “Company”) was organized March 10, 1999. Primary operations are related to traditional banking activities through its subsidiary Farmers & Merchants Bank of Central California (the “Bank”) which was established in 1916. The Bank’s wholly owned subsidiaries include Farmers & Merchants Investment Corporation and Farmers/Merchants Corp. Farmers & Merchants Investment Corporation has been dormant since 1991. Farmers/Merchants Corp. acts as trustee on deeds of trust originated by the Bank.

The Company’s other subsidiaries include F & M Bancorp, Inc. and FMCB Statutory Trust I. F & M Bancorp, Inc. was created in March 2002 to protect the name F & M Bank. During 2002, the Company completed a fictitious name filing in California to begin using the streamlined name “F & M Bank” as part of a larger effort to enhance the Company’s image and build brand name recognition. In December 2003, the Company formed a wholly owned subsidiary, FMCB Statutory Trust I. FMCB Statutory Trust I is a non-consolidated subsidiary per Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”) and was formed for the sole purpose of issuing Trust Preferred Securities and related subordinated debentures.

The accounting and reporting policies of the Company conform to U.S. GAAP and prevailing practice within the banking industry. The following is a summary of the significant accounting and reporting policies used in preparing the consolidated financial statements.

Basis of Presentation

The accompanying consolidated financial statements and notes thereto have been prepared in accordance with accounting principles generally accepted in the United States of America for financial information.

These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting on Form 10-Q. Accordingly, certain disclosures normally presented in the notes to the annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted. The Company believes that the disclosures are adequate to make the information not misleading. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The results of operations for the three-month period ended March 31, 2016 may not necessarily be indicative of future operating results.

The accompanying consolidated financial statements include the accounts of the Company and the Company’s wholly owned subsidiaries, F & M Bancorp, Inc. and the Bank, along with the Bank’s wholly owned subsidiaries, Farmers & Merchants Investment Corporation and Farmers/Merchants Corp. Significant inter-company transactions have been eliminated in consolidation.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of 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 these estimates.

Certain amounts in the prior years' financial statements and related footnote disclosures have been reclassified to conform to the current-year presentation. These reclassifications had no effect on previously reported net income or total shareholders’ equity. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair presentation of financial results for the periods presented.

8

Cash and Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, the Company has defined cash and cash equivalents as those amounts included in the balance sheet captions Cash and Due from Banks, Interest Bearing Deposits with Banks, Federal Funds Sold and Securities Purchased Under Agreements to Resell. For these instruments, the carrying amount is a reasonable estimate of fair value.

Investment Securities

Investment securities are classified at the time of purchase as held-to-maturity (“HTM”) if it is management’s intent and the Company has the ability to hold the securities until maturity. These securities are carried at cost, adjusted for amortization of premium and accretion of discount using a level yield of interest over the estimated remaining period until maturity. Losses, reflecting a decline in value judged by the Company to be other than temporary, are recognized in the period in which they occur.

Securities are classified as available-for-sale (“AFS”) if it is management’s intent, at the time of purchase, to hold the securities for an indefinite period of time and/or to use the securities as part of the Company’s asset/liability management strategy. These securities are reported at fair value with aggregate unrealized gains or losses excluded from income and included as a separate component of shareholders’ equity, net of related income taxes. Fair values are based on quoted market prices or broker/dealer price quotations on a specific identification basis. Gains or losses on the sale of these securities are computed using the specific identification method.

Trading securities, if any, are acquired for short-term appreciation and are recorded in a trading portfolio and are carried at fair value, with unrealized gains and losses recorded in non-interest income.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement; and (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans & Leases

Loans & leases are reported at the principal amount outstanding net of unearned discounts and deferred loan & lease fees and costs. Interest income on loans & leases is accrued daily on the outstanding balances using the simple interest method. Loan & lease origination fees are deferred and recognized over the contractual life of the loan or lease as an adjustment to the yield. Loans & leases are placed on non-accrual status when the collection of principal or interest is in doubt or when they become past due for 90 days or more unless they are both well-secured and in the process of collection. For this purpose, a loan or lease is considered well-secured if it is collateralized by property having a net realizable value in excess of the amount of the loan or lease or is guaranteed by a financially capable party. When a loan or lease is placed on non-accrual status, the accrued and unpaid interest receivable is reversed and charged against current income; thereafter, interest income is recognized only as it is collected in cash. Additionally, cash would be applied to principal if all principal was not expected to be collected. Loans & leases placed on non-accrual status are returned to accrual status when the loans or leases are paid current as to principal and interest and future payments are expected to be made in accordance with the contractual terms of the loan or lease.

9

A loan or lease is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the original agreement. Impaired loans & leases are either: (1) non-accrual loans & leases; or (2) restructured loans & leases that are still accruing interest. Loans or leases determined to be impaired are individually evaluated for impairment. When a loan or lease is impaired, the Company measures impairment based on the present value of expected future cash flows discounted at the loan or lease's effective interest rate, except that as a practical expedient, it may measure impairment based on a loan or lease's observable market price, or the fair value of the collateral if the loan or lease is collateral dependent. A loan or lease is collateral dependent if the repayment of the loan or lease is expected to be provided solely by the underlying collateral.

A restructuring of a loan or lease constitutes a troubled debt restructuring (“TDR”) if the Company for economic or legal reasons related to the borrower’s (the term “borrower” is used herein to describe a customer who has entered into either a loan or lease transaction) financial difficulties grants a concession to the borrower that it would not otherwise consider. Restructured loans & leases typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms. If the restructured loan or lease was current on all payments at the time of restructure and management reasonably expects the borrower will continue to perform after the restructure, management may keep the loan or lease on accrual. Loans & leases that are on nonaccrual status at the time they become TDR, remain on nonaccrual status until the borrower demonstrates a sustained period of performance, which the Company generally believes to be six consecutive months of payments, or equivalent. A loan or lease can be removed from TDR status if it was restructured at a market rate in a prior calendar year and is currently in compliance with its modified terms. However, these loans or leases continue to be classified as impaired and are individually evaluated for impairment as described above.

Generally, the Company will not restructure loans or leases for borrowers unless: (1) the existing loan or lease is brought current as to principal and interest payments; and (2) the restructured loan or lease can be underwritten to reasonable underwriting standards. If these standards are not met other actions will be pursued (e.g., foreclosure) to collect outstanding loan or lease amounts. After restructure a determination is made whether the loan or lease will be kept on accrual status based upon the underwriting and historical performance of the restructured credit.

Allowance for Credit Losses

The allowance for credit losses is an estimate of probable incurred credit losses inherent in the Company's loan & lease portfolio as of the balance sheet date. The allowance is established through a provision for credit losses, which is charged to expense. Additions to the allowance are expected to maintain the adequacy of the total allowance after credit losses and loan & lease growth. Credit exposures determined to be uncollectible are charged against the allowance. Cash received on previously charged off amounts is recorded as a recovery to the allowance. The overall allowance consists of three primary components: specific reserves related to impaired loans & leases; general reserves for inherent losses related to loans & leases that are not impaired; and an unallocated component that takes into account the imprecision in estimating and allocating allowance balances associated with macro factors.

The determination of the general reserve for loans & leases that are collectively evaluated for impairment is based on estimates made by management, to include, but not limited to, consideration of historical losses by portfolio segment, internal asset classifications, qualitative factors that include economic trends in the Company's service areas, industry experience and trends, geographic concentrations, estimated collateral values, the Company's underwriting policies, the character of the loan & lease portfolio, and probable losses inherent in the portfolio taken as a whole.

The Company maintains a separate allowance for each portfolio segment (loan & lease type). These portfolio segments include: (1) commercial real estate; (2) agricultural real estate; (3) real estate construction (including land and development loans); (4) residential 1^st mortgages; (5) home equity lines and loans; (6) agricultural; (7) commercial; (8) consumer and other; and (9) equipment leases. The allowance for credit losses attributable to each portfolio segment, which includes both individually evaluated impaired loans & leases and loans & leases that are collectively evaluated for impairment, is combined to determine the Company's overall allowance, which is included on the consolidated balance sheet.

The Company assigns a risk rating to all loans & leases and periodically performs detailed reviews of all such loans & leases over a certain threshold to identify credit risks and assess overall collectability. For smaller balance loans & leases, such as consumer and residential real estate, a credit grade is established at inception, and then updated only when the loan or lease becomes contractually delinquent or when the borrower requests a modification. For larger balance loans, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which borrowers operate and the fair values of collateral securing these loans & leases. These credit quality indicators are used to assign a risk rating to each individual loan or lease. These risk ratings are also subject to examination by independent specialists engaged by the Company. The risk ratings can be grouped into five major categories, defined as follows:

10

Pass – A pass loan or lease is a strong credit with no existing or known potential weaknesses deserving of management's close attention.

Special Mention – A special mention loan or lease has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or lease or in the Company's credit position at some future date. Special mention loans & leases are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Substandard – A substandard loan or lease is not adequately protected by the current financial condition and paying capacity of the borrower or the value of the collateral pledged, if any. Loans or leases classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Well defined weaknesses include a project's lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time or the project's failure to fulfill economic expectations.They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful –Loans or leases classified doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, based on currently known facts, conditions and values, highly questionable or improbable.

Loss – Loans or leases classified as loss are considered uncollectible. Once a loan or lease becomes delinquent and repayment becomes questionable, the Company will address collateral shortfalls with the borrower and attempt to obtain additional collateral. If this is not forthcoming and payment in full is unlikely, the Company will estimate its probable loss and immediately charge-off some or all of the balance.

The general reserve component of the allowance for credit losses also consists of reserve factors that are based on management's assessment of the following for each portfolio segment: (1) inherent credit risk; (2) historical losses; and (3) other qualitative factors. These reserve factors are inherently subjective and are driven by the repayment risk associated with each portfolio segment described below:

Commercial Real Estate – Commercial real estate mortgage loans are generally considered to possess a higher inherent risk of loss than the Company’s commercial, agricultural and consumer loan types. Adverse economic developments or an overbuilt market impact commercial real estate projects and may result in troubled loans. Trends in vacancy rates of commercial properties impact the credit quality of these loans. High vacancy rates reduce operating revenues and the ability for properties to produce sufficient cash flow to service debt obligations.

Real Estate Construction – Real estate construction loans, including land loans, are generally considered to possess a higher inherent risk of loss than the Company’s commercial, agricultural and consumer loan types. A major risk arises from the necessity to complete projects within specified cost and time lines. Trends in the construction industry significantly impact the credit quality of these loans, as demand drives construction activity. In addition, trends in real estate values significantly impact the credit quality of these loans, as property values determine the economic viability of construction projects.

Commercial – These loans are generally considered to possess a moderate inherent risk of loss because they are shorter-term; typically made to relationship customers; generally underwritten to existing cash flows of operating businesses; and may be collateralized by fixed assets, inventory and/or accounts receivable. Debt coverage is provided by business cash flows and economic trends influenced by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans.

Agricultural Real Estate and Agricultural – These loans are generally considered to possess a moderate inherent risk of loss since they are typically made to relationship customers and are secured by crop production, livestock and related real estate.  These loans are vulnerable to two risk factors that are largely outside the control of Company and borrowers: commodity prices and weather conditions.

11

Leases – Equipment leases are generally considered to possess a moderate inherent risk of loss. As Lessor, the Company is subject to both the credit risk of the borrower and the residual value risk of the equipment. Credit risks are underwritten using the same credit criteria the Company would use when making an equipment term loan. Residual value risk is managed through the use of qualified, independent appraisers that establish the residual values the Company uses in structuring a lease.

Residential 1st Mortgages and Home Equity Lines and Loans – These loans are generally considered to possess a low inherent risk of loss, although this is not always true as evidenced by the correction in residential real estate values that occurred between 2007 and 2012. The degree of risk in residential real estate lending depends primarily on the loan amount in relation to collateral value, the interest rate and the borrower's ability to repay in an orderly fashion. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate that the borrowers' capacity to repay their obligations may be deteriorating.

Consumer & Other – A consumer installment loan portfolio is usually comprised of a large number of small loans scheduled to be amortized over a specific period. Most installment loans are made for consumer purchases. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate that the borrowers' capacity to repay their obligations may be deteriorating.

At least quarterly, the Board of Directors reviews the adequacy of the allowance, including consideration of the relative risks in the portfolio, current economic conditions and other factors. If the Board of Directors and management determine that changes are warranted based on those reviews, the allowance is adjusted. In addition, the Company's and Bank's regulators, including the Federal Reserve Bank (“FRB”), the California Department of Business Oversight (“DBO”) and the Federal Deposit Insurance Corporation (“FDIC”), as an integral part of their examination process, review the adequacy of the allowance. These regulatory agencies may require additions to the allowance based on their judgment about information available at the time of their examinations.

Allowance for Credit Losses on Off-Balance-Sheet Credit Exposures

The Company also maintains a separate allowance for off-balance-sheet commitments. Management estimates anticipated losses using historical data and utilization assumptions. The allowance for off-balance-sheet commitments is included in Interest Payable and Other Liabilities on the Company’s Consolidated Balance Sheet.

Premises and Equipment

Premises, equipment, and leasehold improvements are stated at cost, less accumulated depreciation and amortization. Depreciation is computed principally by the straight line method over the estimated useful lives of the assets. Estimated useful lives of buildings range from 30 to 40 years, and for furniture and equipment from 3 to 7 years. Leasehold improvements are amortized over the lesser of the terms of the respective leases, or their useful lives, which are generally 5 to 10 years. Remodeling and capital improvements are capitalized while maintenance and repairs are charged directly to occupancy expense.

Other Real Estate

Other real estate, which is included in other assets, is expected to be sold and is comprised of properties no longer utilized for business operations and property acquired through foreclosure in satisfaction of indebtedness. These properties are recorded at fair value less estimated selling costs upon acquisition. Revised estimates to the fair value less cost to sell are reported as adjustments to the carrying amount of the asset, provided that such adjusted value is not in excess of the carrying amount at acquisition. Initial losses on properties acquired through full or partial satisfaction of debt are treated as credit losses and charged to the allowance for credit losses at the time of acquisition. Subsequent declines in value from the recorded amounts, routine holding costs, and gains or losses upon disposition, if any, are included in non-interest expense as incurred.

12

Income Taxes

The Company uses the liability method of accounting for income taxes. This method results in the recognition of deferred tax assets and liabilities that are reflected at currently enacted 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 deferred provision for income taxes is the result of the net change in the deferred tax asset and deferred tax liability balances during the year. This amount combined with the current taxes payable or refundable results in the income tax expense for the current year.

The Company follows the standards set forth in the “Income Taxes” topic of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. This standard prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

The Company accounts for leases with Investment Tax Credits (ITC) under the deferred method as established in ASC 740-10. ITC are viewed and accounted for as a reduction of the cost of the related assets and presented as deferred income on the Company’s financial statement.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceed the amount measured as described above would be reflected as a liability for unrecognized tax benefits in the consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Interest expense and penalties associated with unrecognized tax benefits, if any, are included in the provision for income taxes in the Unaudited Consolidated Statements of Income. As of March 31, 2016 and 2015, the Company had no interest expense or penalties associated with unrecognized tax benefits.

Basic Earnings Per Common Share

The Company’s common stock is not traded on any exchange. The shares are primarily held by local residents and are not actively traded. Basic earnings per common share amounts are computed by dividing net income by the weighted average number of common shares outstanding for the period. There are no common stock equivalent shares. Therefore, there is no presentation of diluted basic earnings per common share. See Note 6 for additional information.

Segment Reporting

The “Segment Reporting” topic of the FASB ASC requires that public companies report certain information about operating segments. It also requires that public companies report certain information about their products and services, the geographic areas in which they operate, and their major customers. The Company is a holding company for a community bank, which offers a wide array of products and services to its customers. Pursuant to its banking strategy, emphasis is placed on building relationships with its customers, as opposed to building specific lines of business. As a result, the Company is not organized around discernible lines of business and prefers to work as an integrated unit to customize solutions for its customers, with business line emphasis and product offerings changing over time as needs and demands change. Therefore, the Company only reports one segment.

13

Low Income Housing Tax Credit Investments (LIHTC)

The Company accounts for its interest in LIHTC using the cost method as established in ASC 323-740. As an investor, the Company obtains income tax credits and deductions from the operating losses of these tax credit entities. The income tax credits and deductions are allocated to the investors based on their ownership percentages and are recorded as a reduction of income tax expense (or an increase to income tax benefit) and a reduction of federal income taxes payable.

Comprehensive Income

The “Comprehensive Income” topic of the FASB ASC establishes standards for the reporting and display of comprehensive income and its components in the financial statements. Other comprehensive income (loss) refers to revenues, expenses, gains, and losses that U.S. GAAP recognize as changes in value to an enterprise but are excluded from net income. For the Company, comprehensive income includes net income and changes in fair value of its available-for-sale investment securities.

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.

2. Investment Securities

The amortized cost, fair values, and unrealized gains and losses of the securities available-for-sale are as follows

(in thousands):

	Amortized		Gross Unrealized				Fair/Book
March 31, 2016	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	63,157	$	190	$	1	$	63,346
US Treasury Notes		65,571		217		-		65,788
Mortgage Backed Securities (1)		207,021		5,113		7		212,127
Other		510		-		-		510
Total	$	336,259	$	5,520	$	8	$	341,771

	Amortized		Gross Unrealized				Fair/Book
December 31, 2015	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	33,536	$	134	$	419	$	33,251
US Treasury Notes		73,048		-		164		72,884
Mortgage Backed Securities (1)		261,016		2,708		1,231		262,493
Other		509		-		-		509
Total	$	368,109	$	2,842	$	1,814	$	369,137

	Amortized		Gross Unrealized				Fair/Book
March 31, 2015	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	68,064	$	69	$	1	$	68,132
US Treasury Notes		19,818		148		-		19,966
Mortgage Backed Securities (1)		270,820		5,977		196		276,601
Other		485		-		-		485
Total	$	359,187	$	6,194	$	197	$	365,184

⁽¹⁾ All Mortgage Backed Securities consist of securities collateralized by residential real estate and were issued by an agency or government sponsored entity of the U.S. government.

14

The book values, estimated fair values and unrealized gains and losses of investments classified as held-to-maturity are as follows (in thousands):

	Book		Gross Unrealized				Fair
March 31, 2016	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	61,535	$	1,357	$	-	$	62,892
Total	$	61,535	$	1,357	$	-	$	62,892

	Book		Gross Unrealized				Fair
December 31, 2015	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	61,396	$	993	$	1	$	62,388
Total	$	61,396	$	993	$	1	$	62,388

	Book		Gross Unrealized				Fair
March 31, 2015	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	61,324	$	766	$	11	$	62,079
Other		2,139		-		-		2,139
Total	$	63,463	$	766	$	11	$	64,218

Fair values are based on quoted market prices or dealer quotes. If a quoted market price or dealer quote is not available, fair value is estimated using quoted market prices for similar securities.

The amortized cost and estimated fair values of investment securities at March 31, 2016 by contractual maturity are shown in the following table (in thousands):

	Available-for-Sale				Held-to-Maturity
March 31, 2016	Amortized Cost		Fair/Book Value		Book Value		Fair Value
Within one year	$	60,504	$	60,503	$	225	$	225
After one year through five years		68,734		69,141		12,034		12,087
After five years through ten years		-		-		11,425		11,615
After ten years		-		-		37,851		38,965
		129,238		129,644		61,535		62,892
Investment securities not due at a single maturity date:
Mortgage-backed securities		207,021		212,127		-		-
Total	$	336,259	$	341,771	$	61,535	$	62,892

Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

15

The following tables show those investments with gross unrealized losses and their market value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at the dates indicated (in thousands):

	Less Than 12 Months						12 Months or More						Total
March 31, 2016	Fair Value			Unrealized Loss			Fair Value			Unrealized Loss			Fair Value			Unrealized Loss
Securities Available-for-Sale
Government Agency & Government-Sponsored Entities		$	39,996		$	1		$	-		$	-		$	39,996		$	1
Mortgage Backed Securities			1,529			7			-			-			1,529			7
Total		$	41,525		$	8		$	-		$	-		$	41,525		$	8

	Less Than 12 Months				12 Months or More				Total
December 31, 2015	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Securities Available-for-Sale
Government Agency & Government-Sponsored Entities	$	29,944	$	419	$	-	$	-	$	29,944	$	419
US Treasury Notes		44,887		164		-		-		44,887		164
Mortgage Backed Securities		78,899		1,089		7,277		142		86,176		1,231
Total	$	153,730	$	1,672	$	7,277	$	142	$	161,007	$	1,814
Securities Held-to-Maturity
Obligations of States and Political Subdivisions	$	839	$	1	$	-	$	-	$	839	$	1
Total	$	839	$	1	$	-	$	-	$	839	$	1

	Less Than 12 Months						12 Months or More						Total
March 31, 2015	Fair Value			Unrealized Loss			Fair Value			Unrealized Loss			Fair Value			Unrealized Loss
Securities Available-for-Sale
Government Agency & Government-Sponsored Entities		$	24,998		$	1		$	-		$	-		$	24,998		$	1
Mortgage Backed Securities			13,033			28			25,942			168			38,975			196
Total		$	38,031		$	29		$	25,942		$	168		$	63,973		$	197
Securities Held-to-Maturity
Obligations of States and Political Subdivisions		$	1,340		$	11		$	-		$	-		$	1,340		$	11
Total		$	1,340		$	11		$	-		$	-		$	1,340		$	11

As of March 31, 2016, the Company held 227 investment securities of which 3 were in a loss position for less than twelve months. No securities were in a loss position for twelve months or more. Management periodically evaluates each investment security for other-than-temporary impairment relying primarily on industry analyst reports and observations of market conditions and interest rate fluctuations. Management believes it will be able to collect all amounts due according to the contractual terms of the underlying investment securities.

Securities of Government Agency and Government Sponsored Entities – At March 31, 2016, 2 securities of government agency and government sponsored entities were in a loss position for less than 12 months. No securities were in a loss position for 12 months or more. The unrealized losses on the Company's investments in securities of government agency and government sponsored entities were $1,000 at March 31, 2016, $419,000 at December 31, 2015 and $1,000, at March 31, 2015. The unrealized loss was caused by interest rate fluctuations. Repayment of these investments is guaranteed by an agency or government sponsored entity of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company's investment. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2016, December 31, 2015, and March 31, 2015.

16

Mortgage Backed Securities – At March 31, 2016, 1 mortgage backed security investment was in a loss position for less than 12 months and none were in a loss position for 12 months or more. The unrealized losses on the Company's investment in mortgage backed securities were $7,000, $1.2 million, and $196,000 at March 31, 2016, December 31, 2015, and March 31, 2015, respectively. The unrealized losses on the Company’s investment in mortgage backed securities were caused by interest rate fluctuations. The contractual cash flows of these investments are guaranteed by an agency or government sponsored entity of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company's investment. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2016, December 31, 2015 and March 31, 2015, respectively.

Obligations of States and Political Subdivisions - At March 31, 2016, no obligations of states and political subdivisions were in a loss position for less than 12 months. None were in a loss position for 12 months or more. As of March 31, 2016, over ninety-eight percent of the Company’s bank-qualified municipal bond portfolio is rated at either the issue or issuer level, and all of these ratings are “investment grade.” The Company monitors the status of the two percent of the portfolio that is not rated and at the current time does not believe any of them to be exhibiting financial problems that could result in a loss in any individual security.

The unrealized losses on the Company’s investment in obligations of states and political subdivisions were $0, $1,400, and $11,000 at March 31, 2016, December 31, 2015 and March 31, 2015, respectively. Management believes that any unrealized losses on the Company's investments in obligations of states and political subdivisions were primarily caused by interest rate fluctuations. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2016, December 31, 2015 and March 31, 2015, respectively.

U.S. Treasury Notes – At March 31, 2016, no U.S. Treasury Note security investments were in a loss position for less than 12 months and none were in a loss position for 12 months or more. The unrealized losses on the Company's investment in US treasury notes were $0 at March 31, 2016 and $164,000 at December 31, 2015. The Company did not hold any U.S. treasury notes at March 31, 2015.  The unrealized losses were caused by interest rate fluctuations. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at March 31 2016 and December 31, 2015.

Proceeds from sales and calls of securities were as follows:

(in thousands)	Proceeds		Gains		Losses
Three Months Ended March 31, 2016	$	102,895	$	244	$	533
Three Months Ended March 31, 2015	$	475	$	1	$	-

Pledged Securities

As of March 31, 2016, securities carried at $184.9 million were pledged to secure public deposits, Federal Home Loan Bank (“FHLB”) borrowings, and other government agency deposits as required by law. This amount was $189.2 million at December 31, 2015, and $196.4 million at March 31, 2015.

17

3. Loans & Leases and Allowance for Credit Losses

The following tables show the allocation of the allowance for credit losses by portfolio segment and by impairment methodology at the dates indicated (in thousands):

March 31, 2016	Commercial Real Estate		Agricultural Real Estate		Real Estate  Construction		Residential 1st Mortgages		Home Equity  Lines & Loans			Agricultural			Commercial			Consumer & Other			Leases			Unallocated		Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2016	$	10,063	$	6,881	$	2,485	$	789	$	2,146		$	6,308		$	7,836		$	175		$	3,294		$	1,546	$	41,523
Charge-Offs		-		-		-		-		(19	)		-			-			(25	)		-			-		(44	)
Recoveries		2		-		-		6		2			-			27			13			-			-		50
Provision		34		2,281		109		1		(65	)		(404	)		(138	)		24			(55	)		813		2,600
Ending Balance- March 31, 2016	$	10,099	$	9,162	$	2,594	$	796	$	2,064		$	5,904		$	7,725		$	187		$	3,239		$	2,359	$	44,129
Ending Balance Individually Evaluated for Impairment		59		-		-		66		65			115			757			26			-			-		1,088
Ending Balance Collectively Evaluated for Impairment		10,040		9,162		2,594		730		1,999			5,789			6,968			161			3,239			2,359		43,041
Loans:
Ending Balance	$	611,511	$	432,281	$	166,455	$	212,205	$	31,639		$	253,655		$	213,479		$	7,066		$	64,780		$	-	$	1,993,071
Ending Balance Individually Evaluated for Impairment		3,376		163		-		1,944		1,513			605			4,714			30			-			-		12,345
Ending Balance Collectively Evaluated for Impairment	$	608,135	$	432,118	$	166,455	$	210,261	$	30,126		$	253,050		$	208,765		$	7,036		$	64,780		$	-	$	1,980,726

December 31, 2015	Commercial Real Estate			Agricultural Real Estate		Real Estate Construction			Residential 1st  Mortgages			Home Equity  Lines & Loans			Agricultural		Commercial			Consumer & Other			Leases		Unallocated		Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2015	$	7,842		$	4,185	$	1,669		$	1,022		$	2,426		$	6,104	$	8,195		$	218		$	2,211	$	1,529	$	35,401
Charge-Offs		-			-		-			-			-			-		(12	)		(84	)		-		-		(96	)
Recoveries		2,939			-		2,225			8			87			4		136			69			-		-		5,468
Provision		(718	)		2,696		(1,409	)		(241	)		(367	)		200		(483	)		(28	)		1,083		17		750
Ending Balance- December 31, 2015	$	10,063		$	6,881	$	2,485		$	789		$	2,146		$	6,308	$	7,836		$	175		$	3,294	$	1,546	$	41,523
Ending Balance Individually Evaluated for Impairment		61			-		-			69			35			115		905			28			-		-		1,213
Ending Balance Collectively Evaluated for Impairment		10,002			6,881		2,485			720			2,111			6,193		6,931			147			3,294		1,546		40,310
Loans & Leases:
Ending Balance	$	603,650		$	424,034	$	151,974		$	206,405		$	33,056		$	293,966	$	210,804		$	6,592		$	65,878	$	-	$	1,996,359
Ending Balance Individually Evaluated for Impairment		3,420			-		-			2,010			1,214			606		4,760			34			-		-		12,044
Ending Balance Collectively Evaluated for Impairment		600,230			424,034		151,974			204,395			31,842			293,360		206,044			6,558			65,878		-		1,984,315

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March 31, 2015	Commercial Real Estate			Agricultural Real Estate		Real Estate Construction		Residential 1st Mortgages			Home Equity Lines & Loans			Agricultural			Commercial			Consumer & Other			Leases		Unallocated		Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2015	$	7,842		$	4,185	$	1,669	$	1,022		$	2,426		$	6,104		$	8,195		$	218		$	2,211	$	1,529	$	35,401
Charge-Offs		-			-		-		-			-			-			(12	)		(17	)		-		-		(29	)
Recoveries		2,938			-		-		-			5			1			2			22			-		-		2,968
Provision		(2,826	)		2,716		247		(349	)		(335	)		(1,503	)		756			(11	)		288		1,617		600
Ending Balance- March 31, 2015	$	7,954		$	6,901	$	1,916	$	673		$	2,096		$	4,602		$	8,941		$	212		$	2,499	$	3,146	$	38,940
Ending Balance Individually Evaluated for Impairment		61			-		-		72			53			129			1,118			37			-		-		1,470
Ending Balance Collectively Evaluated for Impairment		7,893			6,901		1,916		601			2,043			4,473			7,823			175			2,499		3,146		37,470
Loans:
Ending Balance	$	529,550		$	351,866	$	101,616	$	182,431		$	31,724		$	216,231		$	236,141		$	4,915		$	50,846	$	-	$	1,705,320
Ending Balance Individually Evaluated for Impairment		3,573			-		4,363		2,080			1,668			457			4,840			44			-		-		17,025
Ending Balance Collectively Evaluated for Impairment	$	525,977		$	351,866	$	97,253	$	180,351		$	30,056		$	215,774		$	231,301		$	4,871		$	50,846	$	-	$	1,688,295

The ending balance of loans individually evaluated for impairment includes restructured loans in the amount of $5.3 million at March 31, 2016, $4.9 million at December 31, 2015 and $9.8 million at March 31, 2015, which are no longer disclosed or classified as TDRs.

19

The following tables show the loan & lease portfolio allocated by management’s internal risk ratings at the dates indicated (in thousands):

March 31, 2016	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	602,242	$	8,573	$	696	$	611,511
Agricultural Real Estate		429,785		2,496		-		432,281
Real Estate Construction		164,895		1,560		-		166,455
Residential 1st Mortgages		210,884		410		911		212,205
Home Equity Lines & Loans		30,701		72		866		31,639
Agricultural		252,387		638		630		253,655
Commercial		202,878		7,582		3,019		213,479
Consumer & Other		6,856		-		210		7,066
Leases		60,441		4,339		-		64,780
Total	$	1,961,069	$	25,670	$	6,332	$	1,993,071

December 31, 2015	Pass		Special Mention		Substandard		Total Loans
Loans & Leases:
Commercial Real Estate	$	595,011	$	7,917	$	722	$	603,650
Agricultural Real Estate		424,034		-		-		424,034
Real Estate Construction		150,379		1,595		-		151,974
Residential 1st Mortgages		205,135		413		857		206,405
Home Equity Lines and Loans		32,419		75		562		33,056
Agricultural		293,325		9		632		293,966
Commercial		199,467		8,160		3,177		210,804
Consumer & Other		6,411		-		181		6,592
Leases		65,878		-		-		65,878
Total	$	1,972,059	$	18,169	$	6,131	$	1,996,359

March 31, 2015	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	520,613	$	8,834	$	103	$	529,550
Agricultural Real Estate		351,866		-		-		351,866
Real Estate Construction		99,920		1,696		-		101,616
Residential 1st Mortgages		181,021		744		666		182,431
Home Equity Lines & Loans		30,772		83		869		31,724
Agricultural		215,507		453		271		216,231
Commercial		220,491		12,086		3,564		236,141
Consumer & Other		4,687		-		228		4,915
Leases		50,846		-		-		50,846
Total	$	1,675,723	$	23,896	$	5,701	$	1,705,320

See “Note 1. Significant Accounting Policies - Allowance for Credit Losses” for a description of the internal risk ratings used by the Company. There were no loans or leases outstanding at March 31, 2016, December 31, 2015, and March 31, 2015, rated doubtful or loss.

20

The following tables show an aging analysis of the loan & lease portfolio by the time past due at the dates indicated

(in thousands):

March 31, 2016	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	696	$	-	$	-	$	-	$	696	$	610,815	$	611,511
Agricultural Real Estate		-		-		-		163		163		432,118		432,281
Real Estate Construction		-		-		-		-		-		166,455		166,455
Residential 1st Mortgages		-		-		-		62		62		212,143		212,205
Home Equity Lines & Loans		-		-		-		564		564		31,075		31,639
Agricultural		-		-		-		-		-		253,655		253,655
Commercial		-		-		-		1,499		1,499		211,980		213,479
Consumer & Other		5		-		-		9		14		7,052		7,066
Leases		-		-		-		-		-		64,780		64,780
Total	$	701			$	-	$	2,297	$	2,998	$	1,990,073	$	1,993,071

December 31, 2015	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	705	$	-	$	-	$	19	$	724	$	602,926	$	603,650
Agricultural Real Estate		-		-		-		-		-		424,034		424,034
Real Estate Construction		-		-		-		-		-		151,974		151,974
Residential 1st Mortgages		97		194		-		65		356		206,049		206,405
Home Equity Lines and Loans		-		-		-		538		538		32,518		33,056
Agricultural		-		-		-		-		-		293,966		293,966
Commercial		-		-		-		1,524		1,524		209,280		210,804
Consumer & Other		7		-		-		10		17		6,575		6,592
Leases		-		-		-		-		-		65,878		65,878
Total	$	809	$	194	$	-	$	2,156	$	3,159	$	1,993,200	$	1,996,359

March 31, 2015	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	719	$	-	$	-	$	103	$	822	$	528,728	$	529,550
Agricultural Real Estate		-		-		-		-		-		351,866		351,866
Real Estate Construction		-		-		-		-		-		101,616		101,616
Residential 1st Mortgages		99		-		-		74		173		182,258		182,431
Home Equity Lines & Loans		-		-		-		616		616		31,108		31,724
Agricultural		-		-		-		14		14		216,217		216,231
Commercial		-		-		-		1,573		1,573		234,568		236,141
Consumer & Other		9		-		-		13		22		4,893		4,915
Leases		-		-		-		-		-		50,846		50,846
Total	$	827			$	-	$	2,393	$	3,220	$	1,702,100	$	1,705,320

21

The following tables show information related to impaired loans & leases for the periods indicated (in thousands):

March 31, 2016	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	80	$	80	$	-	$	91	$	2
Agricultural Real Estate		163		163		-		82		3
Residential 1st Mortgages		329		371		-		440		2
Home Equity Lines & Loans		725		796		-		653		-
Agricultural		193		193		-		193		-
Commercial		3,083		3,083		-		3,093		33
	$	4,573	$	4,686	$	-	$	4,552	$	40
With an allowance recorded:
Residential 1st Mortgages	$	242	$	282	$	12	$	295	$	3
Home Equity Lines & Loans		218		231		35		176		1
Agricultural		413		413		115		413		6
Commercial		1,631		1,789		757		1,644		6
Consumer & Other		26		31		26		30		-
	$	2,530	$	2,746	$	945	$	2,558	$	16
Total	$	7,103	$	7,432	$	945	$	7,110	$	56

December 31, 2015	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	102	$	104	$	-	$	479	$	7
Residential 1st Mortgages		551		618		-		560		16
Home Equity Lines and Loans		581		646		-		620		3
Agricultural		193		193		-		105		3
Commercial		3,103		3,103		-		2,349		85
	$	4,530	$	4,664	$	-	$	4,113	$	114
With an allowance recorded:
Residential 1st Mortgages	$	348	$	420	$	17	$	354	$	16
Home Equity Lines and Loans		134		151		7		136		5
Agricultural		412		413		115		431		28
Commercial		1,657		1,798		905		2,456		31
Consumer & Other		34		40		29		39		3
	$	2,585	$	2,822	$	1,073	$	3,416	$	83
Total	$	7,115	$	7,486	$	1,073	$	7,529	$	197

March 31, 2015	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	192	$	192	$	-	$	96	$	2
Residential 1st Mortgages		569		632		-		285		4
Home Equity Lines & Loans		661		701		-		331		1
Agricultural		14		27		-		7		-
Commercial		48		48		-		24		1
	$	1,484	$	1,600	$	-	$	743	$	8
With an allowance recorded:
Residential 1st Mortgages	$	359	$	429	$	18		648	$	4
Home Equity Lines & Loans		138		156		7		545		1
Agricultural		443		443		129		452		7
Commercial		4,793		4,889		1,118		4,768		25
Consumer & Other		43		49		37		45		1
	$	5,776	$	5,966	$	1,309	$	6,458	$	38
Total	$	7,260	$	7,566	$	1,309	$	7,201	$	46

22

Total recorded investment shown in the prior tables will not equal the total ending balance of loans & leases individually evaluated for impairment on the allocation of allowance tables. This is because the calculation of recorded investment takes into account charge-offs, net unamortized loan & lease fees & costs, unamortized premium or discount, and accrued interest. This table also excludes impaired loans that were previously modified in a troubled debt restructuring, are currently performing and are no longer disclosed or classified as TDRs.

At March 31, 2016, the Company allocated $919,000 of specific reserves to $6.4 million of troubled debt restructured loans & leases, of which $4.8 million were performing. The Company had no commitments at March 31, 2016 to lend additional amounts to customers with outstanding loans or leases that are classified as TDRs.

During the three-month period ending March 31, 2016, the terms of certain loans & leases were modified as troubled debt restructurings. The modification of the terms of such loans & leases can include one or a combination of the following: a reduction of the stated interest rate; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate of the loan were for 5 years. Modifications involving an extension of the maturity date were for 10 years.

The following table presents loans or leases by class modified as TDRs during the three-month period ended March 31, 2016 (in thousands):

	March 31, 2016
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Home Equity Lines & Loans		2	$	305	$	286
Total		2	$	305	$	286

The TDRs described above decreased the allowance for credit losses by $17,000 and resulted in charge-offs of $20,000 for the three months ended March 31, 2016.

During the three-months ended March 31, 2016, there were no payment defaults on loans or leases modified as troubled debt restructurings within twelve months following the modification. The Company considers a loan or lease to be in payment default once it is greater than 90 days contractually past due under the modified terms.

At December 31, 2015, the Company allocated $1.1 million of specific reserves to $6.6 million of troubled debt restructured loans, of which $5.0 million were performing. The Company had no commitments at December 31, 2015 to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

During the period ending December 31, 2015, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate of the loan were for periods ranging from 4 to 30 years. Modifications involving an extension of the maturity date were for periods ranging from 6 months to 30 years.

23

The following table presents loans by class modified as troubled debt restructured loans for the period ended December 31, 2015 (in thousands):

			December 31, 2015
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Agricultural		1	$	194	$	194
Commercial		1		131		119
Total		2	$	325	$	313

The troubled debt restructurings described above increased the allowance for credit losses by $70,000 and resulted in charge-offs of $12,000 for the twelve months ended December 31, 2015.

During the period ended December 31, 2015, there were no payment defaults on loans modified as troubled debt restructurings within twelve months following the modification. The Company considers a loan to be in payment default once it is greater than 90 days contractually past due under the modified terms.

At March 31, 2015, the Company allocated $1.3 million of specific reserves to $6.5 million of troubled debt restructured loans & leases, of which $4.9 million were performing. The Company had no commitments at March 31, 2015 to lend additional amounts to customers with outstanding loans or leases that are classified as TDRs.

During the three-month period ending March 31, 2015, the terms of certain loans & leases were modified as troubled debt restructurings. The modification of the terms of such loans & leases can include one or a combination of the following: a reduction of the stated interest rate; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate of the loan were for 10 years. Modifications involving an extension of the maturity date were for 10 years.

The following table presents loans or leases by class modified as TDRs during the three-month period ended March 31, 2015 (in thousands):

	March 31, 2015
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding  Recorded Investment		Post-Modification Outstanding Recorded  Investment
Commercial		1	$	131	$	119
Total		1	$	131	$	119

The TDR described above increased the allowance for credit losses by $114,000 and resulted in charge-offs of $12,000 for the three months ended March 31, 2015.

During the three-months ended March 31, 2015, there were no payment defaults on loans or leases modified as troubled debt restructurings within twelve months following the modification. The Company considers a loan or lease to be in payment default once it is greater than 90 days contractually past due under the modified terms.

24

4. Fair Value Measurements

The Company follows the “Fair Value Measurement and Disclosures” topic of the FASB ASC, which establishes a framework for measuring fair value in U.S. GAAP and expands disclosures about fair value measurements. This standard applies whenever other standards require, or permit, assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. In this standard, the FASB clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, this standard establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy is as follows:

Level 1 inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date.

Level 2 inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Management monitors the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period.

Management evaluates the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total assets, total liabilities or total earnings.

Securities classified as AFS are reported at fair value on a recurring basis utilizing Level 1, 2 and 3 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond's terms and conditions, among other things.

The Company does not record all loans & leases at fair value on a recurring basis. However, from time to time, a loan or lease is considered impaired and an allowance for credit losses is established. Once a loan or lease is identified as individually impaired, management measures impairment in accordance with the “Receivable” topic of the FASB ASC. The fair value of impaired loans or leases is estimated using one of several methods, including collateral value when the loan is collateral dependent, market value of similar debt, enterprise value, and discounted cash flows. Impaired loans & leases not requiring an allowance represent loans & leases for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans & leases. Impaired loans & leases where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. The fair value of collateral dependent impaired loans is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including sales comparison, cost and the income approach. Adjustments are often made in the appraisal process by the appraisers to take into account differences between the comparable sales and income and other available data. Such adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value. The valuation technique used for Level 3 nonrecurring impaired loans is primarily the sales comparison approach less selling costs of 10%.

25

Other Real Estate (“ORE”) is reported at fair value on a non-recurring basis. Fair values are based on recent real estate appraisals. These appraisals may use a single valuation approach or a combination of approaches including sales comparison, cost and the income approach. Adjustments are often made in the appraisal process by the appraisers to take into account differences between the comparable sales and income and other available data. Such adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value. The valuation technique used for Level 3 nonrecurring ORE is primarily the sales comparison approach less selling costs of 10%.

At March 31, 2016, formal foreclosure proceedings were in process for $538,000 of consumer mortgage loans secured by residential real estate properties.

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value for the periods indicated.

			Fair Value Measurements At March 31, 2016, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets  for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant  Unobservable Inputs (Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	63,346	$	-	$	63,346	$	-
US Treasury Notes		65,788		65,788		-		-
Mortgage Backed Securities		212,127		-		212,127		-
Other		510		200		310		-
Total Assets Measured at Fair Value On a Recurring Basis	$	341,771	$	65,988	$	275,783	$	-

			Fair Value Measurements At December 31, 2015, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets  for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant  Unobservable Inputs (Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	33,251	$	-	$	33,251	$	-
US Treasury Notes		72,884		72,884		-		-
Mortgage Backed Securities		262,493		-		262,493		-
Other		509		199		310		-
Total Assets Measured at Fair Value On a Recurring Basis	$	369,137	$	73,083	$	296,054	$	-

			Fair Value Measurements At March 31, 2015, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable  Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	68,132	$	-	$	68,132	$	-
US Treasury Notes		19,966		-		19,966		-
Mortgage Backed Securities		276,601		-		276,601		-
Other		485		175		310		-
Total Assets Measured at Fair Value On a Recurring Basis	$	365,184	$	175	$	365,009	$	-

Fair values for Level 2 available-for-sale investment securities are based on quoted market prices for similar securities. During the quarters ended March 31, 2016 and 2015, there were no transfers in or out of Level 1, 2, or 3.

26

The following tables present information about the Company’s other real estate and impaired loans or leases, classes of assets or liabilities that the Company carries at fair value on a non-recurring basis, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value for the periods indicated. Not all impaired loans or leases are carried at fair value. Impaired loans or leases are only included in the following tables when their fair value is based upon a current appraisal of the collateral, and if that appraisal results in a partial charge-off or the establishment of a specific reserve.

			Fair Value Measurements At March 31, 2016, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired Loans
Residential 1st Mortgage	$	229	$	-	$	-	$	229
Home Equity Lines and Loans		365		-		-		365
Agricultural		298		-		-		298
Commercial		874		-		-		874
Total Impaired Loans		1,766		-		-		1,766
Other Real Estate
Real Estate Construction		585		-		-		585
Total Other Real Estate		585		-		-		585
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	2,351	$	-	$	-	$	2,351

			Fair Value Measurements At December 31, 2015, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical  Assets (Level 1)		Other Observable  Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
Impaired Loans:
Residential 1st Mortgage	$	329	$	-	$	-	$	329
Home Equity Lines and Loans		125		-		-		125
Agricultural		298		-		-		298
Commercial		752		-		-		752
Consumer		5		-		-		5
Total Impaired Loans		1,509		-		-		1,509
Other Real Estate:
Real Estate Construction		2,441		-		-		2,441
Total Other Real Estate		2,441		-		-		2,441
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	3,950	$	-	$	-	$	3,950

27

			Fair Value Measurements At March 31, 2015, Using
(in thousands)	Fair Value Total		Quoted Prices in  Active Markets  for Identical  Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired Loans
Residential 1st Mortgage	$	341	$	-	$	-	$	341
Home Equity Lines and Loans		130		-		-		130
Agricultural		314		-		-		314
Commercial		3,674		-		-		3,674
Consumer		6						6
Total Impaired Loans		4,465		-		-		4,465
Other Real Estate
Real Estate Construction		2,441		-		-		2,441
Agricultural Real Estate		858		-		-		858
Total Other Real Estate		3,299		-		-		3,299
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	7,764	$	-	$	-	$	7,764

The Company’s property appraisals are primarily based on the sales comparison approach and the income approach methodologies, which consider recent sales of comparable properties, including their income generating characteristics, and then make adjustments to reflect the general assumptions that a market participant would make when analyzing the property for purchase. These adjustments may increase or decrease an appraised value and can vary significantly depending on the location, physical characteristics and income producing potential of each property. Additionally, the quality and volume of market information available at the time of the appraisal can vary from period to period and cause significant changes to the nature and magnitude of comparable sale adjustments. Given these variations, comparable sale adjustments are generally not a reliable indicator for how fair value will increase or decrease from period to period. Under certain circumstances, management discounts are applied based on specific characteristics of an individual property.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at March 31, 2016:

(in thousands)	Fair Value		Valuation Technique	Unobservable Inputs	Range, Weighted Avg.
Impaired Loans
Residential 1st Mortgage	$	229	Sales Comparison Approach	Adjustment for Difference Between Comparable Sales		2% -4%, 3	%
Home Equity Lines and Loans	$	365	Sales Comparison Approach	Adjustment for Difference Between Comparable Sales		1% - 2%, 1	%
Agricultural	$	298	Income Approach	Capitalization Rate		16% - 16%, 16	%
Commercial	$	874	Income Approach	Capitalization Rate		16% - 16%, 16	%
Other Real Estate
Real Estate Construction	$	585	Sales Comparison Approach	Adjustment for Difference Between Comparable Sales		10% - 10%, 10	%

28

5. Fair Value of Financial Instruments

U.S. GAAP requires disclosure of fair value information about financial instruments, whether or not recognized on the balance sheet, for which it is practical to estimate that value. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. The use of assumptions and various valuation techniques, as well as the absence of secondary markets for certain financial instruments, will likely reduce the comparability of fair value disclosures between financial institutions. In some cases, book value is a reasonable estimate of fair value due to the relatively short period of time between origination of the instrument and its expected realization.

The following tables summarize the book value and estimated fair value of financial instruments for the periods indicated:

				Fair Value of Financial Instruments Using
March 31, 2016  (in thousands)	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs  (Level 3)			Total Estimated Fair Value
Assets:
Cash and Cash Equivalents	$	73,716		$	73,716	$	-	$	-		$	73,716
Investment Securities Available-for-Sale:
Government Agency & Government-Sponsored Entities		63,346			-		63,346		-			63,346
US Treasury Notes		65,788			65,788		-					65,788
Mortgage Backed Securities		212,127					212,127		-			212,127
Other		510			200		310		-			510
Total Investment Securities Available-for-Sale		341,771			65,988		275,783		-			341,771
Investment Securities Held-to-Maturity:
Obligations of States and Political Subdivisions		61,535			-		50,436		12,456			62,892
Total Investment Securities Held-to-Maturity		61,535			-		50,436		12,456			62,892
FHLB Stock		7,795			N/A		N/A		N/A			N/A
Loans & Leases, Net of Deferred Fees & Allowance:
Commercial Real Estate		601,412			-		-		604,707			604,707
Agricultural Real Estate		423,119			-		-		414,223			414,223
Real Estate Construction		163,861			-		-		163,917			163,917
Residential 1st Mortgages		211,409			-		-		214,885			214,885
Home Equity Lines and Loans		29,575			-		-		30,806			30,806
Agricultural		247,751			-		-		246,626			246,626
Commercial		205,754			-		-		204,828			204,828
Consumer & Other		6,879			-		-		6,938			6,938
Leases		61,541							62,459			62,459
Unallocated Allowance		(2,359	)		-		-		(2,359	)		(2,359	)
Total Loans & Leases, Net of Deferred Fees & Allowance		1,948,942			-		-		1,947,030			1,947,030
Accrued Interest Receivable		8,118			-		8,118		-			8,118
Liabilities:
Deposits:
Demand		637,140			637,140		-		-			637,140
Interest Bearing Transaction		409,360			409,361		-		-			409,361
Savings and Money Market		725,823			725,822		-		-			725,822
Time		484,141			-		483,789		-			483,789
Total Deposits		2,256,464			1,772,323		483,789		-			2,256,112
Subordinated Debentures		10,310			-		6,437		-			6,437
Accrued Interest Payable		471			-		471		-			471

29

				Fair Value of Financial Instruments Using
December 31, 2015 (in thousands)	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)			Other Observable Inputs (Level 2)			Significant  Unobservable  Inputs (Level 3)			Total Estimated Fair Value
Assets:
Cash and Cash Equivalents	$	59,446		$	59,446		$	-		$	-		$	59,446
Investment Securities Available-for-Sale:
Government Agency & Government-Sponsored Entities		33,251			-			33,251			-			33,251
U.S. Treasury Notes		72,884			72,884			-						72,884
Mortgage Backed Securities		262,493			-			262,493			-			262,493
Other		509			199			310			-			509
Total Investment Securities Available-for-Sale		369,137			73,083			296,054			-			369,137
Investment Securities Held-to-Maturity:
Obligations of States and Political Subdivisions		61,396			-			44,675			17,713			62,388
Total Investment Securities Held-to-Maturity		61,396			-			44,675			17,713			62,388
FHLB Stock		7,795			N/	A		N/	A		N/	A		N/	A
Loans & Leases, Net of Deferred Fees & Allowance:
Commercial Real Estate		593,587			-			-			591,271			591,271
Agricultural Real Estate		417,153			-			-			405,295			405,295
Real Estate Construction		149,489			-			-			149,371			149,371
Residential 1st Mortgages		205,616			-			-			207,431			207,431
Home Equity Lines and Loans		30,910			-			-			32,360			32,360
Agricultural		287,658			-			-			285,733			285,733
Commercial		202,968			-			-			201,105			201,105
Consumer & Other		6,417			-			-			6,416			6,416
Leases		62,584			-			-			62,139			62,139
Unallocated Allowance		(1,546	)		-			-			(1,546	)		(1,546	)
Total Loans & Leases, Net of Deferred Fees & Allowance		1,954,836			-			-			1,939,575			1,939,575
Accrued Interest Receivable		9,240			-			9,240			-			9,240
Liabilities:
Deposits:
Demand		711,029			711,029			-			-			711,029
Interest Bearing Transaction		377,594			377,594			-			-			377,594
Savings and Money Market		707,885			707,885			-			-			707,885
Time		481,024			-			480,334			-			480,334
Total Deposits		2,277,532			1,796,508			480,334			-			2,276,842
Subordinated Debentures		10,310			-			6,424			-			6,424
Accrued Interest Payable		513			-			513			-			513

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				Fair Value of Financial Instruments Using
March 31, 2015 (in thousands)	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)			Other Observable Inputs (Level 2)			Significant Unobservable  Inputs (Level 3)			Total Estimated Fair Value
Assets:
Cash and Cash Equivalents	$	143,936		$	143,936		$	-		$	-		$	143,936
Investment Securities Available-for-Sale:
Government Agency & Government-Sponsored Entities		68,132			-			68,132			-			68,132
US Treasury Notes		19,966						19,966						19,966
Mortgage Backed Securities		276,601						276,601			-			276,601
Other		485			175			310			-			485
Total Investment Securities Available-for-Sale		365,184			175			365,009			-			365,184
Investment Securities Held-to-Maturity:
Obligations of States and Political Subdivisions		61,324			-			48,583			13,496			62,079
Other		2,139			-			2,139			-			2,139
Total Investment Securities Held-to-Maturity		63,463			-			50,722			13,496			64,218
FHLB Stock		7,677			N/	A		N/	A		N/	A		N/	A
Loans & Leases, Net of Deferred Fees & Allowance:
Commercial Real Estate		521,596			-			-			519,698			519,698
Agricultural Real Estate		344,965			-			-			346,742			346,742
Real Estate Construction		99,700			-			-			99,861			99,861
Residential 1st Mortgages		181,758			-			-			185,210			185,210
Home Equity Lines and Loans		29,628			-			-			31,332			31,332
Agricultural		211,629			-			-			210,769			210,769
Commercial		227,200			-			-			224,783			224,783
Consumer & Other		4,703			-			-			4,747			4,747
Leases		48,347									48,779			48,779
Unallocated Allowance		(3,146	)		-			-			(3,146	)		(3,146	)
Total Loans & Leases, Net of Deferred Fees & Allowance		1,666,380			-			-			1,668,775			1,668,775
Accrued Interest Receivable		7,324			-			7,324			-			7,324
Liabilities:
Deposits:
Demand		578,820			578,820			-			-			578,820
Interest Bearing Transaction		340,045			340,045			-			-			340,045
Savings and Money Market		699,308			699,308			-			-			699,308
Time		493,600			-			493,600			-			493,600
Total Deposits		2,111,773			1,618,173			493,600			-			2,111,773
Subordinated Debentures		10,310			-			6,250			-			6,250
Accrued Interest Payable		433			-			433			-			433

Fair value estimates presented herein are based on pertinent information available to management as of March 31, 2016, December 31, 2015, and March 31, 2015. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purpose of these financial statements since that date, and; therefore, current estimates of fair value may differ significantly from the amounts presented above. The methods and assumptions used to estimate the fair value of each class of financial instrument listed in the table above are explained below.

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Cash and Cash Equivalents - The carrying amounts reported in the balance sheet for cash and due from banks, interest-bearing deposits with banks, federal funds sold, and securities purchased under agreements to resell are a reasonable estimate of fair value. All cash and cash equivalents are classified as Level 1.

Investment Securities - Fair values for investment securities consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond's terms and conditions, among other things. Based on the available market information the classification level could be 1, 2, or 3.

Federal Home Loan Bank Stock - It is not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability.

Loans & Leases, Net of Deferred Loan & Lease Fees & Allowance - Fair values of loans & leases are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans & leases are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans & leases are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans & leases do not necessarily represent an exit price.

Deposit Liabilities - The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. Fair values for fixed-maturity certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

Subordinated Debentures - The fair values of the Company’s Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

Accrued Interest Receivable and Payable - The carrying amount of accrued interest receivable and payable approximates their fair value resulting in a Level 2 classification.

6. Dividends and Basic Earnings Per Common Share

Farmers & Merchants Bancorp common stock is not traded on any exchange. The shares are primarily held by local residents and are not actively traded. No cash dividends were declared during the first quarter of 2016 or 2015.

Basic earnings per common share amounts are computed by dividing net income by the weighted average number of common shares outstanding for the period. The Company has no securities or other contracts, such as stock options, that could require the issuance of common stock.   Accordingly, diluted earnings per share are not presented. The following table calculates the basic earnings per common share for the three months ended March 31, 2016 and 2015.

(net income in thousands)	2016		2015
Net Income	$	7,172	$	6,403
Weighted Average Number of Common Shares Outstanding		791,895		785,366
Basic Earnings Per Common Share Amount	$	9.06	$	8.15

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7. Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09 - Revenue from Contracts with Customers (Topic 606), which will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific revenue recognition guidance throughout the Accounting Standards Codification. The amendments in this update affect any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets unless those contracts, including leases and insurance contracts, are within the scope of other standards. The amendments establish a core principle requiring the recognition of revenue to depict the transfer of goods or services to customers in an amount reflecting the consideration to which the entity expects to be entitled in exchange for such goods or services. The amendments also require expanded disclosures concerning the nature, amount, timing and uncertainty of revenues and cash flows arising from contracts with customers. For public entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and must be applied retrospectively. Early application is not permitted. Management is currently evaluating the impact of adoption.

In August 2015, the FASB issued ASU 2015-14 - Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date. The amendments in this Update defer the effective date of Update 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires that a lessee recognize assets and liabilities for leases with lease terms of more than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, the standard will require both types of leases to be recognized on the balance sheet. It also requires disclosures to better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The new standard applies to public business entities in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. Management is currently evaluating the impact of adoption.

Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

The following is management’s discussion and analysis of the major factors that influenced our financial performance for the three months ended March 31, 2016. This analysis should be read in conjunction with our 2015 Annual Report to Shareholders on Form 10-K, and with the unaudited financial statements and notes as set forth in this report.

Forward–Looking Statements

This Form 10-Q contains various forward-looking statements, usually containing the words “estimate,” “project,” “expect,” “objective,” “goal,” or similar expressions and includes assumptions concerning Farmers & Merchants Bancorp’s (together with its subsidiaries, the “Company” or “we”) operations, future results, and prospects. These forward-looking statements are based upon current expectations and are subject to risks and uncertainties. In connection with the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary statement identifying important factors which could cause the actual results of events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions.

Such factors include the following: (1) continuing economic sluggishness in the Central Valley of California; (2) significant changes in interest rates and loan prepayment speeds; (3) credit risks of lending and investment activities; (4) changes in federal and state banking laws or regulations; (5) competitive pressure in the banking industry; (6) changes in governmental fiscal or monetary policies; (7) uncertainty regarding the economic outlook resulting from the continuing war on terrorism, as well as actions taken or to be taken by the U.S. or other governments as a result of further acts or threats of terrorism; (8) ongoing drought conditions in California and the resulting impact on the Company’s agricultural customers; (9) expansion into new geographic markets and new lines of business; and (10) other factors discussed in Item 1A. Risk Factors located in the Company’s 2015 Annual Report on Form 10-K.

33

Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances arising after the date on which they are made.

Introduction

Farmers & Merchants Bancorp, or the Company, is a bank holding company formed March 10, 1999. Its subsidiary, Farmers & Merchants Bank of Central California, or the Bank, is a California state-chartered bank formed in 1916. Banking services are provided in twenty-four locations in the Company's service area. The service area includes Sacramento, San Joaquin, Stanislaus, Merced and Contra Costa Counties with branches in Sacramento, Elk Grove, Galt, Lodi, Stockton, Linden, Modesto, Turlock, Hilmar, Merced, Walnut Creek and Concord.

As a bank holding company, the Company is subject to regulation and examination by the Board of Governors of the Federal Reserve System (“FRB”). As a California, state-chartered, non-fed member bank, the Bank is subject to regulation and examination by the California Department of Business Oversight (“DBO”) and the Federal Deposit Insurance Corporation (“FDIC”).

Overview

Although the Company has initiated efforts to expand its geographic footprint into the East Bay area of San Francisco, California, the Company’s primary service area remains the mid Central Valley of California, a region that can be significantly impacted by the seasonal needs of the agricultural industry. Accordingly, discussion of the Company’s Financial Condition and Results of Operations is influenced by the seasonal banking needs of its agricultural customers (e.g., during the spring and summer customers draw down their deposit balances and increase loan borrowing to fund the purchase of equipment and planting of crops. Correspondingly, deposit balances are replenished and loans repaid in late fall and winter as crops are harvested and sold).

The state of California has experienced drought conditions since 2013. These conditions did not have a material impact on the Company’s credit quality during the 2015 growing season. Although rain and snow levels in early 2016 increased significantly relative to prior years, they were not sufficient to completely relieve the drought conditions that had built up over the prior three years. Accordingly, management believes that current conditions will continue to have an adverse impact on some of the Company’s agricultural customers’ operating costs in 2016, but at the current time we cannot tell what the ultimate impact will be on 2016 crop yields and crop quality. The longer the drought continues, the more significant is its impact, particularly if ground water levels begin to significantly deteriorate or riparian rights are curtailed.

For the three months ended March 31, 2016, Farmers & Merchants Bancorp reported net income of $7,172,000, earnings per share of $9.06 and return on average assets of 1.11%. Return on average shareholders’ equity was 11.11% for the three months ended March 31, 2016.

For the three months ended March 31, 2015, Farmers & Merchants Bancorp reported net income of $6,403,000, earnings per share of $8.15 and return on average assets of 1.08%. Return on average shareholders’ equity was 10.76% for the three months ended March 31, 2015.

The following is a summary of the financial results for the three-month period ended March 31, 2016 compared to March 31, 2015.

· Net income increased 12.0% to $7,172,000 from $6,403,000.

· Earnings per share increased 11.2% to $9.06 from $8.15.

34

· Total assets increased 7.4% to $2.6 billion.

· Total loans & leases increased 16.9% to $2.0 billion.

· Total deposits increased 6.9% to $2.3 billion.

The primary reasons for the Company’s $861,000 or 8.3% increase in pre-tax income in the first quarter of 2016 as compared to the same period of 2015 were:

· A $2.61 million increase in net interest income primarily related to the growth in earning assets.

· A $5.68 million increase in gain on sale of ORE related to the disposition of one of the Company’s foreclosed properties.

These positive impacts were partially offset by:

· A $2.00 million increase in the provision for credit losses and a $100,000 increase in the provision for unused commitments, resulting from: (1) management’s assessment of the risks related to the continuing sluggish economy in our primary service area, and increasing concerns regarding the level of future growth in the U.S. economy in general; (2) a decline in key agricultural commodity prices; (3) continuing drought conditions in California; and (4) the overall growth in the loan portfolio, measured by both commitments and outstanding balances.

· A $290,000 increase in loss on sale of investment securities as the Company took advantage of a decline in market interest rates to sell certain lower yielding investment securities.

· A $1.18 million decrease in non-interest income primarily related to a $1.10 million non-recurring financing fee earned in the first quarter of 2015.

· A $3.86 million increase in non-interest expense primarily related to:

- Salaries and employee benefits of new staff added for branch expansion and the Company’s equipment leasing activities, bank wide raises, and increased contributions to employee retirement and other benefit plans.

- Legal, consulting and other professional services resulting from management’s assessment of the Company’s future corporate structure, branding and overall strategic direction.

- Recruiting and training of new staff as the company expands its geographic footprint and business activities.

- Amortization expense related to an increase in CRA qualifying low income housing tax credit investments.

- Occupancy, equipment and marketing expenses from branch expansion and remodeling, ATM upgrades, introduction of a new logo and celebration of the Bank’s 100th anniversary.

Results of Operations

Net Interest Income / Net Interest Margin

The tables on the following pages reflect the Company's average balance sheets and volume and rate analysis for the three month periods ended March 31, 2016 and 2015.

The average yields on earning assets and average rates paid on interest-bearing liabilities have been computed on an annualized basis for purposes of comparability with full year data. Average balance amounts for assets and liabilities are the computed average of daily balances.

Net interest income is the amount by which the interest and fees on loans & leases and other interest earning assets exceed the interest paid on interest bearing sources of funds. For the purpose of analysis, the interest earned on tax-exempt investments and municipal loans is adjusted to an amount comparable to interest subject to normal income taxes.  This adjustment is referred to as “taxable equivalent” and is noted wherever applicable.

35

The Volume and Rate Analysis of Net Interest Income summarizes the changes in interest income and interest expense based on changes in average asset and liability balances (volume) and changes in average rates (rate). For each category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to: (1) changes in volume (change in volume multiplied by initial rate); (2) changes in rate (change in rate multiplied by initial volume); and (3) changes in rate/volume (allocated in proportion to the respective volume and rate components).

The Company’s earning assets and rate sensitive liabilities are subject to repricing at different times, which exposes the Company to income fluctuations when interest rates change. In order to minimize income fluctuations, the Company attempts to match asset and liability maturities. However, some maturity mismatch is inherent in the asset and liability mix. See “Item 3. Quantitative and Qualitative Disclosures about Market Risk – Interest Rate Risk.”

36

Farmers & Merchants Bancorp

Year-to-Date Average Balances and Interest Rates

(Interest and Rates on a Taxable Equivalent Basis)

(in thousands)

	Three Months Ended March 31, 2016									Three Months Ended March 31, 2015
Assets	Balance			Interest			Annualized Yield/Rate			Balance			Interest			Annualized Yield/Rate
Interest Bearing Deposits With Banks	$	36,953		$	46			0.50	%	$	93,453		$	58			0.25	%
Investment Securities
U.S. Treasuries		32,160			72			0.90	%		5,945			19			1.28	%
Government Agency & Government-Sponsored Entities		33,946			105			1.24	%		76,278			39			0.20	%
Obligations of States and Political Subdivisions - Non-Taxable		61,422			743			4.84	%		61,569			801			5.21	%
Mortgage Backed Securities		254,732			1,422			2.23	%		278,137			1,522			2.19	%
Other		510			3			2.35	%		2,629			6			0.91	%
Total Investment Securities		382,770			2,345			2.45	%		424,558			2,387			2.25	%
Loans & Leases
Real Estate		1,410,915			15,966			4.55	%		1,130,388			13,522			4.85	%
Home Equity Line & Loans		32,309			389			4.84	%		32,072			422			5.34	%
Agricultural		259,903			2,614			4.05	%		227,904			2,218			3.95	%
Commercial		216,461			2,157			4.01	%		231,141			2,396			4.20	%
Consumer		4,893			78			6.41	%		4,840			72			6.03	%
Other		1,968			11			2.25	%		-			-			0.00	%
Leases		65,687			679			4.16	%		47,186			497			4.27	%
Total Loans & Leases		1,992,136			21,894			4.42	%		1,673,531			19,127			4.64	%
Total Earning Assets		2,411,859		$	24,285			4.05	%		2,191,542		$	21,572			3.99	%
Unrealized Gain (Loss) on Securities Available-for-Sale		4,039									5,545
Allowance for Credit Losses		(41,605	)								(35,446	)
Cash and Due From Banks		41,036									36,746
All Other Assets		168,357									173,503
Total Assets	$	2,583,686								$	2,371,890
Liabilities & Shareholders' Equity
Interest Bearing Deposits
Transaction	$	392,519		$	108			0.11	%	$	341,038		$	46			0.05	%
Savings and Money Market		737,862			280			0.15	%		678,842			290			0.17	%
Time Deposits		482,856			440			0.37	%		479,948			376			0.32	%
Total Interest Bearing Deposits		1,613,237			828			0.21	%		1,499,828			712			0.19	%
Federal Home Loan Bank Advances		3,426			4			0.47	%		3			-			0.00	%
Subordinated Debentures		10,310			88			3.43	%		10,310			80			3.10	%
Total Interest Bearing Liabilities		1,626,973		$	920			0.23	%		1,510,141		$	792			0.21	%
Interest Rate Spread								3.82	%								3.78	%
Demand Deposits (Non-Interest Bearing)		651,313									576,231
All Other Liabilities		47,295									47,520
Total Liabilities		2,325,581									2,133,892
Shareholders' Equity		258,105									237,998
Total Liabilities & Shareholders' Equity	$	2,583,686								$	2,371,890
Impact of Non-Interest Bearing Deposits and Other Liabilities								0.07	%								0.07	%
Net Interest Income and Margin on Total Earning Assets					23,365			3.90	%					20,780			3.85	%
Tax Equivalent Adjustment					(259	)								(279	)
Net Interest Income				$	23,106			3.85	%				$	20,501			3.79	%

Notes:  Yields on municipal securities have been calculated on a fully taxable equivalent basis.  Loan interest income includes fee income and unearned discount in the amount of $1.0 million and $1.3 million for the quarters ended March 31, 2016 and 2015, respectively. Yields on securities available-for-sale are based on historical cost.

37

Farmers & Merchants Bancorp

Volume and Rate Analysis of Net Interest Revenue

(Rates on a Taxable Equivalent Basis)

(in thousands)

	Three Months Ended Mar. 31, 2016 compared to Mar. 31, 2015
Interest Earning Assets	Volume			Rate			Net Chg.
Interest Bearing Deposits With Banks	$	(49	)	$	37		$	(12	)
Investment Securities
U.S. Treasuries		61			(8	)		53
U.S. Agencies		(33	)		99			66
Municipals - Non-Taxable		(2	)		(57	)		(59	)
Mortgage Backed Securities		(131	)		31			(100	)
Other		(8	)		4			(3	)
Total Investment Securities Available-for-Sale		(113	)		70			(43	)
Loans
Real Estate		3,314			(870	)		2,444
Home Equity		3			(37	)		(33	)
Agricultural		336			60			396
Commercial		(137	)		(101	)		(239	)
Consumer		1			6			6
Other		11			-			11
Leases		196			(13	)		182
Total Loans		3,723			(956	)		2,767
Total Earning Assets		3,562			(849	)		2,712
Interest Bearing Liabilities
Interest Bearing Deposits
Transaction		8			54			62
Savings and Money Market		25			(35	)		(10	)
Time Deposits		2			62			64
Total Interest Bearing Deposits		35			80			116
Other Borrowed Funds		4			0			4
Subordinated Debentures		-			8			8
Total Interest Bearing Liabilities		39			89			128
Total Change	$	3,523		$	(938	)	$	2,584

Notes:  Rate/volume variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total "net change."  The above figures have been rounded to the nearest whole number.

Net interest income increased $2.6 million or 12.7% to $23.1 million during the first quarter of 2016 compared to $20.5 million for the first quarter of 2015. On a fully tax equivalent basis, net interest income increased 12.4% and totaled $23.4 million at March 31, 2016, compared to $20.8 million at March 31, 2015. As more fully discussed below, the increase in net interest income was primarily due to a $220.3 million increase in average earning assets.

Net interest income on a taxable equivalent basis, expressed as a percentage of average total earning assets, is referred to as the net interest margin. For the quarter ended March 31, 2016, the Company’s net interest margin was 3.90% compared to 3.85% for the quarter ended March 31, 2015. This increase in net interest margin was due primarily to an increase in earning asset yields that exceeded the increase in funding costs.

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Average loans & leases totaled $2.0 billion for the quarter ended March 31, 2016; an increase of $318.6 million compared to the average balance for the quarter ended March 31, 2015. Loans & leases increased from 76.4% of average earning assets at March 31, 2015 to 82.6% at March 31, 2016. As a result of the continuing impact of the sustained low rate environment since late 2008, the annualized yield on the Company’s loan portfolio declined to 4.42% for the quarter ended March 31, 2016, compared to 4.64% for the quarter ended March 31, 2015. Overall, the positive impact on interest revenue from the increase in loan & lease balances exceeded the negative impact of a decline in yields, resulting in interest revenue from loans & leases increasing 14.5% to $21.9 million for quarter ended March 31, 2016. The Company has been experiencing aggressive competitor pricing for loans & leases to which it may need to continue to respond in order to retain key customers. This could place even greater negative pressure on future loan & lease yields and net interest margin.

The investment portfolio is the other main component of the Company’s earning assets. Since the risk factor for investments is typically lower than that of loans or leases, the yield earned on investments is generally less than that of loans & leases. Average investment securities totaled $382.8 million for the quarter ended March 31, 2016; a decrease of $41.8 million compared to the average balance for the quarter ended March 31, 2015. Tax equivalent interest income on securities decreased $43,000 to $2.3 million for the quarter ended March 31, 2016, compared to $2.4 million for the quarter ended March 31, 2015. The average investment portfolio yield, on a tax equivalent (TE) basis, was 2.45% for the quarter ended March 31, 2016, compared to 2.25% for the quarter ended March 31, 2015. See “Financial Condition – Investment Securities” for a discussion of the Company’s investment strategy in 2016. Net interest income on the Schedule of Year-to-Date Average Balances and Interest Rates is shown on a tax equivalent basis, which is higher than net interest income as reflected on the Consolidated Statement of Income because of adjustments that relate to income on securities that are exempt from federal income taxes.

Interest bearing deposits with banks and overnight investments in Federal Funds Sold are additional earning assets available to the Company. Interest bearing deposits with banks consisted of FRB deposits. Balances with the FRB earn interest at the Fed Funds rate, which had been 0.25% since December 2008, but increased to 0.50% in December 2015. Average interest bearing deposits with banks for the quarter ended March 31, 2016, was $37.0 million, a decrease of $56.5 million compared to the average balance for the quarter ended March 31, 2015. Interest income on interest bearing deposits with banks for the quarter ended March 31, 2016, decreased $12,000 to $46,000 compared to the quarter ended March 31, 2015.

Average interest-bearing liabilities increased $116.8 million or 7.7% during the first quarter of 2016. Of that increase: (1) interest-bearing transaction deposits increased $51.5 million; (2) savings and money market deposits increased $59.0 million; (3) time deposits increased $2.9 million; (4) FHLB advances increased $3.4 million (see “Financial Condition – Federal Home Loan Bank Advances and Federal Reserve Bank Borrowings”); and (5) subordinated debt remained unchanged (see “Financial Condition – Subordinated Debentures”).

Total interest expense on interest bearing deposits was $828,000 for the first quarter of 2016 as compared to $712,000 million for the first quarter of 2015. The average rate paid on interest-bearing deposits was 0.21% for the first quarter of 2016 compared to 0.19% for the first quarter of 2015.

Provision and Allowance for Credit Losses

As a financial institution that assumes lending and credit risks as a principal element of its business, credit losses will be experienced in the normal course of business. The Company has established credit management policies and procedures that govern both the approval of new loans & leases and the monitoring of the existing portfolio. The Company manages and controls credit risk through comprehensive underwriting and approval standards, dollar limits on loans & leases to one borrower (the term “borrower” is used herein to describe a customer who has entered into either a loan or lease transaction), and by restricting loans & leases made primarily to its principal market area where management believes it is best able to assess the applicable risk. Additionally, management has established guidelines to ensure the diversification of the Company’s credit portfolio such that even within key portfolio sectors such as real estate or agriculture, the portfolio is diversified across factors such as location, building type, crop type, etc. Management reports regularly to the Board of Directors regarding trends and conditions in the loan & lease portfolio and regularly conducts credit reviews of individual loans & leases. Loans & leases that are performing but have shown some signs of weakness are subject to more stringent reporting and oversight.

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Allowance for Credit Losses

The allowance for credit losses is an estimate of probable incurred credit losses inherent in the Company's loan & lease portfolio as of the balance sheet date. The allowance is established through a provision for credit losses, which is charged to expense. Additions to the allowance are expected to maintain the adequacy of the total allowance after credit losses and loan & lease growth. Credit exposures determined to be uncollectible are charged against the allowance. Cash received on previously charged off amounts is recorded as a recovery to the allowance. The overall allowance consists of three primary components: specific reserves related to impaired loans & leases; general reserves for inherent losses related to loans & leases that are not impaired; and an unallocated component that takes into account the imprecision in estimating and allocating allowance balances associated with macro factors.

A loan or lease is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the original agreement. Loans & leases determined to be impaired are individually evaluated for impairment. When a loan or lease is impaired, the Company measures impairment based on the present value of expected future cash flows discounted at the loan’s or lease's effective interest rate, except that as a practical expedient, it may measure impairment based on a loan’s or lease's observable market price, or the fair value of the collateral if the loan or lease is collateral dependent. A loan or lease is collateral dependent if the repayment of the loan or lease is expected to be provided solely by the underlying collateral.

A restructuring of a loan or lease constitutes a troubled debt restructuring (“TDR”) under ASC 310-40, if the Company for economic or legal reasons related to the borrower's financial difficulties grants a concession to the borrower that it would not otherwise consider. Restructured loans or leases typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms. If the restructured loan or lease was current on all payments at the time of restructure and management reasonably expects the borrower will continue to perform after the restructure, management may keep the loan or lease on accrual. Loans & leases that are on nonaccrual status at the time they become a TDR, remain on nonaccrual status until the borrower demonstrates a sustained period of performance, which the Company generally believes to be six consecutive months of payments, or equivalent. A loan or lease can be removed from TDR status if it was restructured at a market rate in a prior calendar year and is currently in compliance with its modified terms. However, these loans or leases continue to be classified as impaired and are individually evaluated for impairment.

The determination of the general reserve for loans or leases that are collectively evaluated for impairment is based on estimates made by management, to include, but not limited to, consideration of historical losses by portfolio segment, internal asset classifications, and qualitative factors that include economic trends in the Company's service areas, industry experience and trends, geographic concentrations, estimated collateral values, the Company's underwriting policies, the character of the loan & lease portfolio, and probable losses inherent in the portfolio taken as a whole.

The Company maintains a separate allowance for each portfolio segment (loan & lease type). These portfolio segments include: (1) commercial real estate; (2) agricultural real estate; (3) real estate construction (including land and development loans); (4) residential 1^st mortgages; (5) home equity lines and loans; (6) agricultural; (7) commercial; (8) consumer & other; and (9) equipment leases. See “Financial Condition – Loans & Leases” for examples of loans & leases made by the Company. The allowance for credit losses attributable to each portfolio segment, which includes both impaired loans & leases and loans & leases that are not impaired, is combined to determine the Company's overall allowance, which is included on the consolidated balance sheet.

The Company assigns a risk rating to all loans & leases and periodically performs detailed reviews of all such loans & leases over a certain threshold to identify credit risks and assess overall collectability. For smaller balance loans & leases, such as consumer and residential real estate, a credit grade is established at inception, and then updated only when the loan or lease becomes contractually delinquent or when the borrower requests a modification. For larger balance loans, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which borrowers operate and the fair values of collateral securing these loans & leases. These credit quality indicators are used to assign a risk rating to each individual loan or lease. These risk ratings are also subject to examination by independent specialists engaged by the Company. The risk ratings can be grouped into five major categories, defined as follows:

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Pass – A pass loan or lease is a strong credit with no existing or known potential weaknesses deserving of management's close attention.

Special Mention – A special mention loan or lease has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or lease position at some future date. Special mention loans & leases are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Substandard – A substandard loan or lease is not adequately protected by the current financial condition and paying capacity of the borrower or the value of the collateral pledged, if any. Loans or leases classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Well-defined weaknesses include a project's lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time or the project's failure to fulfill economic expectations. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans or leases classified doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, based on currently known facts, conditions and values, highly questionable or improbable.

Loss – Loans or leases classified as loss are considered uncollectible. Once a loan or lease becomes delinquent and repayment becomes questionable, the Company will address collateral shortfalls with the borrower and attempt to obtain additional collateral. If this is not forthcoming and payment in full is unlikely, the Bank will estimate its probable loss and immediately charge-off some or all of the balance.

The general reserve component of the allowance for credit losses also consists of reserve factors that are based on management's assessment of the following for each portfolio segment: (1) inherent credit risk; (2) historical losses; and (3) other qualitative factors. These reserve factors are inherently subjective and are driven by the repayment risk associated with each portfolio segment described below:

Commercial Real Estate – Commercial real estate mortgage loans are generally considered to possess a higher inherent risk of loss than the Company’s commercial, agricultural and consumer loan types. Adverse economic developments or an overbuilt market impact commercial real estate projects and may result in troubled loans. Trends in vacancy rates of commercial properties impact the credit quality of these loans. High vacancy rates reduce operating revenues and the ability for properties to produce sufficient cash flow to service debt obligations.

Real Estate Construction – Real estate construction loans, including land loans, are generally considered to possess a higher inherent risk of loss than the Company’s commercial, agricultural and consumer loan types. A major risk arises from the necessity to complete projects within specified cost and time lines. Trends in the construction industry significantly impact the credit quality of these loans, as demand drives construction activity. In addition, trends in real estate values significantly impact the credit quality of these loans, as property values determine the economic viability of construction projects.

Commercial – These loans are generally considered to possess a moderate inherent risk of loss because they are shorter-term; typically made to relationship customers; generally underwritten to existing cash flows of operating businesses; and may be collateralized by fixed assets, inventory and/or accounts receivable. Debt coverage is provided by business cash flows and economic trends influenced by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans.

Agricultural Real Estate and Agricultural – These loans are generally considered to possess a moderate inherent risk of loss since they are typically made to relationship customers and are secured by crop production, livestock and related real estate.  These loans are vulnerable to two risk factors that are largely outside the control of Company and borrowers: commodity prices and weather conditions.

Leases – Equipment leases are generally considered to possess a moderate inherent risk of loss. As Lessor, the company is subject to both the credit risk of the borrower and the residual value risk of the equipment. Credit risks are underwritten using the same credit criteria the Company would use when making an equipment term loan. Residual value risk is managed through the use of qualified, independent appraisers that establish the residual values the Company uses in structuring a lease.

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Residential 1st Mortgages and Home Equity Lines and Loans – These loans are generally considered to possess a low inherent risk of loss, although this is not always true as evidenced by the weakness in residential real estate values over the past five years. The degree of risk in residential real estate lending depends primarily on the loan amount in relation to collateral value, the interest rate and the borrower's ability to repay in an orderly fashion.  Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate that the borrowers' capacity to repay their obligations may be deteriorating.

Consumer & Other – A consumer installment loan portfolio is usually comprised of a large number of small loans scheduled to be amortized over a specific period. Most installment loans are made for consumer purchases. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate that the borrowers' capacity to repay their obligations may be deteriorating.

Provision for Credit Losses

Changes in the provision for credit losses between years are the result of management’s evaluation, based upon information currently available, of the adequacy of the allowance for credit losses relative to factors such as the credit quality of the loan & lease portfolio, loan & lease growth, current credit losses, and the prevailing economic climate and its effect on borrowers’ ability to repay loans & leases in accordance with the terms of the notes.

The Central Valley of California was one of the hardest hit areas in the country during the recession. In many areas, housing prices declined as much as 60% and unemployment reached 15% or more. Although the economy has stabilized throughout most of the Central Valley, housing prices for the most part have not recovered significantly and unemployment levels remain well above those in other areas of the state and country. While, in management’s opinion, the Company’s levels of net charge-offs and non-performing assets as of March 31, 2016, compare very favorably to our peers at the present time, carefully managing credit risk remains a key focus of the Company.

The state of California has experienced drought conditions since 2013. These conditions did not have a material impact on the Company’s credit quality during the 2015 growing season. Although rain and snow levels in early 2016 increased significantly relative to prior years, they were not sufficient to completely relieve the drought conditions that had built up over the prior three years. Accordingly, management believes that current conditions will continue to have an adverse impact on some of the Company’s agricultural customers’ operating costs in 2016, but at the current time we cannot tell what the ultimate impact will be on 2016 crop yields and crop quality. The longer the drought continues, the more significant is its impact, particularly if ground water levels begin to significantly deteriorate or riparian rights are curtailed.

The Company made a $2.6 million provision for credit losses during the first quarter of 2016 compared to $600,000 during the first quarter of 2015. Net recoveries during the first quarter of 2016 were $6,000 compared to net recoveries of $2.9 million in the first quarter of 2015. During the first quarter of 2015 the Company was able to fully recover the entire $2.9 million that was charged-off during 2010 on a restructured commercial real estate loan.  In addition to the full recovery of the charged off principal, this transaction also resulted in the recovery of $353,000 in interest income and the client’s payment of a financing fee of $1.1 million.  See “Overview – Looking Forward: 2016 and Beyond”, “Critical Accounting Policies and Estimates – Allowance for Credit Losses” and “Item 7A. Quantitative and Qualitative Disclosures About Market Risk-Credit Risk” located in the Company’s 2015 Annual Report on Form 10-K.

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After reviewing all factors above, based upon information currently available, management concluded that the allowance for credit losses as of March 31, 2016, was adequate.

	Three Months Ended March 31,
Allowance for Credit Losses (in thousands)	2016			2015
Balance at Beginning of Period	$	41,523		$	35,401
Loans or Leases Charged Off		(44	)		(29	)
Recoveries of Loans or Leases Previously Charged Off		50			2,968
Provision Charged to Expense		2,600			600
Balance at End of Period	$	44,129		$	38,940

The table below breaks out current quarter activity by portfolio segment (in thousands):

March 31, 2016	Commercial Real Estate		Agricultural Real Estate		Real Estate Construction		Residential 1st Mortgages		Home Equity Lines & Loans			Agricultural			Commercial			Consumer & Other			Leases			Unallocated		Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2016	$	10,063	$	6,881	$	2,485	$	789	$	2,146		$	6,308		$	7,836		$	175		$	3,294		$	1,546	$	41,523
Charge-Offs		-		-		-		-		(19	)		-			-			(25	)		-			-		(44	)
Recoveries		2		-		-		6		2			-			27			13			-			-		50
Provision		34		2,281		109		1		(65	)		(404	)		(138	)		24			(55	)		813		2,600
Ending Balance- March 31, 2016	$	10,099	$	9,162	$	2,594	$	796	$	2,064		$	5,904		$	7,725		$	187		$	3,239		$	2,359	$	44,129

The Allowance for Credit Losses at March 31, 2016 increased $2.6 million from December 31, 2015. The allowance allocated to the following portfolio segments changed materially during the quarter:

· Agricultural Real Estate allowance balances increased $2.3 million primarily due to increased qualitative factors in the Company’s allowance calculation related to: (1) the longer-term impact of continuing drought conditions in California; and (2) declines in prices for certain commodities that will impact agricultural real estate prices as cash flow is reduced.

· Unallocated allowance balances increased $813,000.  These balances are generally associated with macro risk factors which are difficult to precisely estimate and allocate.  Factors that we considered during this quarter include: (1) the continuing sluggish economy in our primary service area; (2) increasing concerns regarding the level of future growth in the U.S. economy in general; (3) the long term impact of drought conditions on a broader group of borrowers than just those directly involved in the agricultural industry; and (4) the long term impact of political changes on water policy.

See “Management’s Discussion and Analysis - Financial Condition – Classified Loans & Leases and Non-Performing Assets” for further discussion regarding these loan categories.

See “Note 3. Allowance for Credit Losses” for additional details regarding the provision and allowance for credit losses.

Non-Interest Income

Non-interest income includes: (1) service charges and fees from deposit accounts; (2) net gains and losses from investment securities; (3) increases in the cash surrender value of bank owned life insurance; (4) debit card and ATM fees; (5) net gains and losses on non-qualified deferred compensation plans; and (6) fees from other miscellaneous business services.

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Overall, non-interest income decreased $1.9 million or 41.7% for the three months ended March 31, 2016, compared to the same period of 2015. This decrease was primarily due to: (1) a $290,000 decrease in the net gain on the sale of investment securities; (2) a $474,000 decrease in the net gain on deferred compensation investments; and (3) a $1.1 million non-recurring financing fee related to the full recovery of a loan previously charged off that took place in the first quarter of 2015. (see “Provision for Credit Losses”).

Balances in non-qualified deferred compensation plans may be invested in financial instruments whose market value fluctuates based upon trends in interest rates and stock prices. Although Generally Accepted Accounting Principles require these investment gains/losses be recorded in non-interest income, an offsetting entry is also required to be made to non-interest expense resulting in no effect on the Company’s net income.

Non-Interest Expense

Non-interest expense for the Company includes expenses for: (1) salaries and employee benefits; (2) net gains and losses on non-qualified deferred compensation plan investments; (3) occupancy; (4) equipment; (5) supplies; (6) legal fees; (7) professional services; (8) data processing; (9) marketing; (10) deposit insurance; (11) ORE carrying costs and gains/losses on sale; and (12) other miscellaneous expenses.

Overall, non-interest expense decreased $2.2 million or 15.5% for the three months ended March 31, 2016, compared to the same period in 2015. This decrease was primarily comprised of: (1) a $5.7 million gain on the sale of ORE property; and (2) a $474,000 decrease in the net gain on deferred compensation investments. These decreases were partially offset by: (1) a $1.6 million increase in salaries and employee benefits primarily related to: (a) new staff added for the branches in Walnut Creek and Concord and the Company’s leasing activities; (b) increased contributions to retirement and profit sharing plans; and (c) bank wide raises that occurred in mid-2015; (2) a $390,000 increase in occupancy, equipment and marketing expenses related to branch expansion and remodeling, ATM upgrades, introduction of a new logo and celebration of the Bank’s 100^th anniversary; (3) a $738,000 increase in legal, consulting and other professional services related to management’s assessment of the Company’s future corporate structure, branding and overall strategic direction; (4) a $327,000 increase in amortization expense related to an increase in CRA qualifying low income housing tax credit investments (See “Income Taxes” for the offsetting credits related to these investments); (5) a $206,000 increase in recruiting and training expense related to the addition of new staff as the Company expands its geographic footprint and business activities; and (6) a $100,000 increase in the provision for unused commitments.

Balances in non-qualified deferred compensation plans may be invested in financial instruments whose market value fluctuates based upon trends in interest rates and stock prices. Although Generally Accepted Accounting Principles require these investment gains/losses be recorded in non-interest income, an offsetting entry is also required to be made to non-interest expense resulting in no effect on the Company’s net income.

Income Taxes

The provision for income taxes increased 2.3% to $4.0 million for the first quarter of 2016 compared to the first quarter of 2015. The effective tax rate for the first quarter of 2016 was 36.0% compared to 38.1% for the first quarter of 2015. The Company’s effective tax rate fluctuates from quarter to quarter due primarily to changes in the mix of taxable and tax-exempt earning sources. The effective rates were lower than the statutory rate of 42% due primarily to benefits regarding the cash surrender value of life insurance; credits associated with low income housing tax credit investments (LIHTC); and tax-exempt interest income on municipal securities and loans.

Current tax law causes the Company’s current taxes payable to approximate or exceed the current provision for taxes on the income statement. Three provisions have had a significant effect on the Company’s current income tax liability: (1) the restrictions on the deductibility of credit losses; (2) deductibility of retirement and other long-term employee benefits only when paid; and (3) the statutory deferral of deductibility of California franchise taxes on the Company’s federal return.

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Financial Condition

This section discusses material changes in the Company’s balance sheet at March 31, 2016, as compared to December 31, 2015 and to March 31, 2015. As previously discussed (see “Overview”) the Company’s financial condition can be influenced by the seasonal banking needs of its agricultural customers.

Investment Securities and Federal Funds Sold

The investment portfolio provides the Company with an income alternative to loans & leases. The debt securities in the Company’s investment portfolio have historically been comprised primarily of: (1) mortgage-backed securities issued by federal government-sponsored entities; (2) debt securities issued by US Treasury, government agencies and government-sponsored entities; and (3) investment grade bank-qualified municipal bonds. However, at certain times, the Company has selectively added investment grade corporate securities (floating rate and fixed rate with maturities less than 5 years) to the portfolio in order to obtain yields that exceed government agency securities of equivalent maturity without subjecting the Company to the interest rate risk associated with mortgage-backed securities.

The Company’s investment portfolio at March 31, 2016 was $403.3 million compared to $430.5 million at the end of 2015, a decrease of $27.2 million or 6.3%. At March 31, 2015, the investment portfolio totaled $428.6 million. To protect against future increases in market interest rates, while at the same time generating some reasonable level of current yields, the Company currently invests most of its available funds in either shorter term corporate, US Treasury, government agency & government-sponsored entity securities or shorter term (10, 15, and 20 year) mortgage-backed securities.

The Company's total investment portfolio currently represents 15.6% of the Company’s total assets as compared to 16.5% at December 31, 2015, and 17.8% at March 31, 2015.

As of March 31, 2016 the Company held $61.5 million of municipal investments, of which $43.2 million were bank-qualified municipal bonds, all classified as HTM. In order to comply with Section 939A of the Dodd-Frank Act, the Company: (1) only invests in bonds rated AA or better; and (2) performs its own credit analysis on new purchases of municipal bonds. As of March 31, 2016, ninety-eight percent of the Company’s bank-qualified municipal bond portfolio is rated at either the issue or issuer level, and all of these ratings are “investment grade.” The Company monitors the status of all municipal investments with particular attention paid to the approximately two percent ($539,000) of the portfolio that is not rated, and at the current time does not believe any of them to be exhibiting financial problems that could result in a loss in any individual security.

Not included in the investment portfolio are interest bearing deposits with banks and overnight investments in Federal Funds Sold. Interest bearing deposits with banks consisted of FRB deposits. The FRB currently pays interest on the deposits that banks maintain in their FRB accounts, whereas historically banks had to sell these Federal Funds to other banks in order to earn interest. Since balances at the FRB are effectively risk free, the Company elected to maintain its excess cash at the FRB. Interest bearing deposits with banks totaled $32.1 million at March 31, 2016, $9.5 million at December 31, 2015 and $110.2 million at March 31, 2015.

The Company classifies its investments as HTM, trading, or AFS. Securities are classified as HTM and are carried at amortized cost when the Company has the intent and ability to hold the securities to maturity. Trading securities are securities acquired for short-term appreciation and are carried at fair value, with unrealized gains and losses recorded in non-interest income. As of March 31, 2016, December 31, 2015 and March 31, 2015, there were no securities in the trading portfolio. Securities classified as AFS include securities, which may be sold to effectively manage interest rate risk exposure, prepayment risk, satisfy liquidity demands and other factors. These securities are reported at fair value with aggregate, unrealized gains or losses excluded from income and included as a separate component of shareholders’ equity, net of related income taxes.

Loans & Leases

Loans & leases can be categorized by borrowing purpose and use of funds. Common examples of loans & leases made by the Company include:

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Commercial and Agricultural Real Estate - These are loans secured by farmland, commercial real estate, multifamily residential properties, and other non-farm, non-residential properties generally within our market area. Commercial mortgage term loans can be made if the property is either income producing or scheduled to become income producing based upon acceptable pre-leasing, and the income will be the Bank's primary source of repayment for the loan. Loans are made both on owner occupied and investor properties; generally do not exceed 10 years (and may have pricing adjustments on a shorter timeframe); have debt service coverage ratios of 1.00 or better with a target of greater than 1.25; and fixed rates that are most often tied to treasury indices with an appropriate spread based on the amount of perceived risk in the loan.

Real Estate Construction - These are loans for development and construction (the Company generally requires the borrower to fund the land acquisition) and are secured by commercial or residential real estate. These loans are generally made only to experienced local developers with whom the Bank has a successful track record; for projects in our service area; with Loan To Value (LTV) below 75%; and where the property can be developed and sold within 2 years. Commercial construction loans are made only when there is a written take-out commitment from the Bank or an acceptable financial institution or government agency. Most acquisition, development and construction loans are tied to the prime rate or LIBOR with an appropriate spread based on the amount of perceived risk in the loan.

Residential 1^st Mortgages - These are loans primarily made on owner occupied residences; generally underwritten to income and LTV guidelines similar to those used by FNMA and FHLMC; however, we will make loans on rural residential properties up to 40 acres. Most residential loans have terms from ten to twenty years and carry fixed rates priced off of treasury rates. The Company has always underwritten mortgage loans based upon traditional underwriting criteria and does not make loans that are known in the industry as “subprime,” “no or low doc,” or “stated income.”

Home Equity Lines and Loans - These are loans made to individuals for home improvements and other personal needs. Generally, amounts do not exceed $250,000; Combined Loan To Value (CLTV) does not exceed 80%; FICO scores are at or above 670; Total Debt Ratios do not exceed 43%; and in some situations the Company is in a 1^st lien position.

Agricultural - These are loans and lines of credit made to farmers to finance agricultural production. Lines of credit are extended to finance the seasonal needs of farmers during peak growing periods; are usually established for periods no longer than 12 to 36 months; are often secured by general filing liens on livestock, crops, crop proceeds and equipment; and are most often tied to the prime rate with an appropriate spread based on the amount of perceived risk in the loan. Term loans are primarily made for the financing of equipment, expansion or modernization of a processing plant, or orchard/vineyard development; have maturities from five to seven years; and fixed rates that are most often tied to treasury indices with an appropriate spread based on the amount of perceived risk in the loan.

Commercial - These are loans and lines of credit to businesses that are sole proprietorships, partnerships, LLC’s and corporations. Lines of credit are extended to finance the seasonal working capital needs of customers during peak business periods; are usually established for periods no longer than 12 to 24 months; are often secured by general filing liens on accounts receivable, inventory and equipment; and are most often tied to the prime rate with an appropriate spread based on the amount of perceived risk in the loan. Term loans are primarily made for the financing of equipment, expansion or modernization of a plant or purchase of a business; have maturities from five to seven years; and fixed rates that are most often tied to treasury indices with an appropriate spread based on the amount of perceived risk in the loan.

Consumer - These are loans to individuals for personal use, and primarily include loans to purchase automobiles or recreational vehicles, and unsecured lines of credit. The Company has a very minimal consumer loan portfolio, and loans are primarily made as an accommodation to deposit customers.

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Leases –These are leases to businesses or individuals, for the purpose of financing the acquisition of equipment. They can be either “finance leases” where the lessee retains the tax benefits of ownership but obtains 100% financing on their equipment purchases; or “true tax leases” where the Company, as lessor, places reliance on equipment residual value and in doing so obtains the tax benefits of ownership. Leases typically have a maturity of three to ten years, and fixed rates that are most often tied to treasury indices with an appropriate spread based on the amount of perceived risk. Credit risks are underwritten using the same credit criteria the Company would use when making an equipment term loan. Residual value risk is managed through the use of qualified, independent appraisers that establish the residual values the Company uses in structuring a lease.

The Company accounts for leases with Investment Tax Credits (ITC) under the deferred method as established in ASC 740-10. ITC are viewed and accounted for as a reduction of the cost of the related assets and presented as deferred income on the Company’s financial statement.

See “Item 3. Quantitative and Qualitative Disclosures About Market Risk-Credit Risk” for a discussion about the credit risks the Company assumes and its overall credit risk management practices.

Each loan or lease type involves risks specific to the: (1) borrower; (2) collateral; and (3) loan & lease structure. See “Results of Operations - Provision and Allowance for Credit Losses” for a more detailed discussion of risks by loan & lease type. The Company’s current underwriting policies and standards are designed to mitigate the risks involved in each loan & lease type. The Company’s policies require that loans & leases are approved only to those borrowers exhibiting a clear source of repayment and the ability to service existing and proposed debt. The Company’s underwriting procedures for all loan & lease types require careful consideration of the borrower, the borrower’s financial condition, the borrower’s management capability, the borrower’s industry, and the economic environment affecting the loan or lease.

Most loans & leases made by the Company are secured, but collateral is the secondary or tertiary source of repayment; cash flow is our primary source of repayment. The quality and liquidity of collateral are important and must be confirmed before the loan is made.

In order to be responsive to borrower needs, the Company prices loans & leases: (1) on both a fixed rate and adjustable rate basis; (2) over different terms; and (3) based upon different rate indices; as long as these structures are consistent with the Company’s interest rate risk management policies and procedures (see Item 3. Quantitative and Qualitative Disclosures About Market Risk-Interest Rate Risk).

Overall, the Company's loan & lease portfolio at March 31, 2016 totaled $2.0 billion, an increase of $287.8 million or 16.9% over March 31, 2015. This increase has occurred despite the continuing sluggish economic conditions in the Central Valley of California and is a result of: (1) the Company’s intensified business development efforts directed toward credit-qualified borrowers; (2) entry into the equipment leasing business; and (3) expansion of our service area into Walnut Creek and Concord. No assurances can be made that this growth in the loan & lease portfolio will continue.

Loans & leases at March 31, 2016 decreased $3.3 million from December 31, 2015. This small overall decrease was a result of $40.3 million in normal seasonal pay downs of loans made to the Company’s agricultural customers offset by growth in other portfolio segments.

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The following table sets forth the distribution of the loan & lease portfolio by type and percent as of the periods indicated.

Loan & Lease Portfolio	March 31, 2016				December 31, 2015				March 31, 2015
(in thousands)	$		%		$		%		$		%
Commercial Real Estate	$	617,148	30.9	%	$	609,602	30.4	%	$	534,134	31.2	%
Agricultural Real Estate		432,281	21.6	%		424,034	21.2	%		351,866	20.6	%
Real Estate Construction		166,455	8.3	%		151,974	7.6	%		101,616	5.9	%
Residential 1st Mortgages		212,205	10.6	%		206,405	10.3	%		182,431	10.7	%
Home Equity Lines and Loans		31,639	1.6	%		33,056	1.7	%		31,724	1.9	%
Agricultural		253,655	12.7	%		293,966	14.7	%		216,231	12.7	%
Commercial		213,479	10.7	%		210,804	10.5	%		236,141	13.8	%
Consumer & Other		7,066	0.4	%		6,592	0.3	%		4,915	0.3	%
Leases		63,979	3.2	%		65,054	3.3	%		49,988	2.9	%
Total Gross Loans & Leases		1,997,907	100.0	%		2,001,487	100.0	%		1,709,046	100.0	%
Less: Unearned Income		4,836				5,128				3,726
Subtotal		1,993,071				1,996,359				1,705,320
Less: Allowance for Credit Losses		44,129				41,523				38,940
Net Loans & Leases	$	1,948,942			$	1,954,836			$	1,666,380

Classified Loans & Leases and Non-Performing Assets

All loans & leases are assigned a credit risk grade using grading standards developed by bank regulatory agencies. See “Results of Operations - Provision and Allowance for Credit Losses” for more detail on risk grades. The Company utilizes the services of a third-party independent loan review firm to perform evaluations of individual loans & leases and review the credit risk grades the Company places on loans & leases. Loans & leases that are judged to exhibit a higher risk profile are referred to as “classified loans & leases,” and these loans & leases receive increased management attention. As of March 31, 2016, classified loans totaled $6.3 million compared to $6.1 million at December 31, 2015 and $5.7 million at March 31, 2015.

Classified loans & leases with higher levels of credit risk can be further designated as “impaired” loans & leases. A loan or lease is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the original agreement. See “Results of Operations - Provision and Allowance for Credit Losses” for further details. Impaired loans & leases consist of: (1) non-accrual loans & leases; and/or (2) restructured loans & leases that are still performing (i.e., accruing interest).

Non-Accrual Loans & leases - Accrual of interest on loans & leases is generally discontinued when a loan or lease becomes contractually past due by 90 days or more with respect to interest or principal. When loans & leases are 90 days past due, but in management's judgment are well secured and in the process of collection, they may not be classified as non-accrual. When a loan or lease is placed on non-accrual status, all interest previously accrued but not collected is reversed. Income on such loans & leases is then recognized only to the extent that cash is received and where the future collection of principal is probable. As of March 31, 2016 non-accrual loans & leases totaled $2.3 million. At December 31, 2015 and March 31, 2015, non-accrual loans & leases totaled $2.2 million and $2.4 million, respectively.

Restructured Loans & Leases - A restructuring of a loan or lease constitutes a TDR under ASC 310-40, if the Company for economic or legal reasons related to the debtor's financial difficulties grants a concession to the debtor that it would not otherwise consider. Restructured loans or leases typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms. If the restructured loan or lease was current on all payments at the time of restructure and management reasonably expects the borrower will continue to perform after the restructure, management may keep the loan or lease on accrual. Loans & leases that are on nonaccrual status at the time they become TDR loans, remain on nonaccrual status until the borrower demonstrates a sustained period of performance, which the Company generally believes to be six consecutive months of payments, or equivalent. A loan or lease can be removed from TDR status if it was restructured at a market rate in a prior calendar year and is currently in compliance with its modified terms. However, these loans or leases continue to be classified as impaired and are individually evaluated for impairment.

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As of March 31, 2016, restructured loans & leases on accrual totaled $4.8 million as compared to $5.0 million at December 31, 2015. Restructured loans on accrual at March 31, 2015 were $4.9 million.

Other Real Estate - Loans where the collateral has been repossessed are classified as other real estate ("ORE") or, if the collateral is personal property, the loan is classified as other assets on the Company's financial statements.

The following table sets forth the amount of the Company's non-performing loans & leases (defined as non-accrual loans & leases plus accruing loans & leases past due 90 days or more) and ORE as of the dates indicated.

Non-Performing Assets

(in thousands)	March 31, 2016			Dec. 31, 2015			March 31, 2015
Non-Performing Loans & Leases	$	2,297		$	2,156		$	2,391
Other Real Estate		585			2,441			3,299
Total Non-Performing Assets	$	2,882		$	4,597		$	5,690
Non-Performing Loans & Leases as a % of Total Loans & Leases		0.11	%		0.11	%		0.14	%
Restructured Loans & Leases (Performing)	$	4,799		$	4,953		$	4,865

Although management believes that non-performing loans & leases are generally well-secured and that potential losses are provided for in the Company’s allowance for credit losses, there can be no assurance that future deterioration in economic conditions and/or collateral values will not result in future credit losses. Specific reserves of $661,000, $782,000, and $933,000 have been established for non-performing loans & leases at March 31, 2016, December 31, 2015 and March 31, 2015, respectively.

Foregone interest income on non-accrual loans & leases which would have been recognized during the period, if all such loans & leases had been current in accordance with their original terms, totaled $27,000 for the three months ended March 31, 2016, $109,000 for the year ended December 31, 2015, and $24,000 for the three months ended March 31, 2015.

The Company reported $585,000 of ORE at March 31, 2016, $2.4 million at December 31, 2015, and $3.3 million at March 31, 2015. The March 31, 2016 value is net of a $1.0 million reserve for ORE valuation allowance. The December 31, 2015 and March 31, 2015 values are both net of a $3.7 million reserve for ORE valuation allowance.

Except for those classified and non-performing loans & leases discussed above, the Company’s management is not aware of any loans & leases as of March 31, 2016, for which known financial problems of the borrower would cause serious doubts as to the ability of these borrowers to materially comply with their present loan or lease repayment terms, or any known events that would result in the loan or lease being designated as non-performing at some future date. However:

· The Central Valley was one of the hardest hit areas in the country during the recession. In many areas, housing prices declined as much as 60% and unemployment reached 15% or more. Although the economy has stabilized throughout most of the Central Valley, housing prices for the most part have not fully recovered and unemployment levels remain above those in other areas of the state and country.

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· The state of California has experienced drought conditions since 2013. These conditions did not have a material impact on the Company’s credit quality during the 2015 growing season. Although rain and snow levels in early 2016 increased significantly relative to prior years, they were not sufficient to completely relieve the drought conditions that had built up over the prior three years. Accordingly, management believes that current conditions will continue to have an adverse impact on some of the Company’s agricultural customers’ operating costs in 2016, but at the current time we cannot tell what the ultimate impact will be on 2016 crop yields and crop quality. The longer the drought continues, the more significant is its impact, particularly if ground water levels begin to significantly deteriorate or riparian rights are curtailed.

See “Part I, Item 1A. Risk Factors” in the Company’s 2015 Annual Report on Form 10-K.

Deposits

One of the key sources of funds to support earning assets is the generation of deposits from the Company’s customer base. The ability to grow the customer base and subsequently deposits is a significant element in the performance of the Company.

The Company's deposit balances at March 31, 2016 have increased $144.7 million or 6.9% compared to March 31, 2015. In addition to the Company’s ongoing business development activities for deposits, the following factors positively impacted year-over-year deposit growth: (1) the Federal government’s decision to permanently increase FDIC deposit insurance limits from $100,000 to $250,000 per depositor; and (2) the Company’s strong financial results and position and F&M Bank’s reputation as one of the most safe and sound banks in its market territory. The Company expects that, at some point, deposit customers may begin to diversify how they invest their money (e.g., move funds back into the stock market or other investments) and this could impact future deposit growth.

Although total deposits have increased 6.9% since March 31, 2015, importantly, low cost transaction accounts have continued to grow at a strong pace:

· Demand and interest-bearing transaction accounts increased $127.6 million or 13.9% since March 31, 2015.

· Savings and money market accounts have increased $26.5 million or 3.8% since March 31, 2015.

· Time deposit accounts have decreased $9.5 million or 1.9% since March 31, 2015.

The Company's deposit balances at March 31, 2016 have decreased $21.1 million or 0.9% compared to December 31, 2015. Savings and money market deposits increased 2.5% or $17.9 million while demand and interest-bearing transaction accounts decreased by $42.1 million or 3.9% and time deposit accounts increased by $3.1 million or 0.6%. Deposit trends in the first half of the year can be impacted by the seasonal needs of our agricultural customers.

Federal Home Loan Bank Advances and Federal Reserve Bank Borrowings

Lines of credit with the Federal Reserve Bank and the Federal Home Loan Bank are other key sources of funds to support earning assets. These sources of funds are also used to manage the Company’s interest rate risk exposure, and as opportunities arise, to borrow and invest the proceeds at a positive spread through the investment portfolio. There were no FHLB Advances at March 31, 2016, December 31, 2015, or March 31, 2015. There were no Federal Funds purchased or advances from the FRB at March 31, 2016, December 31, 2015 or March 31, 2015.

As of March 31, 2016 the Company has additional borrowing capacity of $357.8 million with the Federal Home Loan Bank and $332.5 million with the Federal Reserve Bank. Any borrowings under these lines would be collateralized with loans that have been accepted for pledging at the FHLB and FRB.

Long-Term Subordinated Debentures

On December 17, 2003, the Company raised $10 million through an offering of trust-preferred securities (“TPS”). See Note 13 located in “Item 8. Financial Statements and Supplementary Data” of the Company’s 2015 Annual Report on Form 10-K. Although this amount is reflected as subordinated debt on the Company’s balance sheet, under current regulatory guidelines, our TPS will continue to qualify as regulatory capital (See “Capital”). These securities accrue interest at a variable rate based upon 3-month LIBOR plus 2.85%. Interest rates reset quarterly and were 3.49% as of March 31, 2016, 3.38% at December 31, 2015 and 3.12% at March 31, 2015. The average rate paid for these securities for the first quarter of 2016 was 3.43% and 3.10% for the first quarter of 2015. Additionally, if the Company decided to defer interest on the subordinated debentures, the Company would be prohibited from paying cash dividends on the Company’s common stock.

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Capital

The Company relies primarily on capital generated through the retention of earnings to satisfy its capital requirements. The Company engages in an ongoing assessment of its capital needs in order to support business growth and to insure depositor protection. Shareholders’ Equity totaled $262.4 million at March 31, 2016, $251.8 million at December 31, 2015, and $241.3 million at March 31, 2015.

The Company and the Bank are subject to various federal regulatory capital requirements under the Basel III Capital Rules. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company and the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company and the Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The implementation of Basel III requirements will increase the required capital levels that the Company and the Bank must maintain. The final rules include new minimum risk-based capital and leverage ratios, which would be phased in over time. The new minimum capital level requirements applicable to the Company and the Bank under the final rules will be: (i) a common equity Tier 1 capital ratio of 4.5% of risk-weighted assets (“RWA”); (ii) a Tier 1 capital ratio of 6% of RWA; (iii) a total capital ratio of 8% of RWA; and (iv) a Tier 1 leverage ratio of 4% of total assets. The final rules also establish a "capital conservation buffer" of 2.5% above each of the new regulatory minimum capital ratios, which would result in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0% of RWA; (ii) a Tier 1 capital ratio of 8.5% of RWA; and (iii) a total capital ratio of 10.5% of RWA. An institution will be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. The final rules also permit the Company’s subordinated debentures issued in 2003 to continue to be counted as Tier 1 capital.

The final rules became effective as applied to the Company and the Bank on January 1, 2015, with a phase in period through January 1, 2019.  The Company believes that it is currently in compliance with all of these new capital requirements (as fully phased-in) and that they will not result in any restrictions on the Company’s business activity.

In addition, the most recent notification from the FDIC categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following tables. There are no conditions or events since that notification that management believes have changed the Bank’s category.

(in thousands)	Actual					Current Regulatory Capital Requirements					Well Capitalized Under Prompt Corrective Action
The Company:	Amount		Ratio			Amount		Ratio			Amount			Ratio
As of March 31, 2016
Total Capital Ratio	$	298,924		12.67	%	$	188,726		8.0	%		N/	A		N/	A
Common Equity Tier 1 Capital Ratio	$	259,252		10.99	%	$	106,159		4.5	%		N/	A		N/	A
Tier 1 Capital Ratio	$	269,252		11.41	%	$	141,545		6.0	%		N/	A		N/	A
Tier 1 Leverage Ratio	$	269,252		10.43	%	$	103,286		4.0	%		N/	A		N/	A

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(in thousands)	Actual					Current Regulatory Capital Requirements					Well Capitalized Under Prompt Corrective Action
The Bank:	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of March 31, 2016
Total Capital Ratio	$	298,853		12.67	%	$	188,697		8.0	%	$	235,871		10.0	%
Common Equity Tier 1 Capital Ratio	$	269,185		11.41	%	$	106,142		4.5	%	$	153,316		6.5	%
Tier 1 Capital Ratio	$	269,185		11.41	%	$	141,523		6.0	%	$	188,697		8.0	%
Tier 1 Leverage Ratio	$	269,185		10.43	%	$	103,258		4.0	%	$	129,072		5.0	%

As previously discussed (see “Long-Term Subordinated Debentures”), in order to supplement its regulatory capital base, during December 2003 the Company issued $10 million of trust preferred securities. On March 1, 2005, the Federal Reserve Board issued its final rule effective April 11, 2005, concerning the regulatory capital treatment of trust preferred securities (“TPS”) by bank holding companies (“BHCs”). Under the final rule BHCs may include TPS in Tier 1 capital in an amount equal to 25% of the sum of core capital net of goodwill. Any portion of trust-preferred securities not qualifying as Tier 1 capital would qualify as Tier 2 capital subject to certain limitations. The Company has received notification from the Federal Reserve Bank of San Francisco that all of the Company’s trust preferred securities currently qualify as Tier 1 capital.

The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability.

In 1998, the Board approved the Company’s first common stock repurchase program. This program has been extended and expanded several times since then, and most recently, on August 11, 2015, the Board of Directors approved an extension of the $20 million stock repurchase program over the three-year period ending September 30, 2018. See “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of the Company’s 2015 Annual Report on Form 10-K for additional information.

There were no stock repurchases during the first quarter of 2016 or 2015. The remaining dollar value of shares that may yet be purchased under the Company’s Common Stock Repurchase Plan is approximately $20 million.

On August 5, 2008, the Board of Directors approved a Share Purchase Rights Plan (the “Rights Plan”), pursuant to which the Company entered into a Rights Agreement dated August 5, 2008, with Computershare (formerly Registrar and Transfer Company), as Rights Agent. The Rights Plan was set to expire on August 5, 2018.  On November 19, 2015, the Board of Directors approved a seven-year extension of the term of the Rights Plan.  Pursuant to an Amendment to the Rights Agreement dated February 18, 2016, the term of the Rights Plan was extended from August 5, 2018 to August 5, 2025.  The extension of the term of the Rights Plan was intended as a means to continue to guard against abusive takeover tactics and was not in response to any particular proposal. See “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of the Company’s 2015 Annual Report on Form 10-K for further explanation.

On January 28, 2016, the Company issued 1,600 shares of common stock to the Bank’s non-qualified defined contribution retirement plans. These shares were issued at a price of $525 per share based upon a valuation completed by a nationally recognized bank consulting and advisory firm and in reliance upon the exemption in Section 4(2) of the Securities Act of 1933, as amended, and the regulations promulgated thereunder. The proceeds from this issuance was contributed to the Bank as equity capital.

Critical Accounting Policies and Estimates

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” is based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. In preparing the Company’s financial statements management makes estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. These judgments govern areas such as the allowance for credit losses, the fair value of financial instruments and accounting for income taxes.

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For a full discussion of the Company’s critical accounting policies and estimates see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2015 Annual Report on Form 10-K.

Off Balance Sheet Commitments

In the normal course of business the Company enters into financial instruments with off balance sheet risks in order to meet the financing needs of its customers. These financial instruments consist of commitments to extend credit, letters of credit and other types of financial guarantees. The Company had the following off balance sheet commitments as of the dates indicated.

(in thousands)	March 31, 2016		December 31, 2015		March 31, 2015
Commitments to Extend Credit	$	672,368	$	708,122	$	604,429
Letters of Credit		14,092		14,745		9,841
Performance Guarantees Under Interest Rate Swap Contracts Entered Into Between Our Borrowing Customers and Third Parties		4,893		2,758		3,288

The Company's exposure to credit loss in the event of nonperformance by the other party with regard to standby letters of credit, undisbursed loan commitments, and financial guarantees is represented by the contractual notional amount of those instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. The Company uses the same credit policies in making commitments and conditional obligations as it does for recorded balance sheet items. The Company may or may not require collateral or other security to support financial instruments with credit risk. Evaluations of each customer's creditworthiness are performed on a case-by-case basis.

Standby letters of credit are conditional commitments issued by the Company to guarantee performance of or payment for a customer to a third party. Most standby letters of credit are issued for 12 months or less. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Additionally, the Company maintains a reserve for off balance sheet commitments which totaled $267,000 at March 31, 2016, $167,000 at December 31, 2015, and $142,000 at March 31, 2015. We do not anticipate any material losses as a result of these transactions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Risk Management

The Company has adopted risk management policies and procedures, which aim to ensure the proper control and management of all risk factors inherent in the operation of the Company, most importantly credit risk, interest rate risk and liquidity risk. These risk factors are not mutually exclusive. It is recognized that any product or service offered by the Company may expose the Company to one or more of these risk factors.

Credit Risk

Credit risk is the risk to earnings or capital arising from an obligor’s failure to meet the terms of any contract or otherwise fail to perform as agreed. Credit risk is found in all activities where success depends on counterparty, issuer, or borrower performance.

Credit risk in the investment portfolio and correspondent bank accounts is addressed through defined limits in the Company’s policy statements. In addition, certain securities carry insurance to enhance credit quality of the bond.

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In order to control credit risk in the loan & lease portfolio the Company has established credit management policies and procedures that govern both the approval of new loans & leases and the monitoring of the existing portfolio. The Company manages and controls credit risk through comprehensive underwriting and approval standards, dollar limits on loans & leases to one borrower, and by restricting loans & leases made primarily to its principal market area where management believes it is best able to assess the applicable risk. Additionally, management has established guidelines to ensure the diversification of the Company’s credit portfolio such that even within key portfolio sectors such as real estate or agriculture, the portfolio is diversified across factors such as location, building type, crop type, etc. However, as a financial institution that assumes credit risks as a principal element of its business, credit losses will be experienced in the normal course of business. The allowance for credit losses is maintained at a level considered by management to be adequate to provide for risks inherent in the loan & lease portfolio. The allowance is increased by provisions charged to operating expense and reduced by net charge-offs.

The Company’s methodology for assessing the appropriateness of the allowance is applied on a regular basis and considers all loans & leases. The systematic methodology consists of three parts.

Part 1 - includes a detailed analysis of the loan & lease portfolio in two phases. The first phase is conducted in accordance with the “Receivables” topic of the FASB ASC. Individual loans & leases are reviewed to identify them for impairment. A loan or lease is impaired when principal and interest are deemed uncollectible in accordance with the original contractual terms of the loan or lease. Impairment is measured as either the expected future cash flows discounted at each loan’s or lease’s effective interest rate, the fair value of the loan’s or lease’s collateral if the loan or lease is collateral dependent, or an observable market price of the loan or lease, if one exists. Upon measuring the impairment, the Company will ensure an appropriate level of allowance is present or established.

Central to the first phase of the analysis of the loan & lease portfolio is the risk rating system. The originating credit officer assigns each borrower an initial risk rating, which is based primarily on a thorough analysis of that borrower’s financial position in conjunction with industry and economic trends. Approvals are made based upon the amount of inherent credit risk specific to the transaction and are reviewed for appropriateness by senior credit administration personnel. Credits are monitored by credit administration personnel for deterioration in a borrower’s financial condition, which would impact the ability of the borrower to perform under the contract. Risk ratings are adjusted as necessary. Risk ratings are reviewed by both the Company’s independent third-party credit examiners and bank examiners from the DBO and FDIC.

Based on the risk rating system, specific allowances are established in cases where management has identified significant conditions or circumstances related to a credit that management believes indicates that the loan or lease is impaired and there is a probability of loss. Management performs a detailed analysis of these loans & leases, including, but not limited to, cash flows, appraisals of the collateral, conditions of the marketplace for liquidating the collateral, and assessment of the guarantors. Management then determines the inherent loss potential and allocates a portion of the allowance for losses as a specific allowance for each of these credits.

The second phase is conducted by segmenting the loan & lease portfolio by risk rating and into groups of loans & leases with similar characteristics in accordance with the “Contingency” topic of the FASB ASC. In this second phase, groups of loans & leases with similar characteristics are reviewed and the appropriate allowance factor is applied based on the historical average charge-off rate for each particular group of loans or leases.

Part 2 - considers qualitative internal and external factors that may affect a loan or lease’s collectability, is based upon management’s evaluation of various conditions, the effects of which are not directly measured in the determination of the historical and specific allowances. The evaluation of the inherent loss with respect to these conditions is subject to a higher degree of uncertainty because they are not identified with specific problem credits or portfolio segments. The conditions evaluated in connection with the second element of the analysis of the allowance include, but are not limited to the following conditions that existed as of the balance sheet date:

§ general economic and business conditions affecting the key service areas of the Company;

§ credit quality trends (including trends in collateral values, delinquencies and non-performing loans & leases);

§ loan & lease volumes, growth rates and concentrations;

§ loan & lease portfolio seasoning;

§ specific industry and crop conditions;

§ recent loss experience; and

§ duration of the current business cycle.

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Part 3 - An unallocated allowance often occurs due to the imprecision in estimating and allocating allowance balances associated with macro factors such as: (1) the continuing sluggish economic conditions in the Central Valley; and (2) the long term impact of drought conditions currently being experienced in California.

Management reviews all of these conditions in discussion with the Company’s senior credit officers. To the extent that any of these conditions is evidenced by a specifically identifiable impaired credit or portfolio segment as of the evaluation date, management’s estimate of the effect of such condition may be reflected as a specific allowance applicable to such credit or portfolio segment. Where any of these conditions is not evidenced by a specifically identifiable impaired credit or portfolio segment as of the evaluation date, management’s evaluation of the inherent loss related to such condition is reflected in the second element of the allowance or in the unallocated allowance.

Management believes, that based upon the preceding methodology, and using information currently available, the allowance for credit losses at March 31, 2016 was adequate. No assurances can be given that future events may not result in increases in delinquencies, non-performing loans & leases, or net loan & lease charge-offs that would require increases in the provision for credit losses and thereby adversely affect the results of operations.

Interest Rate Risk

The mismatch between maturities of interest sensitive assets and liabilities results in uncertainty in the Company’s earnings and economic value and is referred to as interest rate risk. The Company does not attempt to predict interest rates and positions the balance sheet in a manner, which seeks to minimize, to the extent possible, the effects of changing interest rates.

The Company measures interest rate risk in terms of potential impact on both its economic value and earnings. The methods for governing the amount of interest rate risk include: (1) analysis of asset and liability mismatches (Gap analysis); (2) the utilization of a simulation model; and (3) limits on maturities of investment, loan & lease, and deposit products, which reduces the market volatility of those instruments.

The Gap analysis measures, at specific time intervals, the divergence between earning assets and interest bearing liabilities for which repricing opportunities will occur. A positive difference, or Gap, indicates that earning assets will reprice faster than interest-bearing liabilities. This will generally produce a greater net interest margin during periods of rising interest rates and a lower net interest margin during periods of declining interest rates. Conversely, a negative Gap will generally produce a lower net interest margin during periods of rising interest rates and a greater net interest margin during periods of decreasing interest rates.

The interest rates paid on deposit accounts do not always move in unison with the rates charged on loans & leases. In addition, the magnitude of changes in the rates charged on loans & leases is not always proportionate to the magnitude of changes in the rate paid for deposits. Consequently, changes in interest rates do not necessarily result in an increase or decrease in the net interest margin solely as a result of the differences between repricing opportunities of earning assets or interest bearing liabilities.

The Company also utilizes the results of a dynamic simulation model to quantify the estimated exposure of net interest income to sustained interest rate changes. The sensitivity of the Company’s net interest income is measured over a rolling one-year horizon.

The simulation model estimates the impact of changing interest rates on interest income from all interest-earning assets and the interest expense paid on all interest-bearing liabilities reflected on the Company’s balance sheet. This sensitivity analysis is compared to policy limits, which specify a maximum tolerance level for net interest income exposure over a one-year horizon assuming no balance sheet growth, given a 200 basis point upward and a 100 basis point downward shift in interest rates. A shift in rates over a 12-month period is assumed. Results that exceed policy limits, if any, are analyzed for risk tolerance and reported to the Board with appropriate recommendations. At March 31, 2016, the Company’s estimated net interest income sensitivity to changes in interest rates, as a percent of net interest income was an increase in net interest income of 4.99% if rates increase by 200 basis points and a decrease in net interest income of 2.13% if rates decline 100 basis points. Comparatively, at December 31, 2015, the Company’s estimated net interest income sensitivity to changes in interest rates, as a percent of net interest income was an increase in net interest income of 3.88% if rates increase by 200 basis points and a decrease in net interest income of 1.67% if rates decline 100 basis points.

55

The estimated sensitivity does not necessarily represent a Company forecast and the results may not be indicative of actual changes to the Company’s net interest income. These estimates are based upon a number of assumptions including: the nature and timing of interest rate levels including yield curve shape; prepayments on loans & leases and securities; pricing strategies on loans & leases and deposits; replacement of asset and liability cash flows; and other assumptions. While the assumptions used are based on current economic and local market conditions, there is no assurance as to the predictive nature of these conditions including how customer preferences or competitor influences might change.

Liquidity Risk

Liquidity risk is the risk to earnings or capital resulting from the Company’s inability to meet its obligations when they come due without incurring unacceptable losses. It includes the ability to manage unplanned decreases or changes in funding sources and to recognize or address changes in market conditions that affect the Company’s ability to liquidate assets or acquire funds quickly and with minimum loss of value. The Company endeavors to maintain a cash flow adequate to fund operations, handle fluctuations in deposit levels, respond to the credit needs of borrowers, and to take advantage of investment opportunities as they arise.

The Company’s principal operating sources of liquidity include (see “Item 8. Financial Statements and Supplementary Data – Consolidated Statements of Cash Flows” of the Company’s 2015 Annual Report on Form 10-K) cash and cash equivalents, cash provided by operating activities, principal payments on loans & leases, proceeds from the maturity or sale of investments, and growth in deposits. To supplement these operating sources of funds the Company maintains Federal Funds credit lines of $75 million and repurchase lines of $130 million with major banks. As of March 31, 2016 the Company has additional borrowing capacity of $358.1 million with the FHLB and $332.5 million with the FRB. Borrowings under these lines are collateralized with loans or securities that have been accepted for pledging at the FHLB and FRB.

At March 31, 2016, the Company had available sources of liquidity, which included cash and cash equivalents and unpledged investment securities AFS of approximately $271 million, which represents 10.39% of total assets.

ITEM 4. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures designed to ensure that information is recorded and reported in all filings of financial reports. Such information is reported to the Company’s management, including its Chief Executive Officer and its Chief Financial Officer to allow timely and accurate disclosure based on the definition of “disclosure controls and procedures” in Rule 13a-15(e). In designing these controls and procedures, management recognizes that they can only provide reasonable assurance of achieving the desired control objectives. Management also evaluated the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by this report, the Company carried out an evaluation of the effectiveness of Company’s disclosure controls and procedures under the supervision and with the participation of the Chief Executive Officer, the Chief Financial Officer and other senior management of the Company. The evaluation was based, in part, upon reports and affidavits provided by a number of executives. Based on the foregoing, the Company’s Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect the internal controls over financial reporting subsequent to the date the Company completed its evaluation.

56

PART II.  OTHER INFORMATION

ITEM 1. Legal Proceedings

Certain lawsuits and claims arising in the ordinary course of business have been filed or are pending against the Company or its subsidiaries. Based upon information available to the Company, its review of such lawsuits and claims and consultation with its counsel, the Company believes the liability relating to these actions, if any, would not have a material adverse effect on its consolidated financial statements.

There are no material proceedings adverse to the Company to which any director, officer or affiliate of the Company is a party.

ITEM 1A. Risk Factors

See “Item 1A. Risk Factors” in the Company’s 2015 Annual Report to Shareholders on Form 10-K. In management’s opinion, there have been no material changes in risk factors since the filing of the 2015 Form 10-K.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no shares repurchased by Farmers & Merchants Bancorp during the first quarter of 2016. The remaining dollar value of shares that may yet be purchased under the Company’s Stock Repurchase Plan is approximately $20.0 million.

The common stock of Farmers & Merchants Bancorp is not widely held or listed on any exchange. However, trades are reported on the OTCQX under the symbol “FMCB.” Additionally, management is aware that there are private transactions in the Company’s common stock.

In January, 2016, the Company issued 1,600 shares of common stock to the Bank’s non-qualified defined contribution retirement plans. These shares were issued at a price of $525 per share based upon a valuation completed by a nationally recognized bank consulting and advisory firm and in reliance upon the exemption in Section 4(2) of the Securities Act of 1933, as amended, and the regulations promulgated thereunder. The proceeds were contributed to the Bank as equity capital.

In January, 2015, the Company issued 1,700 shares of common stock to the Bank’s non-qualified defined contribution retirement plans. These shares were issued at a price of $450 per share based upon a valuation completed by a nationally recognized bank consulting and advisory firm and in reliance upon the exemption in Section 4(2) of the Securities Act of 1933, as amended, the regulations promulgated thereunder. The proceeds were contributed to the Bank as equity capital.

ITEM 3. Defaults Upon Senior Securities

Not applicable

ITEM 4. Mine Safety Disclosures

Not applicable

ITEM 5. Other Information

None

57

ITEM 6. Exhibits

See “Index to Exhibits”

SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FARMERS & MERCHANTS BANCORP
Date:  May 9, 2016	/s/ Kent A. Steinwert
	Kent A. Steinwert
	Chairman, President
	& Chief Executive Officer
	(Principal Executive Officer)

Date:  May 9, 2016	/s/ Stephen W. Haley
	Stephen W. Haley
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial & Accounting Officer)

Index to Exhibits

Exhibit No.	Description
31(a)	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(b)	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Schema Document
101.CAL	XBRL Calculation Linkbase Document
101.LAB	XBRL Label Linkbase Document
101.PRE	XBRL Presentation Linkbase Document
101.DEF	XBRL Definition Linkbase Document

58

EX-31.A

Exhibit 31(a)

Certification Pursuant to Section 302

Of the Sarbanes-Oxley Act of 2002

For the Chief Executive Officer

I, Kent A. Steinwert, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Farmers & Merchants Bancorp;

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

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

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

(b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures  and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

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

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  May 9, 2016	/s/ Kent A. Steinwert
	Kent A. Steinwert
	Chairman, President
	& Chief Executive Officer

EX-31.B

Exhibit 31(b)

Certification Pursuant to Section 302

Of the Sarbanes-Oxley Act of 2002

For the Chief Financial Officer

I, Stephen W. Haley, certify that:

1. I have reviewed this quarterly  report on Form 10-Q of Farmers & Merchants Bancorp;

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

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

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the

period in which this report is being prepared;

(b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures  and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

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

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 9, 2016	/s/ Stephen W. Haley
	Stephen W. Haley
	Executive Vice President & Chief Financial Officer

EX-32

Exhibit 32

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Farmers & Merchants Bancorp (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Kent A. Steinwert, Chairman, President and Chief Executive Officer, and Stephen W. Haley, Executive Vice President and Chief Financial Officer of the Company, certify pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange act of 1934 and Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. $ 1350), that:

1. the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. $ 78m or 78o(d)); and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

May 9, 2016

/s/ Kent A. Steinwert

Kent A. Steinwert

Chairman, President

 & Chief Executive Officer

/s/ Stephen W. Haley

Stephen W. Haley

Executive Vice President & Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	Apr. 29, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	FARMERS & MERCHANTS BANCORP
Entity Central Index Key	0001085913
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		792,387
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016

XML

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Cash and Cash Equivalents:
Cash and Due from Banks	$ 41,659	$ 49,913	$ 33,746
Interest Bearing Deposits with Banks	32,057	9,533	110,190
Total Cash and Cash Equivalents	73,716	59,446	143,936
Investment Securities:
Available-for-Sale	341,771	369,137	365,184
Held-to-Maturity	61,535	61,396	63,463
Total Investment Securities	403,306	430,533	428,647
Loans & Leases:
Loans & Leases	1,993,071	1,996,359	1,705,320
Less: Allowance for Credit Losses	44,129	41,523	38,940
Loans & Leases, Net	1,948,942	1,954,836	1,666,380
Premises and Equipment, Net	26,344	26,575	26,693
Bank Owned Life Insurance	56,371	55,898	54,454
Interest Receivable and Other Assets	84,319	88,057	93,925
Total Assets	2,592,998	2,615,345	2,414,035
Deposits:
Demand	637,140	711,029	578,820
Interest Bearing Transaction	409,360	377,594	340,045
Savings and Money Market	725,823	707,885	699,308
Time	484,141	481,024	493,600
Total Deposits	2,256,464	2,277,532	2,111,773
Subordinated Debentures	10,310	10,310	10,310
Interest Payable and Other Liabilities	63,778	75,668	50,664
Total Liabilities	2,330,552	2,363,510	2,172,747
Shareholders' Equity
Preferred Stock: No Par Value, 1,000,000 Shares Authorized, None Issued or Outstanding	0	0	0
Common Stock: Par Value $0.01, 7,500,000 Shares Authorized, 792,387, 790,787 and 785,782 Shares Issued and Outstanding at March 31, 2016, December 31, 2015 and March 31, 2015, Respectively	8	8	8
Additional Paid-In Capital	82,004	81,164	78,569
Retained Earnings	177,240	170,068	159,236
Accumulated Other Comprehensive Income	3,194	595	3,475
Total Shareholders' Equity	262,446	251,835	241,288
Total Liabilities and Shareholders' Equity	$ 2,592,998	$ 2,615,345	$ 2,414,035

XML

Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Shareholders' Equity
Preferred Stock, par value (in dollars per share)	$ 0	$ 0	$ 0
Preferred Stock, shares authorized (in shares)	1,000,000	1,000,000	1,000,000
Preferred Stock, shares issued (in shares)	0	0	0
Preferred Stock, shares outstanding (in shares)	0	0	0
Common Stock, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01
Common Stock, shares authorized (in shares)	7,500,000	7,500,000	7,500,000
Common Stock, shares issued (in shares)	792,387	790,787	785,782
Common Stock, shares outstanding (in shares)	792,387	790,787	785,782

XML

Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Interest Income
Interest and Fees on Loans & Leases	$ 21,894	$ 19,127
Interest on Deposits with Banks	46	58
Interest on Investment Securities:
Taxable	1,602	1,586
Exempt from Federal Tax	484	522
Total Interest Income	24,026	21,293
Interest Expense
Deposits	828	712
Borrowed Funds	4	0
Subordinated Debentures	88	80
Total Interest Expense	920	792
Net Interest Income	23,106	20,501
Provision for Credit Losses	2,600	600
Net Interest Income After Provision for Credit Losses	20,506	19,901
Non-Interest Income
Service Charges on Deposit Accounts	814	898
Net (Loss) Gain on Sale of Investment Securities	(289)	1
Increase in Cash Surrender Value of Life Insurance	474	464
Debit Card and ATM Fees	835	777
Net Gain on Deferred Compensation Investments	291	765
Other	596	1,759
Total Non-Interest Income	2,721	4,664
Non-Interest Expense
Salaries and Employee Benefits	11,706	10,099
Net Gain on Deferred Compensation Investments	291	765
Occupancy	741	639
Equipment	857	732
Marketing	299	136
FDIC Insurance	316	284
Gain on Sale of ORE	(5,684)	0
Other	3,493	1,563
Total Non-Interest Expense	12,019	14,218
Income Before Income Taxes	11,208	10,347
Provision for Income Taxes	4,036	3,944
Net Income	$ 7,172	$ 6,403
Basic Earnings Per Common Share (in dollars per share)	$ 9.06	$ 8.15

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Consolidated Statements of Comprehensive Income (Unaudited) [Abstract]
Net Income	$ 7,172	$ 6,403
Other Comprehensive Income
Increase in Net Unrealized Gain on Available-for-Sale Securities	4,195	1,627
Deferred Tax Expense Related to Unrealized Gains	(1,764)	(684)
Reclassification Adjustment for Realized Gains on Available-for-Sale Securities Included in Net Income	289	(1)
Deferred Tax Benefit Related to Reclassification Adjustment	(121)	0
Change in Net Unrealized Gain on Available-for-Sale Securities, Net of Tax	2,599	942
Total Other Comprehensive Income	2,599	942
Comprehensive Income	$ 9,771	$ 7,345

XML

Consolidated Statements of Changes in Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income [Member]	Total
Balance at Dec. 31, 2014	$ 8	$ 77,804	$ 152,833	$ 2,533	$ 233,178
Balance (in shares) at Dec. 31, 2014	784,082
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	$ 0	0	6,403	0	6,403
Issuance of Common Stock	$ 0	765	0	0	765
Issuance of Common Stock (in shares)	1,700
Change in Net Unrealized Gains on Securities Available-for-Sale, net of tax	$ 0	0	0	942	942
Balance at Mar. 31, 2015	$ 8	78,569	159,236	3,475	$ 241,288
Balance (in shares) at Mar. 31, 2015	785,782				785,782
Balance at Dec. 31, 2015	$ 8	81,164	170,068	595	$ 251,835
Balance (in shares) at Dec. 31, 2015	790,787				790,787
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	$ 0	0	7,172	0	$ 7,172
Issuance of Common Stock	$ 0	840	0	0	840
Issuance of Common Stock (in shares)	1,600
Change in Net Unrealized Gains on Securities Available-for-Sale, net of tax	$ 0	0	0	2,599	2,599
Balance at Mar. 31, 2016	$ 8	$ 82,004	$ 177,240	$ 3,194	$ 262,446
Balance (in shares) at Mar. 31, 2016	792,387				792,387

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Operating Activities:
Net Income	$ 7,172	$ 6,403
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for Credit Losses	2,600	600
Depreciation and Amortization	478	363
Net Amortization of Investment Security Premiums & Discounts	370	375
Net Loss (Gain) on Sale of Investment Securities	289	(1)
Net Gain on Sale of Other Real Estate	(5,684)	0
Net Change in Operating Assets & Liabilities:
Net Decrease in Interest Receivable and Other Assets	5,371	1,872
Net Decrease in Interest Payable and Other Liabilities	(3,759)	(1,965)
Net Cash Provided by Operating Activities	6,837	7,647
Investing Activities:
Purchase of Investment Securities Available-for-Sale	(118,395)	(19,814)
Proceeds from Sold, Matured or Called Securities Available-for-Sale	141,589	22,629
Purchase of Investment Securities Held-to-Maturity	(1,012)	(205)
Proceeds from Matured or Called Securities Held-to-Maturity	863	587
Net Loans & Leases Paid, Originated or Acquired	3,244	6,895
Principal Collected on Loans & Leases Previously Charged Off	50	2,968
Additions to Premises and Equipment	(247)	(1,235)
Purchase of Other Investments	(5,131)	(361)
Proceeds from Sale of Other Real Estate	7,540	0
Net Cash Provided by Investing Activities	28,501	11,464
Financing Activities:
Net (Decrease) Increase in Deposits	(21,068)	47,700
Net Cash Provided by Financing Activities	(21,068)	47,700
Increase in Cash and Cash Equivalents	14,270	66,811
Cash and Cash Equivalents at Beginning of Period	59,446	77,125
Cash and Cash Equivalents at End of Period	73,716	143,936
Supplementary Data
Cash Payments Made for Income Taxes	261	85
Issuance of Common Stock to the Bank's Non-Qualified Retirement Plans	840	765
Interest Paid	$ 962	$ 737

XML

Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

Significant Accounting Policies [Abstract]

Significant Accounting Policies

1. Significant Accounting Policies

Farmers & Merchants Bancorp (the “Company”) was organized March 10, 1999. Primary operations are related to traditional banking activities through its subsidiary Farmers & Merchants Bank of Central California (the “Bank”) which was established in 1916. The Bank’s wholly owned subsidiaries include Farmers & Merchants Investment Corporation and Farmers/Merchants Corp. Farmers & Merchants Investment Corporation has been dormant since 1991. Farmers/Merchants Corp. acts as trustee on deeds of trust originated by the Bank.

The Company’s other subsidiaries include F & M Bancorp, Inc. and FMCB Statutory Trust I. F & M Bancorp, Inc. was created in March 2002 to protect the name F & M Bank. During 2002, the Company completed a fictitious name filing in California to begin using the streamlined name “F & M Bank” as part of a larger effort to enhance the Company’s image and build brand name recognition. In December 2003, the Company formed a wholly owned subsidiary, FMCB Statutory Trust I. FMCB Statutory Trust I is a non-consolidated subsidiary per Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”) and was formed for the sole purpose of issuing Trust Preferred Securities and related subordinated debentures.

The accounting and reporting policies of the Company conform to U.S. GAAP and prevailing practice within the banking industry. The following is a summary of the significant accounting and reporting policies used in preparing the consolidated financial statements.

Basis of Presentation

The accompanying consolidated financial statements and notes thereto have been prepared in accordance with accounting principles generally accepted in the United States of America for financial information.

These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting on Form 10-Q. Accordingly, certain disclosures normally presented in the notes to the annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted. The Company believes that the disclosures are adequate to make the information not misleading. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The results of operations for the three-month period ended March 31, 2016 may not necessarily be indicative of future operating results.

The accompanying consolidated financial statements include the accounts of the Company and the Company’s wholly owned subsidiaries, F & M Bancorp, Inc. and the Bank, along with the Bank’s wholly owned subsidiaries, Farmers & Merchants Investment Corporation and Farmers/Merchants Corp. Significant inter-company transactions have been eliminated in consolidation.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of 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 these estimates.

Certain amounts in the prior years' financial statements and related footnote disclosures have been reclassified to conform to the current-year presentation. These reclassifications had no effect on previously reported net income or total shareholders’ equity. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair presentation of financial results for the periods presented.

Cash and Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, the Company has defined cash and cash equivalents as those amounts included in the balance sheet captions Cash and Due from Banks, Interest Bearing Deposits with Banks, Federal Funds Sold and Securities Purchased Under Agreements to Resell. For these instruments, the carrying amount is a reasonable estimate of fair value.

Investment Securities

Investment securities are classified at the time of purchase as held-to-maturity (“HTM”) if it is management’s intent and the Company has the ability to hold the securities until maturity. These securities are carried at cost, adjusted for amortization of premium and accretion of discount using a level yield of interest over the estimated remaining period until maturity. Losses, reflecting a decline in value judged by the Company to be other than temporary, are recognized in the period in which they occur.

Securities are classified as available-for-sale (“AFS”) if it is management’s intent, at the time of purchase, to hold the securities for an indefinite period of time and/or to use the securities as part of the Company’s asset/liability management strategy. These securities are reported at fair value with aggregate unrealized gains or losses excluded from income and included as a separate component of shareholders’ equity, net of related income taxes. Fair values are based on quoted market prices or broker/dealer price quotations on a specific identification basis. Gains or losses on the sale of these securities are computed using the specific identification method.

Trading securities, if any, are acquired for short-term appreciation and are recorded in a trading portfolio and are carried at fair value, with unrealized gains and losses recorded in non-interest income.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement; and (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans & Leases

Loans & leases are reported at the principal amount outstanding net of unearned discounts and deferred loan & lease fees and costs. Interest income on loans & leases is accrued daily on the outstanding balances using the simple interest method. Loan & lease origination fees are deferred and recognized over the contractual life of the loan or lease as an adjustment to the yield. Loans & leases are placed on non-accrual status when the collection of principal or interest is in doubt or when they become past due for 90 days or more unless they are both well-secured and in the process of collection. For this purpose, a loan or lease is considered well-secured if it is collateralized by property having a net realizable value in excess of the amount of the loan or lease or is guaranteed by a financially capable party. When a loan or lease is placed on non-accrual status, the accrued and unpaid interest receivable is reversed and charged against current income; thereafter, interest income is recognized only as it is collected in cash. Additionally, cash would be applied to principal if all principal was not expected to be collected. Loans & leases placed on non-accrual status are returned to accrual status when the loans or leases are paid current as to principal and interest and future payments are expected to be made in accordance with the contractual terms of the loan or lease.

A loan or lease is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the original agreement. Impaired loans & leases are either: (1) non-accrual loans & leases; or (2) restructured loans & leases that are still accruing interest. Loans or leases determined to be impaired are individually evaluated for impairment. When a loan or lease is impaired, the Company measures impairment based on the present value of expected future cash flows discounted at the loan or lease's effective interest rate, except that as a practical expedient, it may measure impairment based on a loan or lease's observable market price, or the fair value of the collateral if the loan or lease is collateral dependent. A loan or lease is collateral dependent if the repayment of the loan or lease is expected to be provided solely by the underlying collateral.

A restructuring of a loan or lease constitutes a troubled debt restructuring (“TDR”) if the Company for economic or legal reasons related to the borrower’s (the term “borrower” is used herein to describe a customer who has entered into either a loan or lease transaction) financial difficulties grants a concession to the borrower that it would not otherwise consider. Restructured loans & leases typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms. If the restructured loan or lease was current on all payments at the time of restructure and management reasonably expects the borrower will continue to perform after the restructure, management may keep the loan or lease on accrual. Loans & leases that are on nonaccrual status at the time they become TDR, remain on nonaccrual status until the borrower demonstrates a sustained period of performance, which the Company generally believes to be six consecutive months of payments, or equivalent. A loan or lease can be removed from TDR status if it was restructured at a market rate in a prior calendar year and is currently in compliance with its modified terms. However, these loans or leases continue to be classified as impaired and are individually evaluated for impairment as described above.

Generally, the Company will not restructure loans or leases for borrowers unless: (1) the existing loan or lease is brought current as to principal and interest payments; and (2) the restructured loan or lease can be underwritten to reasonable underwriting standards. If these standards are not met other actions will be pursued (e.g., foreclosure) to collect outstanding loan or lease amounts. After restructure a determination is made whether the loan or lease will be kept on accrual status based upon the underwriting and historical performance of the restructured credit.

Allowance for Credit Losses

The allowance for credit losses is an estimate of probable incurred credit losses inherent in the Company's loan & lease portfolio as of the balance sheet date. The allowance is established through a provision for credit losses, which is charged to expense. Additions to the allowance are expected to maintain the adequacy of the total allowance after credit losses and loan & lease growth. Credit exposures determined to be uncollectible are charged against the allowance. Cash received on previously charged off amounts is recorded as a recovery to the allowance. The overall allowance consists of three primary components: specific reserves related to impaired loans & leases; general reserves for inherent losses related to loans & leases that are not impaired; and an unallocated component that takes into account the imprecision in estimating and allocating allowance balances associated with macro factors.

The determination of the general reserve for loans & leases that are collectively evaluated for impairment is based on estimates made by management, to include, but not limited to, consideration of historical losses by portfolio segment, internal asset classifications, qualitative factors that include economic trends in the Company's service areas, industry experience and trends, geographic concentrations, estimated collateral values, the Company's underwriting policies, the character of the loan & lease portfolio, and probable losses inherent in the portfolio taken as a whole.

The Company maintains a separate allowance for each portfolio segment (loan & lease type). These portfolio segments include: (1) commercial real estate; (2) agricultural real estate; (3) real estate construction (including land and development loans); (4) residential 1^st mortgages; (5) home equity lines and loans; (6) agricultural; (7) commercial; (8) consumer and other; and (9) equipment leases. The allowance for credit losses attributable to each portfolio segment, which includes both individually evaluated impaired loans & leases and loans & leases that are collectively evaluated for impairment, is combined to determine the Company's overall allowance, which is included on the consolidated balance sheet.

The Company assigns a risk rating to all loans & leases and periodically performs detailed reviews of all such loans & leases over a certain threshold to identify credit risks and assess overall collectability. For smaller balance loans & leases, such as consumer and residential real estate, a credit grade is established at inception, and then updated only when the loan or lease becomes contractually delinquent or when the borrower requests a modification. For larger balance loans, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which borrowers operate and the fair values of collateral securing these loans & leases. These credit quality indicators are used to assign a risk rating to each individual loan or lease. These risk ratings are also subject to examination by independent specialists engaged by the Company. The risk ratings can be grouped into five major categories, defined as follows:

Pass – A pass loan or lease is a strong credit with no existing or known potential weaknesses deserving of management's close attention.

Special Mention – A special mention loan or lease has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or lease or in the Company's credit position at some future date. Special mention loans & leases are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Substandard – A substandard loan or lease is not adequately protected by the current financial condition and paying capacity of the borrower or the value of the collateral pledged, if any. Loans or leases classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Well defined weaknesses include a project's lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time or the project's failure to fulfill economic expectations.They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful –Loans or leases classified doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, based on currently known facts, conditions and values, highly questionable or improbable.

Loss – Loans or leases classified as loss are considered uncollectible. Once a loan or lease becomes delinquent and repayment becomes questionable, the Company will address collateral shortfalls with the borrower and attempt to obtain additional collateral. If this is not forthcoming and payment in full is unlikely, the Company will estimate its probable loss and immediately charge-off some or all of the balance.

The general reserve component of the allowance for credit losses also consists of reserve factors that are based on management's assessment of the following for each portfolio segment: (1) inherent credit risk; (2) historical losses; and (3) other qualitative factors. These reserve factors are inherently subjective and are driven by the repayment risk associated with each portfolio segment described below:

Commercial Real Estate – Commercial real estate mortgage loans are generally considered to possess a higher inherent risk of loss than the Company’s commercial, agricultural and consumer loan types. Adverse economic developments or an overbuilt market impact commercial real estate projects and may result in troubled loans. Trends in vacancy rates of commercial properties impact the credit quality of these loans. High vacancy rates reduce operating revenues and the ability for properties to produce sufficient cash flow to service debt obligations.

Real Estate Construction – Real estate construction loans, including land loans, are generally considered to possess a higher inherent risk of loss than the Company’s commercial, agricultural and consumer loan types. A major risk arises from the necessity to complete projects within specified cost and time lines. Trends in the construction industry significantly impact the credit quality of these loans, as demand drives construction activity. In addition, trends in real estate values significantly impact the credit quality of these loans, as property values determine the economic viability of construction projects.

Commercial – These loans are generally considered to possess a moderate inherent risk of loss because they are shorter-term; typically made to relationship customers; generally underwritten to existing cash flows of operating businesses; and may be collateralized by fixed assets, inventory and/or accounts receivable. Debt coverage is provided by business cash flows and economic trends influenced by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans.

Agricultural Real Estate and Agricultural – These loans are generally considered to possess a moderate inherent risk of loss since they are typically made to relationship customers and are secured by crop production, livestock and related real estate.  These loans are vulnerable to two risk factors that are largely outside the control of Company and borrowers: commodity prices and weather conditions.

Leases – Equipment leases are generally considered to possess a moderate inherent risk of loss. As Lessor, the Company is subject to both the credit risk of the borrower and the residual value risk of the equipment. Credit risks are underwritten using the same credit criteria the Company would use when making an equipment term loan. Residual value risk is managed through the use of qualified, independent appraisers that establish the residual values the Company uses in structuring a lease.

Residential 1st Mortgages and Home Equity Lines and Loans – These loans are generally considered to possess a low inherent risk of loss, although this is not always true as evidenced by the correction in residential real estate values that occurred between 2007 and 2012. The degree of risk in residential real estate lending depends primarily on the loan amount in relation to collateral value, the interest rate and the borrower's ability to repay in an orderly fashion. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate that the borrowers' capacity to repay their obligations may be deteriorating.

Consumer & Other – A consumer installment loan portfolio is usually comprised of a large number of small loans scheduled to be amortized over a specific period. Most installment loans are made for consumer purchases. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate that the borrowers' capacity to repay their obligations may be deteriorating.

At least quarterly, the Board of Directors reviews the adequacy of the allowance, including consideration of the relative risks in the portfolio, current economic conditions and other factors. If the Board of Directors and management determine that changes are warranted based on those reviews, the allowance is adjusted. In addition, the Company's and Bank's regulators, including the Federal Reserve Bank (“FRB”), the California Department of Business Oversight (“DBO”) and the Federal Deposit Insurance Corporation (“FDIC”), as an integral part of their examination process, review the adequacy of the allowance. These regulatory agencies may require additions to the allowance based on their judgment about information available at the time of their examinations.

Allowance for Credit Losses on Off-Balance-Sheet Credit Exposures

The Company also maintains a separate allowance for off-balance-sheet commitments. Management estimates anticipated losses using historical data and utilization assumptions. The allowance for off-balance-sheet commitments is included in Interest Payable and Other Liabilities on the Company’s Consolidated Balance Sheet.

Premises and Equipment

Premises, equipment, and leasehold improvements are stated at cost, less accumulated depreciation and amortization. Depreciation is computed principally by the straight line method over the estimated useful lives of the assets. Estimated useful lives of buildings range from 30 to 40 years, and for furniture and equipment from 3 to 7 years. Leasehold improvements are amortized over the lesser of the terms of the respective leases, or their useful lives, which are generally 5 to 10 years. Remodeling and capital improvements are capitalized while maintenance and repairs are charged directly to occupancy expense.

Other Real Estate

Other real estate, which is included in other assets, is expected to be sold and is comprised of properties no longer utilized for business operations and property acquired through foreclosure in satisfaction of indebtedness. These properties are recorded at fair value less estimated selling costs upon acquisition. Revised estimates to the fair value less cost to sell are reported as adjustments to the carrying amount of the asset, provided that such adjusted value is not in excess of the carrying amount at acquisition. Initial losses on properties acquired through full or partial satisfaction of debt are treated as credit losses and charged to the allowance for credit losses at the time of acquisition. Subsequent declines in value from the recorded amounts, routine holding costs, and gains or losses upon disposition, if any, are included in non-interest expense as incurred.

Income Taxes

The Company uses the liability method of accounting for income taxes. This method results in the recognition of deferred tax assets and liabilities that are reflected at currently enacted 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 deferred provision for income taxes is the result of the net change in the deferred tax asset and deferred tax liability balances during the year. This amount combined with the current taxes payable or refundable results in the income tax expense for the current year.

The Company follows the standards set forth in the “Income Taxes” topic of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. This standard prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

The Company accounts for leases with Investment Tax Credits (ITC) under the deferred method as established in ASC 740-10. ITC are viewed and accounted for as a reduction of the cost of the related assets and presented as deferred income on the Company’s financial statement.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceed the amount measured as described above would be reflected as a liability for unrecognized tax benefits in the consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Interest expense and penalties associated with unrecognized tax benefits, if any, are included in the provision for income taxes in the Unaudited Consolidated Statements of Income. As of March 31, 2016 and 2015, the Company had no interest expense or penalties associated with unrecognized tax benefits.

Basic Earnings Per Common Share

The Company’s common stock is not traded on any exchange. The shares are primarily held by local residents and are not actively traded. Basic earnings per common share amounts are computed by dividing net income by the weighted average number of common shares outstanding for the period. There are no common stock equivalent shares. Therefore, there is no presentation of diluted basic earnings per common share. See Note 6 for additional information.

Segment Reporting

The “Segment Reporting” topic of the FASB ASC requires that public companies report certain information about operating segments. It also requires that public companies report certain information about their products and services, the geographic areas in which they operate, and their major customers. The Company is a holding company for a community bank, which offers a wide array of products and services to its customers. Pursuant to its banking strategy, emphasis is placed on building relationships with its customers, as opposed to building specific lines of business. As a result, the Company is not organized around discernible lines of business and prefers to work as an integrated unit to customize solutions for its customers, with business line emphasis and product offerings changing over time as needs and demands change. Therefore, the Company only reports one segment.

Low Income Housing Tax Credit Investments (LIHTC)

The Company accounts for its interest in LIHTC using the cost method as established in ASC 323-740. As an investor, the Company obtains income tax credits and deductions from the operating losses of these tax credit entities. The income tax credits and deductions are allocated to the investors based on their ownership percentages and are recorded as a reduction of income tax expense (or an increase to income tax benefit) and a reduction of federal income taxes payable.

Comprehensive Income

The “Comprehensive Income” topic of the FASB ASC establishes standards for the reporting and display of comprehensive income and its components in the financial statements. Other comprehensive income (loss) refers to revenues, expenses, gains, and losses that U.S. GAAP recognize as changes in value to an enterprise but are excluded from net income. For the Company, comprehensive income includes net income and changes in fair value of its available-for-sale investment securities.

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.

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Investment Securities

3 Months Ended

Mar. 31, 2016

Investment Securities [Abstract]

Investment Securities

2. Investment Securities

The amortized cost, fair values, and unrealized gains and losses of the securities available-for-sale are as follows

(in thousands):

	Amortized		Gross Unrealized				Fair/Book
March 31, 2016	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	63,157	$	190	$	1	$	63,346
US Treasury Notes		65,571		217		-		65,788
Mortgage Backed Securities (1)		207,021		5,113		7		212,127
Other		510		-		-		510
Total	$	336,259	$	5,520	$	8	$	341,771

	Amortized		Gross Unrealized				Fair/Book
December 31, 2015	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	33,536	$	134	$	419	$	33,251
US Treasury Notes		73,048		-		164		72,884
Mortgage Backed Securities (1)		261,016		2,708		1,231		262,493
Other		509		-		-		509
Total	$	368,109	$	2,842	$	1,814	$	369,137

	Amortized		Gross Unrealized				Fair/Book
March 31, 2015	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	68,064	$	69	$	1	$	68,132
US Treasury Notes		19,818		148		-		19,966
Mortgage Backed Securities (1)		270,820		5,977		196		276,601
Other		485		-		-		485
Total	$	359,187	$	6,194	$	197	$	365,184

⁽¹⁾ All Mortgage Backed Securities consist of securities collateralized by residential real estate and were issued by an agency or government sponsored entity of the U.S. government.

The book values, estimated fair values and unrealized gains and losses of investments classified as held-to-maturity are as follows (in thousands):

	Book		Gross Unrealized				Fair
March 31, 2016	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	61,535	$	1,357	$	-	$	62,892
Total	$	61,535	$	1,357	$	-	$	62,892

	Book		Gross Unrealized				Fair
December 31, 2015	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	61,396	$	993	$	1	$	62,388
Total	$	61,396	$	993	$	1	$	62,388

	Book		Gross Unrealized				Fair
March 31, 2015	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	61,324	$	766	$	11	$	62,079
Other		2,139		-		-		2,139
Total	$	63,463	$	766	$	11	$	64,218

Fair values are based on quoted market prices or dealer quotes. If a quoted market price or dealer quote is not available, fair value is estimated using quoted market prices for similar securities.

The amortized cost and estimated fair values of investment securities at March 31, 2016 by contractual maturity are shown in the following table (in thousands):

	Available-for-Sale				Held-to-Maturity
March 31, 2016	Amortized Cost		Fair/Book Value		Book Value		Fair Value
Within one year	$	60,504	$	60,503	$	225	$	225
After one year through five years		68,734		69,141		12,034		12,087
After five years through ten years		-		-		11,425		11,615
After ten years		-		-		37,851		38,965
		129,238		129,644		61,535		62,892
Investment securities not due at a single maturity date:
Mortgage-backed securities		207,021		212,127		-		-
Total	$	336,259	$	341,771	$	61,535	$	62,892

Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The following tables show those investments with gross unrealized losses and their market value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at the dates indicated (in thousands):

	Less Than 12 Months						12 Months or More						Total
March 31, 2016	Fair Value			Unrealized Loss			Fair Value			Unrealized Loss			Fair Value			Unrealized Loss
Securities Available-for-Sale
Government Agency & Government-Sponsored Entities		$	39,996		$	1		$	-		$	-		$	39,996		$	1
Mortgage Backed Securities			1,529			7			-			-			1,529			7
Total		$	41,525		$	8		$	-		$	-		$	41,525		$	8

	Less Than 12 Months				12 Months or More				Total
December 31, 2015	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Securities Available-for-Sale
Government Agency & Government-Sponsored Entities	$	29,944	$	419	$	-	$	-	$	29,944	$	419
US Treasury Notes		44,887		164		-		-		44,887		164
Mortgage Backed Securities		78,899		1,089		7,277		142		86,176		1,231
Total	$	153,730	$	1,672	$	7,277	$	142	$	161,007	$	1,814
Securities Held-to-Maturity
Obligations of States and Political Subdivisions	$	839	$	1	$	-	$	-	$	839	$	1
Total	$	839	$	1	$	-	$	-	$	839	$	1

	Less Than 12 Months						12 Months or More						Total
March 31, 2015	Fair Value			Unrealized Loss			Fair Value			Unrealized Loss			Fair Value			Unrealized Loss
Securities Available-for-Sale
Government Agency & Government-Sponsored Entities		$	24,998		$	1		$	-		$	-		$	24,998		$	1
Mortgage Backed Securities			13,033			28			25,942			168			38,975			196
Total		$	38,031		$	29		$	25,942		$	168		$	63,973		$	197
Securities Held-to-Maturity
Obligations of States and Political Subdivisions		$	1,340		$	11		$	-		$	-		$	1,340		$	11
Total		$	1,340		$	11		$	-		$	-		$	1,340		$	11

As of March 31, 2016, the Company held 227 investment securities of which 3 were in a loss position for less than twelve months. No securities were in a loss position for twelve months or more. Management periodically evaluates each investment security for other-than-temporary impairment relying primarily on industry analyst reports and observations of market conditions and interest rate fluctuations. Management believes it will be able to collect all amounts due according to the contractual terms of the underlying investment securities.

Securities of Government Agency and Government Sponsored Entities – At March 31, 2016, 2 securities of government agency and government sponsored entities were in a loss position for less than 12 months. No securities were in a loss position for 12 months or more. The unrealized losses on the Company's investments in securities of government agency and government sponsored entities were $1,000 at March 31, 2016, $419,000 at December 31, 2015 and $1,000, at March 31, 2015. The unrealized loss was caused by interest rate fluctuations. Repayment of these investments is guaranteed by an agency or government sponsored entity of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company's investment. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2016, December 31, 2015, and March 31, 2015.

Mortgage Backed Securities – At March 31, 2016, 1 mortgage backed security investment was in a loss position for less than 12 months and none were in a loss position for 12 months or more. The unrealized losses on the Company's investment in mortgage backed securities were $7,000, $1.2 million, and $196,000 at March 31, 2016, December 31, 2015, and March 31, 2015, respectively. The unrealized losses on the Company’s investment in mortgage backed securities were caused by interest rate fluctuations. The contractual cash flows of these investments are guaranteed by an agency or government sponsored entity of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company's investment. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2016, December 31, 2015 and March 31, 2015, respectively.

Obligations of States and Political Subdivisions - At March 31, 2016, no obligations of states and political subdivisions were in a loss position for less than 12 months. None were in a loss position for 12 months or more. As of March 31, 2016, over ninety-eight percent of the Company’s bank-qualified municipal bond portfolio is rated at either the issue or issuer level, and all of these ratings are “investment grade.” The Company monitors the status of the two percent of the portfolio that is not rated and at the current time does not believe any of them to be exhibiting financial problems that could result in a loss in any individual security.

The unrealized losses on the Company’s investment in obligations of states and political subdivisions were $0, $1,400, and $11,000 at March 31, 2016, December 31, 2015 and March 31, 2015, respectively. Management believes that any unrealized losses on the Company's investments in obligations of states and political subdivisions were primarily caused by interest rate fluctuations. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at March 31, 2016, December 31, 2015 and March 31, 2015, respectively.

U.S. Treasury Notes – At March 31, 2016, no U.S. Treasury Note security investments were in a loss position for less than 12 months and none were in a loss position for 12 months or more. The unrealized losses on the Company's investment in US treasury notes were $0 at March 31, 2016 and $164,000 at December 31, 2015. The Company did not hold any U.S. treasury notes at March 31, 2015.  The unrealized losses were caused by interest rate fluctuations. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at March 31 2016 and December 31, 2015.

Proceeds from sales and calls of securities were as follows:

(in thousands)	Proceeds		Gains		Losses
Three Months Ended March 31, 2016	$	102,895	$	244	$	533
Three Months Ended March 31, 2015	$	475	$	1	$	-

Pledged Securities

As of March 31, 2016, securities carried at $184.9 million were pledged to secure public deposits, Federal Home Loan Bank (“FHLB”) borrowings, and other government agency deposits as required by law. This amount was $189.2 million at December 31, 2015, and $196.4 million at March 31, 2015.

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Loans & Leases and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2016

Loans & Leases and Allowance for Credit Losses [Abstract]

Loans & Leases and Allowance for Credit Losses

3. Loans & Leases and Allowance for Credit Losses

The following tables show the allocation of the allowance for credit losses by portfolio segment and by impairment methodology at the dates indicated (in thousands):

March 31, 2016	Commercial Real Estate		Agricultural Real Estate		Real Estate  Construction		Residential 1st Mortgages		Home Equity  Lines & Loans			Agricultural			Commercial			Consumer & Other			Leases			Unallocated		Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2016	$	10,063	$	6,881	$	2,485	$	789	$	2,146		$	6,308		$	7,836		$	175		$	3,294		$	1,546	$	41,523
Charge-Offs		-		-		-		-		(19	)		-			-			(25	)		-			-		(44	)
Recoveries		2		-		-		6		2			-			27			13			-			-		50
Provision		34		2,281		109		1		(65	)		(404	)		(138	)		24			(55	)		813		2,600
Ending Balance- March 31, 2016	$	10,099	$	9,162	$	2,594	$	796	$	2,064		$	5,904		$	7,725		$	187		$	3,239		$	2,359	$	44,129
Ending Balance Individually Evaluated for Impairment		59		-		-		66		65			115			757			26			-			-		1,088
Ending Balance Collectively Evaluated for Impairment		10,040		9,162		2,594		730		1,999			5,789			6,968			161			3,239			2,359		43,041
Loans:
Ending Balance	$	611,511	$	432,281	$	166,455	$	212,205	$	31,639		$	253,655		$	213,479		$	7,066		$	64,780		$	-	$	1,993,071
Ending Balance Individually Evaluated for Impairment		3,376		163		-		1,944		1,513			605			4,714			30			-			-		12,345
Ending Balance Collectively Evaluated for Impairment	$	608,135	$	432,118	$	166,455	$	210,261	$	30,126		$	253,050		$	208,765		$	7,036		$	64,780		$	-	$	1,980,726

December 31, 2015	Commercial Real Estate			Agricultural Real Estate		Real Estate Construction			Residential 1st  Mortgages			Home Equity  Lines & Loans			Agricultural		Commercial			Consumer & Other			Leases		Unallocated		Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2015	$	7,842		$	4,185	$	1,669		$	1,022		$	2,426		$	6,104	$	8,195		$	218		$	2,211	$	1,529	$	35,401
Charge-Offs		-			-		-			-			-			-		(12	)		(84	)		-		-		(96	)
Recoveries		2,939			-		2,225			8			87			4		136			69			-		-		5,468
Provision		(718	)		2,696		(1,409	)		(241	)		(367	)		200		(483	)		(28	)		1,083		17		750
Ending Balance- December 31, 2015	$	10,063		$	6,881	$	2,485		$	789		$	2,146		$	6,308	$	7,836		$	175		$	3,294	$	1,546	$	41,523
Ending Balance Individually Evaluated for Impairment		61			-		-			69			35			115		905			28			-		-		1,213
Ending Balance Collectively Evaluated for Impairment		10,002			6,881		2,485			720			2,111			6,193		6,931			147			3,294		1,546		40,310
Loans & Leases:
Ending Balance	$	603,650		$	424,034	$	151,974		$	206,405		$	33,056		$	293,966	$	210,804		$	6,592		$	65,878	$	-	$	1,996,359
Ending Balance Individually Evaluated for Impairment		3,420			-		-			2,010			1,214			606		4,760			34			-		-		12,044
Ending Balance Collectively Evaluated for Impairment		600,230			424,034		151,974			204,395			31,842			293,360		206,044			6,558			65,878		-		1,984,315

March 31, 2015	Commercial Real Estate			Agricultural Real Estate		Real Estate Construction		Residential 1st Mortgages			Home Equity Lines & Loans			Agricultural			Commercial			Consumer & Other			Leases		Unallocated		Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2015	$	7,842		$	4,185	$	1,669	$	1,022		$	2,426		$	6,104		$	8,195		$	218		$	2,211	$	1,529	$	35,401
Charge-Offs		-			-		-		-			-			-			(12	)		(17	)		-		-		(29	)
Recoveries		2,938			-		-		-			5			1			2			22			-		-		2,968
Provision		(2,826	)		2,716		247		(349	)		(335	)		(1,503	)		756			(11	)		288		1,617		600
Ending Balance- March 31, 2015	$	7,954		$	6,901	$	1,916	$	673		$	2,096		$	4,602		$	8,941		$	212		$	2,499	$	3,146	$	38,940
Ending Balance Individually Evaluated for Impairment		61			-		-		72			53			129			1,118			37			-		-		1,470
Ending Balance Collectively Evaluated for Impairment		7,893			6,901		1,916		601			2,043			4,473			7,823			175			2,499		3,146		37,470
Loans:
Ending Balance	$	529,550		$	351,866	$	101,616	$	182,431		$	31,724		$	216,231		$	236,141		$	4,915		$	50,846	$	-	$	1,705,320
Ending Balance Individually Evaluated for Impairment		3,573			-		4,363		2,080			1,668			457			4,840			44			-		-		17,025
Ending Balance Collectively Evaluated for Impairment	$	525,977		$	351,866	$	97,253	$	180,351		$	30,056		$	215,774		$	231,301		$	4,871		$	50,846	$	-	$	1,688,295

The ending balance of loans individually evaluated for impairment includes restructured loans in the amount of $5.3 million at March 31, 2016, $4.9 million at December 31, 2015 and $9.8 million at March 31, 2015, which are no longer disclosed or classified as TDRs.

The following tables show the loan & lease portfolio allocated by management’s internal risk ratings at the dates indicated (in thousands):

March 31, 2016	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	602,242	$	8,573	$	696	$	611,511
Agricultural Real Estate		429,785		2,496		-		432,281
Real Estate Construction		164,895		1,560		-		166,455
Residential 1st Mortgages		210,884		410		911		212,205
Home Equity Lines & Loans		30,701		72		866		31,639
Agricultural		252,387		638		630		253,655
Commercial		202,878		7,582		3,019		213,479
Consumer & Other		6,856		-		210		7,066
Leases		60,441		4,339		-		64,780
Total	$	1,961,069	$	25,670	$	6,332	$	1,993,071

December 31, 2015	Pass		Special Mention		Substandard		Total Loans
Loans & Leases:
Commercial Real Estate	$	595,011	$	7,917	$	722	$	603,650
Agricultural Real Estate		424,034		-		-		424,034
Real Estate Construction		150,379		1,595		-		151,974
Residential 1st Mortgages		205,135		413		857		206,405
Home Equity Lines and Loans		32,419		75		562		33,056
Agricultural		293,325		9		632		293,966
Commercial		199,467		8,160		3,177		210,804
Consumer & Other		6,411		-		181		6,592
Leases		65,878		-		-		65,878
Total	$	1,972,059	$	18,169	$	6,131	$	1,996,359

March 31, 2015	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	520,613	$	8,834	$	103	$	529,550
Agricultural Real Estate		351,866		-		-		351,866
Real Estate Construction		99,920		1,696		-		101,616
Residential 1st Mortgages		181,021		744		666		182,431
Home Equity Lines & Loans		30,772		83		869		31,724
Agricultural		215,507		453		271		216,231
Commercial		220,491		12,086		3,564		236,141
Consumer & Other		4,687		-		228		4,915
Leases		50,846		-		-		50,846
Total	$	1,675,723	$	23,896	$	5,701	$	1,705,320

See “Note 1. Significant Accounting Policies - Allowance for Credit Losses” for a description of the internal risk ratings used by the Company. There were no loans or leases outstanding at March 31, 2016, December 31, 2015, and March 31, 2015, rated doubtful or loss.

The following tables show an aging analysis of the loan & lease portfolio by the time past due at the dates indicated

(in thousands):

March 31, 2016	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	696	$	-	$	-	$	-	$	696	$	610,815	$	611,511
Agricultural Real Estate		-		-		-		163		163		432,118		432,281
Real Estate Construction		-		-		-		-		-		166,455		166,455
Residential 1st Mortgages		-		-		-		62		62		212,143		212,205
Home Equity Lines & Loans		-		-		-		564		564		31,075		31,639
Agricultural		-		-		-		-		-		253,655		253,655
Commercial		-		-		-		1,499		1,499		211,980		213,479
Consumer & Other		5		-		-		9		14		7,052		7,066
Leases		-		-		-		-		-		64,780		64,780
Total	$	701			$	-	$	2,297	$	2,998	$	1,990,073	$	1,993,071

December 31, 2015	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	705	$	-	$	-	$	19	$	724	$	602,926	$	603,650
Agricultural Real Estate		-		-		-		-		-		424,034		424,034
Real Estate Construction		-		-		-		-		-		151,974		151,974
Residential 1st Mortgages		97		194		-		65		356		206,049		206,405
Home Equity Lines and Loans		-		-		-		538		538		32,518		33,056
Agricultural		-		-		-		-		-		293,966		293,966
Commercial		-		-		-		1,524		1,524		209,280		210,804
Consumer & Other		7		-		-		10		17		6,575		6,592
Leases		-		-		-		-		-		65,878		65,878
Total	$	809	$	194	$	-	$	2,156	$	3,159	$	1,993,200	$	1,996,359

March 31, 2015	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	719	$	-	$	-	$	103	$	822	$	528,728	$	529,550
Agricultural Real Estate		-		-		-		-		-		351,866		351,866
Real Estate Construction		-		-		-		-		-		101,616		101,616
Residential 1st Mortgages		99		-		-		74		173		182,258		182,431
Home Equity Lines & Loans		-		-		-		616		616		31,108		31,724
Agricultural		-		-		-		14		14		216,217		216,231
Commercial		-		-		-		1,573		1,573		234,568		236,141
Consumer & Other		9		-		-		13		22		4,893		4,915
Leases		-		-		-		-		-		50,846		50,846
Total	$	827			$	-	$	2,393	$	3,220	$	1,702,100	$	1,705,320

The following tables show information related to impaired loans & leases for the periods indicated (in thousands):

March 31, 2016	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	80	$	80	$	-	$	91	$	2
Agricultural Real Estate		163		163		-		82		3
Residential 1st Mortgages		329		371		-		440		2
Home Equity Lines & Loans		725		796		-		653		-
Agricultural		193		193		-		193		-
Commercial		3,083		3,083		-		3,093		33
	$	4,573	$	4,686	$	-	$	4,552	$	40
With an allowance recorded:
Residential 1st Mortgages	$	242	$	282	$	12	$	295	$	3
Home Equity Lines & Loans		218		231		35		176		1
Agricultural		413		413		115		413		6
Commercial		1,631		1,789		757		1,644		6
Consumer & Other		26		31		26		30		-
	$	2,530	$	2,746	$	945	$	2,558	$	16
Total	$	7,103	$	7,432	$	945	$	7,110	$	56

December 31, 2015	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	102	$	104	$	-	$	479	$	7
Residential 1st Mortgages		551		618		-		560		16
Home Equity Lines and Loans		581		646		-		620		3
Agricultural		193		193		-		105		3
Commercial		3,103		3,103		-		2,349		85
	$	4,530	$	4,664	$	-	$	4,113	$	114
With an allowance recorded:
Residential 1st Mortgages	$	348	$	420	$	17	$	354	$	16
Home Equity Lines and Loans		134		151		7		136		5
Agricultural		412		413		115		431		28
Commercial		1,657		1,798		905		2,456		31
Consumer & Other		34		40		29		39		3
	$	2,585	$	2,822	$	1,073	$	3,416	$	83
Total	$	7,115	$	7,486	$	1,073	$	7,529	$	197

March 31, 2015	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	192	$	192	$	-	$	96	$	2
Residential 1st Mortgages		569		632		-		285		4
Home Equity Lines & Loans		661		701		-		331		1
Agricultural		14		27		-		7		-
Commercial		48		48		-		24		1
	$	1,484	$	1,600	$	-	$	743	$	8
With an allowance recorded:
Residential 1st Mortgages	$	359	$	429	$	18		648	$	4
Home Equity Lines & Loans		138		156		7		545		1
Agricultural		443		443		129		452		7
Commercial		4,793		4,889		1,118		4,768		25
Consumer & Other		43		49		37		45		1
	$	5,776	$	5,966	$	1,309	$	6,458	$	38
Total	$	7,260	$	7,566	$	1,309	$	7,201	$	46

Total recorded investment shown in the prior tables will not equal the total ending balance of loans & leases individually evaluated for impairment on the allocation of allowance tables. This is because the calculation of recorded investment takes into account charge-offs, net unamortized loan & lease fees & costs, unamortized premium or discount, and accrued interest. This table also excludes impaired loans that were previously modified in a troubled debt restructuring, are currently performing and are no longer disclosed or classified as TDRs.

At March 31, 2016, the Company allocated $919,000 of specific reserves to $6.4 million of troubled debt restructured loans & leases, of which $4.8 million were performing. The Company had no commitments at March 31, 2016 to lend additional amounts to customers with outstanding loans or leases that are classified as TDRs.

During the three-month period ending March 31, 2016, the terms of certain loans & leases were modified as troubled debt restructurings. The modification of the terms of such loans & leases can include one or a combination of the following: a reduction of the stated interest rate; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate of the loan were for 5 years. Modifications involving an extension of the maturity date were for 10 years.

The following table presents loans or leases by class modified as TDRs during the three-month period ended March 31, 2016 (in thousands):

	March 31, 2016
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Home Equity Lines & Loans		2	$	305	$	286
Total		2	$	305	$	286

The TDRs described above decreased the allowance for credit losses by $17,000 and resulted in charge-offs of $20,000 for the three months ended March 31, 2016.

During the three-months ended March 31, 2016, there were no payment defaults on loans or leases modified as troubled debt restructurings within twelve months following the modification. The Company considers a loan or lease to be in payment default once it is greater than 90 days contractually past due under the modified terms.

At December 31, 2015, the Company allocated $1.1 million of specific reserves to $6.6 million of troubled debt restructured loans, of which $5.0 million were performing. The Company had no commitments at December 31, 2015 to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

During the period ending December 31, 2015, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate of the loan were for periods ranging from 4 to 30 years. Modifications involving an extension of the maturity date were for periods ranging from 6 months to 30 years.

The following table presents loans by class modified as troubled debt restructured loans for the period ended December 31, 2015 (in thousands):

			December 31, 2015
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Agricultural		1	$	194	$	194
Commercial		1		131		119
Total		2	$	325	$	313

The troubled debt restructurings described above increased the allowance for credit losses by $70,000 and resulted in charge-offs of $12,000 for the twelve months ended December 31, 2015.

During the period ended December 31, 2015, there were no payment defaults on loans modified as troubled debt restructurings within twelve months following the modification. The Company considers a loan to be in payment default once it is greater than 90 days contractually past due under the modified terms.

At March 31, 2015, the Company allocated $1.3 million of specific reserves to $6.5 million of troubled debt restructured loans & leases, of which $4.9 million were performing. The Company had no commitments at March 31, 2015 to lend additional amounts to customers with outstanding loans or leases that are classified as TDRs.

During the three-month period ending March 31, 2015, the terms of certain loans & leases were modified as troubled debt restructurings. The modification of the terms of such loans & leases can include one or a combination of the following: a reduction of the stated interest rate; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate of the loan were for 10 years. Modifications involving an extension of the maturity date were for 10 years.

The following table presents loans or leases by class modified as TDRs during the three-month period ended March 31, 2015 (in thousands):

	March 31, 2015
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding  Recorded Investment		Post-Modification Outstanding Recorded  Investment
Commercial		1	$	131	$	119
Total		1	$	131	$	119

The TDR described above increased the allowance for credit losses by $114,000 and resulted in charge-offs of $12,000 for the three months ended March 31, 2015.

During the three-months ended March 31, 2015, there were no payment defaults on loans or leases modified as troubled debt restructurings within twelve months following the modification. The Company considers a loan or lease to be in payment default once it is greater than 90 days contractually past due under the modified terms.

XML

Fair Value Measurements

3 Months Ended

Mar. 31, 2016

Fair Value Measurements [Abstract]

Fair Value Measurements

4. Fair Value Measurements

The Company follows the “Fair Value Measurement and Disclosures” topic of the FASB ASC, which establishes a framework for measuring fair value in U.S. GAAP and expands disclosures about fair value measurements. This standard applies whenever other standards require, or permit, assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. In this standard, the FASB clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, this standard establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy is as follows:

Level 1 inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date.

Level 2 inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Management monitors the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period.

Management evaluates the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total assets, total liabilities or total earnings.

Securities classified as AFS are reported at fair value on a recurring basis utilizing Level 1, 2 and 3 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond's terms and conditions, among other things.

The Company does not record all loans & leases at fair value on a recurring basis. However, from time to time, a loan or lease is considered impaired and an allowance for credit losses is established. Once a loan or lease is identified as individually impaired, management measures impairment in accordance with the “Receivable” topic of the FASB ASC. The fair value of impaired loans or leases is estimated using one of several methods, including collateral value when the loan is collateral dependent, market value of similar debt, enterprise value, and discounted cash flows. Impaired loans & leases not requiring an allowance represent loans & leases for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans & leases. Impaired loans & leases where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. The fair value of collateral dependent impaired loans is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including sales comparison, cost and the income approach. Adjustments are often made in the appraisal process by the appraisers to take into account differences between the comparable sales and income and other available data. Such adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value. The valuation technique used for Level 3 nonrecurring impaired loans is primarily the sales comparison approach less selling costs of 10%.

Other Real Estate (“ORE”) is reported at fair value on a non-recurring basis. Fair values are based on recent real estate appraisals. These appraisals may use a single valuation approach or a combination of approaches including sales comparison, cost and the income approach. Adjustments are often made in the appraisal process by the appraisers to take into account differences between the comparable sales and income and other available data. Such adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value. The valuation technique used for Level 3 nonrecurring ORE is primarily the sales comparison approach less selling costs of 10%.

At March 31, 2016, formal foreclosure proceedings were in process for $538,000 of consumer mortgage loans secured by residential real estate properties.

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value for the periods indicated.

			Fair Value Measurements At March 31, 2016, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets  for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant  Unobservable Inputs (Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	63,346	$	-	$	63,346	$	-
US Treasury Notes		65,788		65,788		-		-
Mortgage Backed Securities		212,127		-		212,127		-
Other		510		200		310		-
Total Assets Measured at Fair Value On a Recurring Basis	$	341,771	$	65,988	$	275,783	$	-

			Fair Value Measurements At December 31, 2015, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets  for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant  Unobservable Inputs (Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	33,251	$	-	$	33,251	$	-
US Treasury Notes		72,884		72,884		-		-
Mortgage Backed Securities		262,493		-		262,493		-
Other		509		199		310		-
Total Assets Measured at Fair Value On a Recurring Basis	$	369,137	$	73,083	$	296,054	$	-

			Fair Value Measurements At March 31, 2015, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable  Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	68,132	$	-	$	68,132	$	-
US Treasury Notes		19,966		-		19,966		-
Mortgage Backed Securities		276,601		-		276,601		-
Other		485		175		310		-
Total Assets Measured at Fair Value On a Recurring Basis	$	365,184	$	175	$	365,009	$	-

Fair values for Level 2 available-for-sale investment securities are based on quoted market prices for similar securities. During the quarters ended March 31, 2016 and 2015, there were no transfers in or out of Level 1, 2, or 3.

The following tables present information about the Company’s other real estate and impaired loans or leases, classes of assets or liabilities that the Company carries at fair value on a non-recurring basis, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value for the periods indicated. Not all impaired loans or leases are carried at fair value. Impaired loans or leases are only included in the following tables when their fair value is based upon a current appraisal of the collateral, and if that appraisal results in a partial charge-off or the establishment of a specific reserve.

			Fair Value Measurements At March 31, 2016, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired Loans
Residential 1st Mortgage	$	229	$	-	$	-	$	229
Home Equity Lines and Loans		365		-		-		365
Agricultural		298		-		-		298
Commercial		874		-		-		874
Total Impaired Loans		1,766		-		-		1,766
Other Real Estate
Real Estate Construction		585		-		-		585
Total Other Real Estate		585		-		-		585
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	2,351	$	-	$	-	$	2,351

			Fair Value Measurements At December 31, 2015, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical  Assets (Level 1)		Other Observable  Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
Impaired Loans:
Residential 1st Mortgage	$	329	$	-	$	-	$	329
Home Equity Lines and Loans		125		-		-		125
Agricultural		298		-		-		298
Commercial		752		-		-		752
Consumer		5		-		-		5
Total Impaired Loans		1,509		-		-		1,509
Other Real Estate:
Real Estate Construction		2,441		-		-		2,441
Total Other Real Estate		2,441		-		-		2,441
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	3,950	$	-	$	-	$	3,950

			Fair Value Measurements At March 31, 2015, Using
(in thousands)	Fair Value Total		Quoted Prices in  Active Markets  for Identical  Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired Loans
Residential 1st Mortgage	$	341	$	-	$	-	$	341
Home Equity Lines and Loans		130		-		-		130
Agricultural		314		-		-		314
Commercial		3,674		-		-		3,674
Consumer		6						6
Total Impaired Loans		4,465		-		-		4,465
Other Real Estate
Real Estate Construction		2,441		-		-		2,441
Agricultural Real Estate		858		-		-		858
Total Other Real Estate		3,299		-		-		3,299
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	7,764	$	-	$	-	$	7,764

The Company’s property appraisals are primarily based on the sales comparison approach and the income approach methodologies, which consider recent sales of comparable properties, including their income generating characteristics, and then make adjustments to reflect the general assumptions that a market participant would make when analyzing the property for purchase. These adjustments may increase or decrease an appraised value and can vary significantly depending on the location, physical characteristics and income producing potential of each property. Additionally, the quality and volume of market information available at the time of the appraisal can vary from period to period and cause significant changes to the nature and magnitude of comparable sale adjustments. Given these variations, comparable sale adjustments are generally not a reliable indicator for how fair value will increase or decrease from period to period. Under certain circumstances, management discounts are applied based on specific characteristics of an individual property.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at March 31, 2016:

(in thousands)	Fair Value		Valuation Technique	Unobservable Inputs	Range, Weighted Avg.
Impaired Loans
Residential 1st Mortgage	$	229	Sales Comparison Approach	Adjustment for Difference Between Comparable Sales		2% -4%, 3	%
Home Equity Lines and Loans	$	365	Sales Comparison Approach	Adjustment for Difference Between Comparable Sales		1% - 2%, 1	%
Agricultural	$	298	Income Approach	Capitalization Rate		16% - 16%, 16	%
Commercial	$	874	Income Approach	Capitalization Rate		16% - 16%, 16	%
Other Real Estate
Real Estate Construction	$	585	Sales Comparison Approach	Adjustment for Difference Between Comparable Sales		10% - 10%, 10	%

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2016

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

5. Fair Value of Financial Instruments

U.S. GAAP requires disclosure of fair value information about financial instruments, whether or not recognized on the balance sheet, for which it is practical to estimate that value. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. The use of assumptions and various valuation techniques, as well as the absence of secondary markets for certain financial instruments, will likely reduce the comparability of fair value disclosures between financial institutions. In some cases, book value is a reasonable estimate of fair value due to the relatively short period of time between origination of the instrument and its expected realization.

The following tables summarize the book value and estimated fair value of financial instruments for the periods indicated:

				Fair Value of Financial Instruments Using
March 31, 2016  (in thousands)	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs  (Level 3)			Total Estimated Fair Value
Assets:
Cash and Cash Equivalents	$	73,716		$	73,716	$	-	$	-		$	73,716
Investment Securities Available-for-Sale:
Government Agency & Government-Sponsored Entities		63,346			-		63,346		-			63,346
US Treasury Notes		65,788			65,788		-					65,788
Mortgage Backed Securities		212,127					212,127		-			212,127
Other		510			200		310		-			510
Total Investment Securities Available-for-Sale		341,771			65,988		275,783		-			341,771
Investment Securities Held-to-Maturity:
Obligations of States and Political Subdivisions		61,535			-		50,436		12,456			62,892
Total Investment Securities Held-to-Maturity		61,535			-		50,436		12,456			62,892
FHLB Stock		7,795			N/A		N/A		N/A			N/A
Loans & Leases, Net of Deferred Fees & Allowance:
Commercial Real Estate		601,412			-		-		604,707			604,707
Agricultural Real Estate		423,119			-		-		414,223			414,223
Real Estate Construction		163,861			-		-		163,917			163,917
Residential 1st Mortgages		211,409			-		-		214,885			214,885
Home Equity Lines and Loans		29,575			-		-		30,806			30,806
Agricultural		247,751			-		-		246,626			246,626
Commercial		205,754			-		-		204,828			204,828
Consumer & Other		6,879			-		-		6,938			6,938
Leases		61,541							62,459			62,459
Unallocated Allowance		(2,359	)		-		-		(2,359	)		(2,359	)
Total Loans & Leases, Net of Deferred Fees & Allowance		1,948,942			-		-		1,947,030			1,947,030
Accrued Interest Receivable		8,118			-		8,118		-			8,118
Liabilities:
Deposits:
Demand		637,140			637,140		-		-			637,140
Interest Bearing Transaction		409,360			409,361		-		-			409,361
Savings and Money Market		725,823			725,822		-		-			725,822
Time		484,141			-		483,789		-			483,789
Total Deposits		2,256,464			1,772,323		483,789		-			2,256,112
Subordinated Debentures		10,310			-		6,437		-			6,437
Accrued Interest Payable		471			-		471		-			471

				Fair Value of Financial Instruments Using
December 31, 2015 (in thousands)	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)			Other Observable Inputs (Level 2)			Significant  Unobservable  Inputs (Level 3)			Total Estimated Fair Value
Assets:
Cash and Cash Equivalents	$	59,446		$	59,446		$	-		$	-		$	59,446
Investment Securities Available-for-Sale:
Government Agency & Government-Sponsored Entities		33,251			-			33,251			-			33,251
U.S. Treasury Notes		72,884			72,884			-						72,884
Mortgage Backed Securities		262,493			-			262,493			-			262,493
Other		509			199			310			-			509
Total Investment Securities Available-for-Sale		369,137			73,083			296,054			-			369,137
Investment Securities Held-to-Maturity:
Obligations of States and Political Subdivisions		61,396			-			44,675			17,713			62,388
Total Investment Securities Held-to-Maturity		61,396			-			44,675			17,713			62,388
FHLB Stock		7,795			N/	A		N/	A		N/	A		N/	A
Loans & Leases, Net of Deferred Fees & Allowance:
Commercial Real Estate		593,587			-			-			591,271			591,271
Agricultural Real Estate		417,153			-			-			405,295			405,295
Real Estate Construction		149,489			-			-			149,371			149,371
Residential 1st Mortgages		205,616			-			-			207,431			207,431
Home Equity Lines and Loans		30,910			-			-			32,360			32,360
Agricultural		287,658			-			-			285,733			285,733
Commercial		202,968			-			-			201,105			201,105
Consumer & Other		6,417			-			-			6,416			6,416
Leases		62,584			-			-			62,139			62,139
Unallocated Allowance		(1,546	)		-			-			(1,546	)		(1,546	)
Total Loans & Leases, Net of Deferred Fees & Allowance		1,954,836			-			-			1,939,575			1,939,575
Accrued Interest Receivable		9,240			-			9,240			-			9,240
Liabilities:
Deposits:
Demand		711,029			711,029			-			-			711,029
Interest Bearing Transaction		377,594			377,594			-			-			377,594
Savings and Money Market		707,885			707,885			-			-			707,885
Time		481,024			-			480,334			-			480,334
Total Deposits		2,277,532			1,796,508			480,334			-			2,276,842
Subordinated Debentures		10,310			-			6,424			-			6,424
Accrued Interest Payable		513			-			513			-			513

				Fair Value of Financial Instruments Using
March 31, 2015 (in thousands)	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)			Other Observable Inputs (Level 2)			Significant Unobservable  Inputs (Level 3)			Total Estimated Fair Value
Assets:
Cash and Cash Equivalents	$	143,936		$	143,936		$	-		$	-		$	143,936
Investment Securities Available-for-Sale:
Government Agency & Government-Sponsored Entities		68,132			-			68,132			-			68,132
US Treasury Notes		19,966						19,966						19,966
Mortgage Backed Securities		276,601						276,601			-			276,601
Other		485			175			310			-			485
Total Investment Securities Available-for-Sale		365,184			175			365,009			-			365,184
Investment Securities Held-to-Maturity:
Obligations of States and Political Subdivisions		61,324			-			48,583			13,496			62,079
Other		2,139			-			2,139			-			2,139
Total Investment Securities Held-to-Maturity		63,463			-			50,722			13,496			64,218
FHLB Stock		7,677			N/	A		N/	A		N/	A		N/	A
Loans & Leases, Net of Deferred Fees & Allowance:
Commercial Real Estate		521,596			-			-			519,698			519,698
Agricultural Real Estate		344,965			-			-			346,742			346,742
Real Estate Construction		99,700			-			-			99,861			99,861
Residential 1st Mortgages		181,758			-			-			185,210			185,210
Home Equity Lines and Loans		29,628			-			-			31,332			31,332
Agricultural		211,629			-			-			210,769			210,769
Commercial		227,200			-			-			224,783			224,783
Consumer & Other		4,703			-			-			4,747			4,747
Leases		48,347									48,779			48,779
Unallocated Allowance		(3,146	)		-			-			(3,146	)		(3,146	)
Total Loans & Leases, Net of Deferred Fees & Allowance		1,666,380			-			-			1,668,775			1,668,775
Accrued Interest Receivable		7,324			-			7,324			-			7,324
Liabilities:
Deposits:
Demand		578,820			578,820			-			-			578,820
Interest Bearing Transaction		340,045			340,045			-			-			340,045
Savings and Money Market		699,308			699,308			-			-			699,308
Time		493,600			-			493,600			-			493,600
Total Deposits		2,111,773			1,618,173			493,600			-			2,111,773
Subordinated Debentures		10,310			-			6,250			-			6,250
Accrued Interest Payable		433			-			433			-			433

Fair value estimates presented herein are based on pertinent information available to management as of March 31, 2016, December 31, 2015, and March 31, 2015. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purpose of these financial statements since that date, and; therefore, current estimates of fair value may differ significantly from the amounts presented above. The methods and assumptions used to estimate the fair value of each class of financial instrument listed in the table above are explained below.

Cash and Cash Equivalents - The carrying amounts reported in the balance sheet for cash and due from banks, interest-bearing deposits with banks, federal funds sold, and securities purchased under agreements to resell are a reasonable estimate of fair value. All cash and cash equivalents are classified as Level 1.

Investment Securities - Fair values for investment securities consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond's terms and conditions, among other things. Based on the available market information the classification level could be 1, 2, or 3.

Federal Home Loan Bank Stock - It is not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability.

Loans & Leases, Net of Deferred Loan & Lease Fees & Allowance - Fair values of loans & leases are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans & leases are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans & leases are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans & leases do not necessarily represent an exit price.

Deposit Liabilities - The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. Fair values for fixed-maturity certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

Subordinated Debentures - The fair values of the Company’s Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

Accrued Interest Receivable and Payable - The carrying amount of accrued interest receivable and payable approximates their fair value resulting in a Level 2 classification.

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Dividends and Basic Earnings Per Common Share

3 Months Ended

Mar. 31, 2016

Dividends and Basic Earnings Per Common Share [Abstract]

Dividends and Basic Earnings Per Common Share

6. Dividends and Basic Earnings Per Common Share

Farmers & Merchants Bancorp common stock is not traded on any exchange. The shares are primarily held by local residents and are not actively traded. No cash dividends were declared during the first quarter of 2016 or 2015.

Basic earnings per common share amounts are computed by dividing net income by the weighted average number of common shares outstanding for the period. The Company has no securities or other contracts, such as stock options, that could require the issuance of common stock.   Accordingly, diluted earnings per share are not presented. The following table calculates the basic earnings per common share for the three months ended March 31, 2016 and 2015.

(net income in thousands)	2016		2015
Net Income	$	7,172	$	6,403
Weighted Average Number of Common Shares Outstanding		791,895		785,366
Basic Earnings Per Common Share Amount	$	9.06	$	8.15

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Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2016

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

7. Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09 - Revenue from Contracts with Customers (Topic 606), which will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific revenue recognition guidance throughout the Accounting Standards Codification. The amendments in this update affect any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets unless those contracts, including leases and insurance contracts, are within the scope of other standards. The amendments establish a core principle requiring the recognition of revenue to depict the transfer of goods or services to customers in an amount reflecting the consideration to which the entity expects to be entitled in exchange for such goods or services. The amendments also require expanded disclosures concerning the nature, amount, timing and uncertainty of revenues and cash flows arising from contracts with customers. For public entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and must be applied retrospectively. Early application is not permitted. Management is currently evaluating the impact of adoption.

In August 2015, the FASB issued ASU 2015-14 - Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date. The amendments in this Update defer the effective date of Update 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires that a lessee recognize assets and liabilities for leases with lease terms of more than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, the standard will require both types of leases to be recognized on the balance sheet. It also requires disclosures to better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The new standard applies to public business entities in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. Management is currently evaluating the impact of adoption.

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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

Significant Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements and notes thereto have been prepared in accordance with accounting principles generally accepted in the United States of America for financial information.

These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting on Form 10-Q. Accordingly, certain disclosures normally presented in the notes to the annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted. The Company believes that the disclosures are adequate to make the information not misleading. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The results of operations for the three-month period ended March 31, 2016 may not necessarily be indicative of future operating results.

The accompanying consolidated financial statements include the accounts of the Company and the Company’s wholly owned subsidiaries, F & M Bancorp, Inc. and the Bank, along with the Bank’s wholly owned subsidiaries, Farmers & Merchants Investment Corporation and Farmers/Merchants Corp. Significant inter-company transactions have been eliminated in consolidation.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of 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 these estimates.

Certain amounts in the prior years' financial statements and related footnote disclosures have been reclassified to conform to the current-year presentation. These reclassifications had no effect on previously reported net income or total shareholders’ equity. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments), which are necessary for a fair presentation of financial results for the periods presented.

Cash and Cash Equivalents

Cash and Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, the Company has defined cash and cash equivalents as those amounts included in the balance sheet captions Cash and Due from Banks, Interest Bearing Deposits with Banks, Federal Funds Sold and Securities Purchased Under Agreements to Resell. For these instruments, the carrying amount is a reasonable estimate of fair value.

Investment Securities

Investment Securities

Investment securities are classified at the time of purchase as held-to-maturity (“HTM”) if it is management’s intent and the Company has the ability to hold the securities until maturity. These securities are carried at cost, adjusted for amortization of premium and accretion of discount using a level yield of interest over the estimated remaining period until maturity. Losses, reflecting a decline in value judged by the Company to be other than temporary, are recognized in the period in which they occur.

Securities are classified as available-for-sale (“AFS”) if it is management’s intent, at the time of purchase, to hold the securities for an indefinite period of time and/or to use the securities as part of the Company’s asset/liability management strategy. These securities are reported at fair value with aggregate unrealized gains or losses excluded from income and included as a separate component of shareholders’ equity, net of related income taxes. Fair values are based on quoted market prices or broker/dealer price quotations on a specific identification basis. Gains or losses on the sale of these securities are computed using the specific identification method.

Trading securities, if any, are acquired for short-term appreciation and are recorded in a trading portfolio and are carried at fair value, with unrealized gains and losses recorded in non-interest income.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement; and (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans & Leases

Loans & Leases

Loans & leases are reported at the principal amount outstanding net of unearned discounts and deferred loan & lease fees and costs. Interest income on loans & leases is accrued daily on the outstanding balances using the simple interest method. Loan & lease origination fees are deferred and recognized over the contractual life of the loan or lease as an adjustment to the yield. Loans & leases are placed on non-accrual status when the collection of principal or interest is in doubt or when they become past due for 90 days or more unless they are both well-secured and in the process of collection. For this purpose, a loan or lease is considered well-secured if it is collateralized by property having a net realizable value in excess of the amount of the loan or lease or is guaranteed by a financially capable party. When a loan or lease is placed on non-accrual status, the accrued and unpaid interest receivable is reversed and charged against current income; thereafter, interest income is recognized only as it is collected in cash. Additionally, cash would be applied to principal if all principal was not expected to be collected. Loans & leases placed on non-accrual status are returned to accrual status when the loans or leases are paid current as to principal and interest and future payments are expected to be made in accordance with the contractual terms of the loan or lease.

A loan or lease is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the original agreement. Impaired loans & leases are either: (1) non-accrual loans & leases; or (2) restructured loans & leases that are still accruing interest. Loans or leases determined to be impaired are individually evaluated for impairment. When a loan or lease is impaired, the Company measures impairment based on the present value of expected future cash flows discounted at the loan or lease's effective interest rate, except that as a practical expedient, it may measure impairment based on a loan or lease's observable market price, or the fair value of the collateral if the loan or lease is collateral dependent. A loan or lease is collateral dependent if the repayment of the loan or lease is expected to be provided solely by the underlying collateral.

A restructuring of a loan or lease constitutes a troubled debt restructuring (“TDR”) if the Company for economic or legal reasons related to the borrower’s (the term “borrower” is used herein to describe a customer who has entered into either a loan or lease transaction) financial difficulties grants a concession to the borrower that it would not otherwise consider. Restructured loans & leases typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms. If the restructured loan or lease was current on all payments at the time of restructure and management reasonably expects the borrower will continue to perform after the restructure, management may keep the loan or lease on accrual. Loans & leases that are on nonaccrual status at the time they become TDR, remain on nonaccrual status until the borrower demonstrates a sustained period of performance, which the Company generally believes to be six consecutive months of payments, or equivalent. A loan or lease can be removed from TDR status if it was restructured at a market rate in a prior calendar year and is currently in compliance with its modified terms. However, these loans or leases continue to be classified as impaired and are individually evaluated for impairment as described above.

Generally, the Company will not restructure loans or leases for borrowers unless: (1) the existing loan or lease is brought current as to principal and interest payments; and (2) the restructured loan or lease can be underwritten to reasonable underwriting standards. If these standards are not met other actions will be pursued (e.g., foreclosure) to collect outstanding loan or lease amounts. After restructure a determination is made whether the loan or lease will be kept on accrual status based upon the underwriting and historical performance of the restructured credit.

Allowance for Credit Losses

Allowance for Credit Losses

The allowance for credit losses is an estimate of probable incurred credit losses inherent in the Company's loan & lease portfolio as of the balance sheet date. The allowance is established through a provision for credit losses, which is charged to expense. Additions to the allowance are expected to maintain the adequacy of the total allowance after credit losses and loan & lease growth. Credit exposures determined to be uncollectible are charged against the allowance. Cash received on previously charged off amounts is recorded as a recovery to the allowance. The overall allowance consists of three primary components: specific reserves related to impaired loans & leases; general reserves for inherent losses related to loans & leases that are not impaired; and an unallocated component that takes into account the imprecision in estimating and allocating allowance balances associated with macro factors.

The determination of the general reserve for loans & leases that are collectively evaluated for impairment is based on estimates made by management, to include, but not limited to, consideration of historical losses by portfolio segment, internal asset classifications, qualitative factors that include economic trends in the Company's service areas, industry experience and trends, geographic concentrations, estimated collateral values, the Company's underwriting policies, the character of the loan & lease portfolio, and probable losses inherent in the portfolio taken as a whole.

The Company maintains a separate allowance for each portfolio segment (loan & lease type). These portfolio segments include: (1) commercial real estate; (2) agricultural real estate; (3) real estate construction (including land and development loans); (4) residential 1^st mortgages; (5) home equity lines and loans; (6) agricultural; (7) commercial; (8) consumer and other; and (9) equipment leases. The allowance for credit losses attributable to each portfolio segment, which includes both individually evaluated impaired loans & leases and loans & leases that are collectively evaluated for impairment, is combined to determine the Company's overall allowance, which is included on the consolidated balance sheet.

The Company assigns a risk rating to all loans & leases and periodically performs detailed reviews of all such loans & leases over a certain threshold to identify credit risks and assess overall collectability. For smaller balance loans & leases, such as consumer and residential real estate, a credit grade is established at inception, and then updated only when the loan or lease becomes contractually delinquent or when the borrower requests a modification. For larger balance loans, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which borrowers operate and the fair values of collateral securing these loans & leases. These credit quality indicators are used to assign a risk rating to each individual loan or lease. These risk ratings are also subject to examination by independent specialists engaged by the Company. The risk ratings can be grouped into five major categories, defined as follows:

Pass – A pass loan or lease is a strong credit with no existing or known potential weaknesses deserving of management's close attention.

Special Mention – A special mention loan or lease has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or lease or in the Company's credit position at some future date. Special mention loans & leases are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Substandard – A substandard loan or lease is not adequately protected by the current financial condition and paying capacity of the borrower or the value of the collateral pledged, if any. Loans or leases classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Well defined weaknesses include a project's lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time or the project's failure to fulfill economic expectations.They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful –Loans or leases classified doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, based on currently known facts, conditions and values, highly questionable or improbable.

Loss – Loans or leases classified as loss are considered uncollectible. Once a loan or lease becomes delinquent and repayment becomes questionable, the Company will address collateral shortfalls with the borrower and attempt to obtain additional collateral. If this is not forthcoming and payment in full is unlikely, the Company will estimate its probable loss and immediately charge-off some or all of the balance.

The general reserve component of the allowance for credit losses also consists of reserve factors that are based on management's assessment of the following for each portfolio segment: (1) inherent credit risk; (2) historical losses; and (3) other qualitative factors. These reserve factors are inherently subjective and are driven by the repayment risk associated with each portfolio segment described below:

Commercial Real Estate – Commercial real estate mortgage loans are generally considered to possess a higher inherent risk of loss than the Company’s commercial, agricultural and consumer loan types. Adverse economic developments or an overbuilt market impact commercial real estate projects and may result in troubled loans. Trends in vacancy rates of commercial properties impact the credit quality of these loans. High vacancy rates reduce operating revenues and the ability for properties to produce sufficient cash flow to service debt obligations.

Real Estate Construction – Real estate construction loans, including land loans, are generally considered to possess a higher inherent risk of loss than the Company’s commercial, agricultural and consumer loan types. A major risk arises from the necessity to complete projects within specified cost and time lines. Trends in the construction industry significantly impact the credit quality of these loans, as demand drives construction activity. In addition, trends in real estate values significantly impact the credit quality of these loans, as property values determine the economic viability of construction projects.

Commercial – These loans are generally considered to possess a moderate inherent risk of loss because they are shorter-term; typically made to relationship customers; generally underwritten to existing cash flows of operating businesses; and may be collateralized by fixed assets, inventory and/or accounts receivable. Debt coverage is provided by business cash flows and economic trends influenced by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans.

Agricultural Real Estate and Agricultural – These loans are generally considered to possess a moderate inherent risk of loss since they are typically made to relationship customers and are secured by crop production, livestock and related real estate.  These loans are vulnerable to two risk factors that are largely outside the control of Company and borrowers: commodity prices and weather conditions.

Leases – Equipment leases are generally considered to possess a moderate inherent risk of loss. As Lessor, the Company is subject to both the credit risk of the borrower and the residual value risk of the equipment. Credit risks are underwritten using the same credit criteria the Company would use when making an equipment term loan. Residual value risk is managed through the use of qualified, independent appraisers that establish the residual values the Company uses in structuring a lease.

Residential 1st Mortgages and Home Equity Lines and Loans – These loans are generally considered to possess a low inherent risk of loss, although this is not always true as evidenced by the correction in residential real estate values that occurred between 2007 and 2012. The degree of risk in residential real estate lending depends primarily on the loan amount in relation to collateral value, the interest rate and the borrower's ability to repay in an orderly fashion. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate that the borrowers' capacity to repay their obligations may be deteriorating.

Consumer & Other – A consumer installment loan portfolio is usually comprised of a large number of small loans scheduled to be amortized over a specific period. Most installment loans are made for consumer purchases. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate that the borrowers' capacity to repay their obligations may be deteriorating.

At least quarterly, the Board of Directors reviews the adequacy of the allowance, including consideration of the relative risks in the portfolio, current economic conditions and other factors. If the Board of Directors and management determine that changes are warranted based on those reviews, the allowance is adjusted. In addition, the Company's and Bank's regulators, including the Federal Reserve Bank (“FRB”), the California Department of Business Oversight (“DBO”) and the Federal Deposit Insurance Corporation (“FDIC”), as an integral part of their examination process, review the adequacy of the allowance. These regulatory agencies may require additions to the allowance based on their judgment about information available at the time of their examinations.

Allowance for Credit Losses on Off-Balance-Sheet Credit Exposures

Allowance for Credit Losses on Off-Balance-Sheet Credit Exposures

The Company also maintains a separate allowance for off-balance-sheet commitments. Management estimates anticipated losses using historical data and utilization assumptions. The allowance for off-balance-sheet commitments is included in Interest Payable and Other Liabilities on the Company’s Consolidated Balance Sheet.

Premises and Equipment

Premises and Equipment

Premises, equipment, and leasehold improvements are stated at cost, less accumulated depreciation and amortization. Depreciation is computed principally by the straight line method over the estimated useful lives of the assets. Estimated useful lives of buildings range from 30 to 40 years, and for furniture and equipment from 3 to 7 years. Leasehold improvements are amortized over the lesser of the terms of the respective leases, or their useful lives, which are generally 5 to 10 years. Remodeling and capital improvements are capitalized while maintenance and repairs are charged directly to occupancy expense.

Other Real Estate

Other Real Estate

Other real estate, which is included in other assets, is expected to be sold and is comprised of properties no longer utilized for business operations and property acquired through foreclosure in satisfaction of indebtedness. These properties are recorded at fair value less estimated selling costs upon acquisition. Revised estimates to the fair value less cost to sell are reported as adjustments to the carrying amount of the asset, provided that such adjusted value is not in excess of the carrying amount at acquisition. Initial losses on properties acquired through full or partial satisfaction of debt are treated as credit losses and charged to the allowance for credit losses at the time of acquisition. Subsequent declines in value from the recorded amounts, routine holding costs, and gains or losses upon disposition, if any, are included in non-interest expense as incurred.

Income Taxes

Income Taxes

The Company uses the liability method of accounting for income taxes. This method results in the recognition of deferred tax assets and liabilities that are reflected at currently enacted 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 deferred provision for income taxes is the result of the net change in the deferred tax asset and deferred tax liability balances during the year. This amount combined with the current taxes payable or refundable results in the income tax expense for the current year.

The Company follows the standards set forth in the “Income Taxes” topic of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. This standard prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

The Company accounts for leases with Investment Tax Credits (ITC) under the deferred method as established in ASC 740-10. ITC are viewed and accounted for as a reduction of the cost of the related assets and presented as deferred income on the Company’s financial statement.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceed the amount measured as described above would be reflected as a liability for unrecognized tax benefits in the consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Interest expense and penalties associated with unrecognized tax benefits, if any, are included in the provision for income taxes in the Unaudited Consolidated Statements of Income. As of March 31, 2016 and 2015, the Company had no interest expense or penalties associated with unrecognized tax benefits.

Basic Earnings Per Common Share

Basic Earnings Per Common Share

The Company’s common stock is not traded on any exchange. The shares are primarily held by local residents and are not actively traded. Basic earnings per common share amounts are computed by dividing net income by the weighted average number of common shares outstanding for the period. There are no common stock equivalent shares. Therefore, there is no presentation of diluted basic earnings per common share. See Note 6 for additional information.

Segment Reporting

Segment Reporting

The “Segment Reporting” topic of the FASB ASC requires that public companies report certain information about operating segments. It also requires that public companies report certain information about their products and services, the geographic areas in which they operate, and their major customers. The Company is a holding company for a community bank, which offers a wide array of products and services to its customers. Pursuant to its banking strategy, emphasis is placed on building relationships with its customers, as opposed to building specific lines of business. As a result, the Company is not organized around discernible lines of business and prefers to work as an integrated unit to customize solutions for its customers, with business line emphasis and product offerings changing over time as needs and demands change. Therefore, the Company only reports one segment.

Low Income Housing Tax Credit Investments (LIHTC)

Low Income Housing Tax Credit Investments (LIHTC)

The Company accounts for its interest in LIHTC using the cost method as established in ASC 323-740. As an investor, the Company obtains income tax credits and deductions from the operating losses of these tax credit entities. The income tax credits and deductions are allocated to the investors based on their ownership percentages and are recorded as a reduction of income tax expense (or an increase to income tax benefit) and a reduction of federal income taxes payable.

Comprehensive Income

Comprehensive Income

The “Comprehensive Income” topic of the FASB ASC establishes standards for the reporting and display of comprehensive income and its components in the financial statements. Other comprehensive income (loss) refers to revenues, expenses, gains, and losses that U.S. GAAP recognize as changes in value to an enterprise but are excluded from net income. For the Company, comprehensive income includes net income and changes in fair value of its available-for-sale investment securities.

Loss Contingencies

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.

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Recent Accounting Pronouncements (Policies)

3 Months Ended

Mar. 31, 2016

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09 - Revenue from Contracts with Customers (Topic 606), which will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific revenue recognition guidance throughout the Accounting Standards Codification. The amendments in this update affect any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets unless those contracts, including leases and insurance contracts, are within the scope of other standards. The amendments establish a core principle requiring the recognition of revenue to depict the transfer of goods or services to customers in an amount reflecting the consideration to which the entity expects to be entitled in exchange for such goods or services. The amendments also require expanded disclosures concerning the nature, amount, timing and uncertainty of revenues and cash flows arising from contracts with customers. For public entities, the amendments in this update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and must be applied retrospectively. Early application is not permitted. Management is currently evaluating the impact of adoption.

In August 2015, the FASB issued ASU 2015-14 - Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date. The amendments in this Update defer the effective date of Update 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires that a lessee recognize assets and liabilities for leases with lease terms of more than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, the standard will require both types of leases to be recognized on the balance sheet. It also requires disclosures to better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The new standard applies to public business entities in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. Management is currently evaluating the impact of adoption.

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Investment Securities (Tables)

3 Months Ended

Mar. 31, 2016

Investment Securities [Abstract]

Amortized Cost, Fair Values, and Unrealized Gains and Losses of Securities Available-for-Sale

The amortized cost, fair values, and unrealized gains and losses of the securities available-for-sale are as follows

(in thousands):

	Amortized		Gross Unrealized				Fair/Book
March 31, 2016	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	63,157	$	190	$	1	$	63,346
US Treasury Notes		65,571		217		-		65,788
Mortgage Backed Securities (1)		207,021		5,113		7		212,127
Other		510		-		-		510
Total	$	336,259	$	5,520	$	8	$	341,771

	Amortized		Gross Unrealized				Fair/Book
December 31, 2015	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	33,536	$	134	$	419	$	33,251
US Treasury Notes		73,048		-		164		72,884
Mortgage Backed Securities (1)		261,016		2,708		1,231		262,493
Other		509		-		-		509
Total	$	368,109	$	2,842	$	1,814	$	369,137

	Amortized		Gross Unrealized				Fair/Book
March 31, 2015	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	68,064	$	69	$	1	$	68,132
US Treasury Notes		19,818		148		-		19,966
Mortgage Backed Securities (1)		270,820		5,977		196		276,601
Other		485		-		-		485
Total	$	359,187	$	6,194	$	197	$	365,184

⁽¹⁾ All Mortgage Backed Securities consist of securities collateralized by residential real estate and were issued by an agency or government sponsored entity of the U.S. government.

Book Values, Estimated Fair Values and Unrealized Gains and Losses of Investments Classified as Held-to-Maturity

The book values, estimated fair values and unrealized gains and losses of investments classified as held-to-maturity are as follows (in thousands):

	Book		Gross Unrealized				Fair
March 31, 2016	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	61,535	$	1,357	$	-	$	62,892
Total	$	61,535	$	1,357	$	-	$	62,892

	Book		Gross Unrealized				Fair
December 31, 2015	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	61,396	$	993	$	1	$	62,388
Total	$	61,396	$	993	$	1	$	62,388

	Book		Gross Unrealized				Fair
March 31, 2015	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	61,324	$	766	$	11	$	62,079
Other		2,139		-		-		2,139
Total	$	63,463	$	766	$	11	$	64,218

Amortized Cost and Estimated Fair Values of Investment Securities by Contractual Maturity

The amortized cost and estimated fair values of investment securities at March 31, 2016 by contractual maturity are shown in the following table (in thousands):

	Available-for-Sale				Held-to-Maturity
March 31, 2016	Amortized Cost		Fair/Book Value		Book Value		Fair Value
Within one year	$	60,504	$	60,503	$	225	$	225
After one year through five years		68,734		69,141		12,034		12,087
After five years through ten years		-		-		11,425		11,615
After ten years		-		-		37,851		38,965
		129,238		129,644		61,535		62,892
Investment securities not due at a single maturity date:
Mortgage-backed securities		207,021		212,127		-		-
Total	$	336,259	$	341,771	$	61,535	$	62,892

Investments with Gross Unrealized Losses and Their Market Value Aggregated by Investment Category and Length of Time that Individual Securities Have Been in a Continuous Unrealized Loss Position

The following tables show those investments with gross unrealized losses and their market value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at the dates indicated (in thousands):

	Less Than 12 Months						12 Months or More						Total
March 31, 2016	Fair Value			Unrealized Loss			Fair Value			Unrealized Loss			Fair Value			Unrealized Loss
Securities Available-for-Sale
Government Agency & Government-Sponsored Entities		$	39,996		$	1		$	-		$	-		$	39,996		$	1
Mortgage Backed Securities			1,529			7			-			-			1,529			7
Total		$	41,525		$	8		$	-		$	-		$	41,525		$	8

	Less Than 12 Months				12 Months or More				Total
December 31, 2015	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Securities Available-for-Sale
Government Agency & Government-Sponsored Entities	$	29,944	$	419	$	-	$	-	$	29,944	$	419
US Treasury Notes		44,887		164		-		-		44,887		164
Mortgage Backed Securities		78,899		1,089		7,277		142		86,176		1,231
Total	$	153,730	$	1,672	$	7,277	$	142	$	161,007	$	1,814
Securities Held-to-Maturity
Obligations of States and Political Subdivisions	$	839	$	1	$	-	$	-	$	839	$	1
Total	$	839	$	1	$	-	$	-	$	839	$	1

	Less Than 12 Months						12 Months or More						Total
March 31, 2015	Fair Value			Unrealized Loss			Fair Value			Unrealized Loss			Fair Value			Unrealized Loss
Securities Available-for-Sale
Government Agency & Government-Sponsored Entities		$	24,998		$	1		$	-		$	-		$	24,998		$	1
Mortgage Backed Securities			13,033			28			25,942			168			38,975			196
Total		$	38,031		$	29		$	25,942		$	168		$	63,973		$	197
Securities Held-to-Maturity
Obligations of States and Political Subdivisions		$	1,340		$	11		$	-		$	-		$	1,340		$	11
Total		$	1,340		$	11		$	-		$	-		$	1,340		$	11

Proceeds from Sales and Calls of Securities

Proceeds from sales and calls of securities were as follows:

(in thousands)	Proceeds		Gains		Losses
Three Months Ended March 31, 2016	$	102,895	$	244	$	533
Three Months Ended March 31, 2015	$	475	$	1	$	-

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Loans & Leases and Allowance for Credit Losses (Tables)

3 Months Ended

Mar. 31, 2016

Loans & Leases and Allowance for Credit Losses [Abstract]

Allocation of Allowance for Credit Losses by Portfolio Segment and by Impairment Methodology

The following tables show the allocation of the allowance for credit losses by portfolio segment and by impairment methodology at the dates indicated (in thousands):

March 31, 2016	Commercial Real Estate		Agricultural Real Estate		Real Estate  Construction		Residential 1st Mortgages		Home Equity  Lines & Loans			Agricultural			Commercial			Consumer & Other			Leases			Unallocated		Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2016	$	10,063	$	6,881	$	2,485	$	789	$	2,146		$	6,308		$	7,836		$	175		$	3,294		$	1,546	$	41,523
Charge-Offs		-		-		-		-		(19	)		-			-			(25	)		-			-		(44	)
Recoveries		2		-		-		6		2			-			27			13			-			-		50
Provision		34		2,281		109		1		(65	)		(404	)		(138	)		24			(55	)		813		2,600
Ending Balance- March 31, 2016	$	10,099	$	9,162	$	2,594	$	796	$	2,064		$	5,904		$	7,725		$	187		$	3,239		$	2,359	$	44,129
Ending Balance Individually Evaluated for Impairment		59		-		-		66		65			115			757			26			-			-		1,088
Ending Balance Collectively Evaluated for Impairment		10,040		9,162		2,594		730		1,999			5,789			6,968			161			3,239			2,359		43,041
Loans:
Ending Balance	$	611,511	$	432,281	$	166,455	$	212,205	$	31,639		$	253,655		$	213,479		$	7,066		$	64,780		$	-	$	1,993,071
Ending Balance Individually Evaluated for Impairment		3,376		163		-		1,944		1,513			605			4,714			30			-			-		12,345
Ending Balance Collectively Evaluated for Impairment	$	608,135	$	432,118	$	166,455	$	210,261	$	30,126		$	253,050		$	208,765		$	7,036		$	64,780		$	-	$	1,980,726

December 31, 2015	Commercial Real Estate			Agricultural Real Estate		Real Estate Construction			Residential 1st  Mortgages			Home Equity  Lines & Loans			Agricultural		Commercial			Consumer & Other			Leases		Unallocated		Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2015	$	7,842		$	4,185	$	1,669		$	1,022		$	2,426		$	6,104	$	8,195		$	218		$	2,211	$	1,529	$	35,401
Charge-Offs		-			-		-			-			-			-		(12	)		(84	)		-		-		(96	)
Recoveries		2,939			-		2,225			8			87			4		136			69			-		-		5,468
Provision		(718	)		2,696		(1,409	)		(241	)		(367	)		200		(483	)		(28	)		1,083		17		750
Ending Balance- December 31, 2015	$	10,063		$	6,881	$	2,485		$	789		$	2,146		$	6,308	$	7,836		$	175		$	3,294	$	1,546	$	41,523
Ending Balance Individually Evaluated for Impairment		61			-		-			69			35			115		905			28			-		-		1,213
Ending Balance Collectively Evaluated for Impairment		10,002			6,881		2,485			720			2,111			6,193		6,931			147			3,294		1,546		40,310
Loans & Leases:
Ending Balance	$	603,650		$	424,034	$	151,974		$	206,405		$	33,056		$	293,966	$	210,804		$	6,592		$	65,878	$	-	$	1,996,359
Ending Balance Individually Evaluated for Impairment		3,420			-		-			2,010			1,214			606		4,760			34			-		-		12,044
Ending Balance Collectively Evaluated for Impairment		600,230			424,034		151,974			204,395			31,842			293,360		206,044			6,558			65,878		-		1,984,315

March 31, 2015	Commercial Real Estate			Agricultural Real Estate		Real Estate Construction		Residential 1st Mortgages			Home Equity Lines & Loans			Agricultural			Commercial			Consumer & Other			Leases		Unallocated		Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2015	$	7,842		$	4,185	$	1,669	$	1,022		$	2,426		$	6,104		$	8,195		$	218		$	2,211	$	1,529	$	35,401
Charge-Offs		-			-		-		-			-			-			(12	)		(17	)		-		-		(29	)
Recoveries		2,938			-		-		-			5			1			2			22			-		-		2,968
Provision		(2,826	)		2,716		247		(349	)		(335	)		(1,503	)		756			(11	)		288		1,617		600
Ending Balance- March 31, 2015	$	7,954		$	6,901	$	1,916	$	673		$	2,096		$	4,602		$	8,941		$	212		$	2,499	$	3,146	$	38,940
Ending Balance Individually Evaluated for Impairment		61			-		-		72			53			129			1,118			37			-		-		1,470
Ending Balance Collectively Evaluated for Impairment		7,893			6,901		1,916		601			2,043			4,473			7,823			175			2,499		3,146		37,470
Loans:
Ending Balance	$	529,550		$	351,866	$	101,616	$	182,431		$	31,724		$	216,231		$	236,141		$	4,915		$	50,846	$	-	$	1,705,320
Ending Balance Individually Evaluated for Impairment		3,573			-		4,363		2,080			1,668			457			4,840			44			-		-		17,025
Ending Balance Collectively Evaluated for Impairment	$	525,977		$	351,866	$	97,253	$	180,351		$	30,056		$	215,774		$	231,301		$	4,871		$	50,846	$	-	$	1,688,295

Loan & Lease Portfolio Allocated by Management's Internal Risk Ratings

The following tables show the loan & lease portfolio allocated by management’s internal risk ratings at the dates indicated (in thousands):

March 31, 2016	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	602,242	$	8,573	$	696	$	611,511
Agricultural Real Estate		429,785		2,496		-		432,281
Real Estate Construction		164,895		1,560		-		166,455
Residential 1st Mortgages		210,884		410		911		212,205
Home Equity Lines & Loans		30,701		72		866		31,639
Agricultural		252,387		638		630		253,655
Commercial		202,878		7,582		3,019		213,479
Consumer & Other		6,856		-		210		7,066
Leases		60,441		4,339		-		64,780
Total	$	1,961,069	$	25,670	$	6,332	$	1,993,071

December 31, 2015	Pass		Special Mention		Substandard		Total Loans
Loans & Leases:
Commercial Real Estate	$	595,011	$	7,917	$	722	$	603,650
Agricultural Real Estate		424,034		-		-		424,034
Real Estate Construction		150,379		1,595		-		151,974
Residential 1st Mortgages		205,135		413		857		206,405
Home Equity Lines and Loans		32,419		75		562		33,056
Agricultural		293,325		9		632		293,966
Commercial		199,467		8,160		3,177		210,804
Consumer & Other		6,411		-		181		6,592
Leases		65,878		-		-		65,878
Total	$	1,972,059	$	18,169	$	6,131	$	1,996,359

March 31, 2015	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	520,613	$	8,834	$	103	$	529,550
Agricultural Real Estate		351,866		-		-		351,866
Real Estate Construction		99,920		1,696		-		101,616
Residential 1st Mortgages		181,021		744		666		182,431
Home Equity Lines & Loans		30,772		83		869		31,724
Agricultural		215,507		453		271		216,231
Commercial		220,491		12,086		3,564		236,141
Consumer & Other		4,687		-		228		4,915
Leases		50,846		-		-		50,846
Total	$	1,675,723	$	23,896	$	5,701	$	1,705,320

Aging Analysis of Loan & Lease Portfolio by Time Past Due

The following tables show an aging analysis of the loan & lease portfolio by the time past due at the dates indicated

(in thousands):

March 31, 2016	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	696	$	-	$	-	$	-	$	696	$	610,815	$	611,511
Agricultural Real Estate		-		-		-		163		163		432,118		432,281
Real Estate Construction		-		-		-		-		-		166,455		166,455
Residential 1st Mortgages		-		-		-		62		62		212,143		212,205
Home Equity Lines & Loans		-		-		-		564		564		31,075		31,639
Agricultural		-		-		-		-		-		253,655		253,655
Commercial		-		-		-		1,499		1,499		211,980		213,479
Consumer & Other		5		-		-		9		14		7,052		7,066
Leases		-		-		-		-		-		64,780		64,780
Total	$	701			$	-	$	2,297	$	2,998	$	1,990,073	$	1,993,071

December 31, 2015	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	705	$	-	$	-	$	19	$	724	$	602,926	$	603,650
Agricultural Real Estate		-		-		-		-		-		424,034		424,034
Real Estate Construction		-		-		-		-		-		151,974		151,974
Residential 1st Mortgages		97		194		-		65		356		206,049		206,405
Home Equity Lines and Loans		-		-		-		538		538		32,518		33,056
Agricultural		-		-		-		-		-		293,966		293,966
Commercial		-		-		-		1,524		1,524		209,280		210,804
Consumer & Other		7		-		-		10		17		6,575		6,592
Leases		-		-		-		-		-		65,878		65,878
Total	$	809	$	194	$	-	$	2,156	$	3,159	$	1,993,200	$	1,996,359

March 31, 2015	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	719	$	-	$	-	$	103	$	822	$	528,728	$	529,550
Agricultural Real Estate		-		-		-		-		-		351,866		351,866
Real Estate Construction		-		-		-		-		-		101,616		101,616
Residential 1st Mortgages		99		-		-		74		173		182,258		182,431
Home Equity Lines & Loans		-		-		-		616		616		31,108		31,724
Agricultural		-		-		-		14		14		216,217		216,231
Commercial		-		-		-		1,573		1,573		234,568		236,141
Consumer & Other		9		-		-		13		22		4,893		4,915
Leases		-		-		-		-		-		50,846		50,846
Total	$	827			$	-	$	2,393	$	3,220	$	1,702,100	$	1,705,320

Impaired Loans & Leases

The following tables show information related to impaired loans & leases for the periods indicated (in thousands):

March 31, 2016	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	80	$	80	$	-	$	91	$	2
Agricultural Real Estate		163		163		-		82		3
Residential 1st Mortgages		329		371		-		440		2
Home Equity Lines & Loans		725		796		-		653		-
Agricultural		193		193		-		193		-
Commercial		3,083		3,083		-		3,093		33
	$	4,573	$	4,686	$	-	$	4,552	$	40
With an allowance recorded:
Residential 1st Mortgages	$	242	$	282	$	12	$	295	$	3
Home Equity Lines & Loans		218		231		35		176		1
Agricultural		413		413		115		413		6
Commercial		1,631		1,789		757		1,644		6
Consumer & Other		26		31		26		30		-
	$	2,530	$	2,746	$	945	$	2,558	$	16
Total	$	7,103	$	7,432	$	945	$	7,110	$	56

December 31, 2015	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	102	$	104	$	-	$	479	$	7
Residential 1st Mortgages		551		618		-		560		16
Home Equity Lines and Loans		581		646		-		620		3
Agricultural		193		193		-		105		3
Commercial		3,103		3,103		-		2,349		85
	$	4,530	$	4,664	$	-	$	4,113	$	114
With an allowance recorded:
Residential 1st Mortgages	$	348	$	420	$	17	$	354	$	16
Home Equity Lines and Loans		134		151		7		136		5
Agricultural		412		413		115		431		28
Commercial		1,657		1,798		905		2,456		31
Consumer & Other		34		40		29		39		3
	$	2,585	$	2,822	$	1,073	$	3,416	$	83
Total	$	7,115	$	7,486	$	1,073	$	7,529	$	197

March 31, 2015	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	192	$	192	$	-	$	96	$	2
Residential 1st Mortgages		569		632		-		285		4
Home Equity Lines & Loans		661		701		-		331		1
Agricultural		14		27		-		7		-
Commercial		48		48		-		24		1
	$	1,484	$	1,600	$	-	$	743	$	8
With an allowance recorded:
Residential 1st Mortgages	$	359	$	429	$	18		648	$	4
Home Equity Lines & Loans		138		156		7		545		1
Agricultural		443		443		129		452		7
Commercial		4,793		4,889		1,118		4,768		25
Consumer & Other		43		49		37		45		1
	$	5,776	$	5,966	$	1,309	$	6,458	$	38
Total	$	7,260	$	7,566	$	1,309	$	7,201	$	46

Loans & Leases by Class Modified as Troubled Debt Restructured Loans

The following table presents loans or leases by class modified as TDRs during the three-month period ended March 31, 2016 (in thousands):

	March 31, 2016
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Home Equity Lines & Loans		2	$	305	$	286
Total		2	$	305	$	286

The following table presents loans by class modified as troubled debt restructured loans for the period ended December 31, 2015 (in thousands):

			December 31, 2015
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Agricultural		1	$	194	$	194
Commercial		1		131		119
Total		2	$	325	$	313

The following table presents loans or leases by class modified as TDRs during the three-month period ended March 31, 2015 (in thousands):

	March 31, 2015
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding  Recorded Investment		Post-Modification Outstanding Recorded  Investment
Commercial		1	$	131	$	119
Total		1	$	131	$	119

XML

Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Measurements [Abstract]

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value for the periods indicated.

			Fair Value Measurements At March 31, 2016, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets  for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant  Unobservable Inputs (Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	63,346	$	-	$	63,346	$	-
US Treasury Notes		65,788		65,788		-		-
Mortgage Backed Securities		212,127		-		212,127		-
Other		510		200		310		-
Total Assets Measured at Fair Value On a Recurring Basis	$	341,771	$	65,988	$	275,783	$	-

			Fair Value Measurements At December 31, 2015, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets  for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant  Unobservable Inputs (Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	33,251	$	-	$	33,251	$	-
US Treasury Notes		72,884		72,884		-		-
Mortgage Backed Securities		262,493		-		262,493		-
Other		509		199		310		-
Total Assets Measured at Fair Value On a Recurring Basis	$	369,137	$	73,083	$	296,054	$	-

			Fair Value Measurements At March 31, 2015, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable  Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	68,132	$	-	$	68,132	$	-
US Treasury Notes		19,966		-		19,966		-
Mortgage Backed Securities		276,601		-		276,601		-
Other		485		175		310		-
Total Assets Measured at Fair Value On a Recurring Basis	$	365,184	$	175	$	365,009	$	-

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The following tables present information about the Company’s other real estate and impaired loans or leases, classes of assets or liabilities that the Company carries at fair value on a non-recurring basis, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value for the periods indicated. Not all impaired loans or leases are carried at fair value. Impaired loans or leases are only included in the following tables when their fair value is based upon a current appraisal of the collateral, and if that appraisal results in a partial charge-off or the establishment of a specific reserve.

			Fair Value Measurements At March 31, 2016, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired Loans
Residential 1st Mortgage	$	229	$	-	$	-	$	229
Home Equity Lines and Loans		365		-		-		365
Agricultural		298		-		-		298
Commercial		874		-		-		874
Total Impaired Loans		1,766		-		-		1,766
Other Real Estate
Real Estate Construction		585		-		-		585
Total Other Real Estate		585		-		-		585
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	2,351	$	-	$	-	$	2,351

			Fair Value Measurements At December 31, 2015, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical  Assets (Level 1)		Other Observable  Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
Impaired Loans:
Residential 1st Mortgage	$	329	$	-	$	-	$	329
Home Equity Lines and Loans		125		-		-		125
Agricultural		298		-		-		298
Commercial		752		-		-		752
Consumer		5		-		-		5
Total Impaired Loans		1,509		-		-		1,509
Other Real Estate:
Real Estate Construction		2,441		-		-		2,441
Total Other Real Estate		2,441		-		-		2,441
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	3,950	$	-	$	-	$	3,950

			Fair Value Measurements At March 31, 2015, Using
(in thousands)	Fair Value Total		Quoted Prices in  Active Markets  for Identical  Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired Loans
Residential 1st Mortgage	$	341	$	-	$	-	$	341
Home Equity Lines and Loans		130		-		-		130
Agricultural		314		-		-		314
Commercial		3,674		-		-		3,674
Consumer		6						6
Total Impaired Loans		4,465		-		-		4,465
Other Real Estate
Real Estate Construction		2,441		-		-		2,441
Agricultural Real Estate		858		-		-		858
Total Other Real Estate		3,299		-		-		3,299
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	7,764	$	-	$	-	$	7,764

Quantitative Information about Level 3 Fair Value Measurements for Financial Instruments Measured at Fair Value on a Nonrecurring Basis

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at March 31, 2016:

(in thousands)	Fair Value		Valuation Technique	Unobservable Inputs	Range, Weighted Avg.
Impaired Loans
Residential 1st Mortgage	$	229	Sales Comparison Approach	Adjustment for Difference Between Comparable Sales		2% -4%, 3	%
Home Equity Lines and Loans	$	365	Sales Comparison Approach	Adjustment for Difference Between Comparable Sales		1% - 2%, 1	%
Agricultural	$	298	Income Approach	Capitalization Rate		16% - 16%, 16	%
Commercial	$	874	Income Approach	Capitalization Rate		16% - 16%, 16	%
Other Real Estate
Real Estate Construction	$	585	Sales Comparison Approach	Adjustment for Difference Between Comparable Sales		10% - 10%, 10	%

XML

Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value of Financial Instruments [Abstract]

Book Value and Estimated Fair Value of Financial Instruments

The following tables summarize the book value and estimated fair value of financial instruments for the periods indicated:

				Fair Value of Financial Instruments Using
March 31, 2016  (in thousands)	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs  (Level 3)			Total Estimated Fair Value
Assets:
Cash and Cash Equivalents	$	73,716		$	73,716	$	-	$	-		$	73,716
Investment Securities Available-for-Sale:
Government Agency & Government-Sponsored Entities		63,346			-		63,346		-			63,346
US Treasury Notes		65,788			65,788		-					65,788
Mortgage Backed Securities		212,127					212,127		-			212,127
Other		510			200		310		-			510
Total Investment Securities Available-for-Sale		341,771			65,988		275,783		-			341,771
Investment Securities Held-to-Maturity:
Obligations of States and Political Subdivisions		61,535			-		50,436		12,456			62,892
Total Investment Securities Held-to-Maturity		61,535			-		50,436		12,456			62,892
FHLB Stock		7,795			N/A		N/A		N/A			N/A
Loans & Leases, Net of Deferred Fees & Allowance:
Commercial Real Estate		601,412			-		-		604,707			604,707
Agricultural Real Estate		423,119			-		-		414,223			414,223
Real Estate Construction		163,861			-		-		163,917			163,917
Residential 1st Mortgages		211,409			-		-		214,885			214,885
Home Equity Lines and Loans		29,575			-		-		30,806			30,806
Agricultural		247,751			-		-		246,626			246,626
Commercial		205,754			-		-		204,828			204,828
Consumer & Other		6,879			-		-		6,938			6,938
Leases		61,541							62,459			62,459
Unallocated Allowance		(2,359	)		-		-		(2,359	)		(2,359	)
Total Loans & Leases, Net of Deferred Fees & Allowance		1,948,942			-		-		1,947,030			1,947,030
Accrued Interest Receivable		8,118			-		8,118		-			8,118
Liabilities:
Deposits:
Demand		637,140			637,140		-		-			637,140
Interest Bearing Transaction		409,360			409,361		-		-			409,361
Savings and Money Market		725,823			725,822		-		-			725,822
Time		484,141			-		483,789		-			483,789
Total Deposits		2,256,464			1,772,323		483,789		-			2,256,112
Subordinated Debentures		10,310			-		6,437		-			6,437
Accrued Interest Payable		471			-		471		-			471

				Fair Value of Financial Instruments Using
December 31, 2015 (in thousands)	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)			Other Observable Inputs (Level 2)			Significant  Unobservable  Inputs (Level 3)			Total Estimated Fair Value
Assets:
Cash and Cash Equivalents	$	59,446		$	59,446		$	-		$	-		$	59,446
Investment Securities Available-for-Sale:
Government Agency & Government-Sponsored Entities		33,251			-			33,251			-			33,251
U.S. Treasury Notes		72,884			72,884			-						72,884
Mortgage Backed Securities		262,493			-			262,493			-			262,493
Other		509			199			310			-			509
Total Investment Securities Available-for-Sale		369,137			73,083			296,054			-			369,137
Investment Securities Held-to-Maturity:
Obligations of States and Political Subdivisions		61,396			-			44,675			17,713			62,388
Total Investment Securities Held-to-Maturity		61,396			-			44,675			17,713			62,388
FHLB Stock		7,795			N/	A		N/	A		N/	A		N/	A
Loans & Leases, Net of Deferred Fees & Allowance:
Commercial Real Estate		593,587			-			-			591,271			591,271
Agricultural Real Estate		417,153			-			-			405,295			405,295
Real Estate Construction		149,489			-			-			149,371			149,371
Residential 1st Mortgages		205,616			-			-			207,431			207,431
Home Equity Lines and Loans		30,910			-			-			32,360			32,360
Agricultural		287,658			-			-			285,733			285,733
Commercial		202,968			-			-			201,105			201,105
Consumer & Other		6,417			-			-			6,416			6,416
Leases		62,584			-			-			62,139			62,139
Unallocated Allowance		(1,546	)		-			-			(1,546	)		(1,546	)
Total Loans & Leases, Net of Deferred Fees & Allowance		1,954,836			-			-			1,939,575			1,939,575
Accrued Interest Receivable		9,240			-			9,240			-			9,240
Liabilities:
Deposits:
Demand		711,029			711,029			-			-			711,029
Interest Bearing Transaction		377,594			377,594			-			-			377,594
Savings and Money Market		707,885			707,885			-			-			707,885
Time		481,024			-			480,334			-			480,334
Total Deposits		2,277,532			1,796,508			480,334			-			2,276,842
Subordinated Debentures		10,310			-			6,424			-			6,424
Accrued Interest Payable		513			-			513			-			513

				Fair Value of Financial Instruments Using
March 31, 2015 (in thousands)	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)			Other Observable Inputs (Level 2)			Significant Unobservable  Inputs (Level 3)			Total Estimated Fair Value
Assets:
Cash and Cash Equivalents	$	143,936		$	143,936		$	-		$	-		$	143,936
Investment Securities Available-for-Sale:
Government Agency & Government-Sponsored Entities		68,132			-			68,132			-			68,132
US Treasury Notes		19,966						19,966						19,966
Mortgage Backed Securities		276,601						276,601			-			276,601
Other		485			175			310			-			485
Total Investment Securities Available-for-Sale		365,184			175			365,009			-			365,184
Investment Securities Held-to-Maturity:
Obligations of States and Political Subdivisions		61,324			-			48,583			13,496			62,079
Other		2,139			-			2,139			-			2,139
Total Investment Securities Held-to-Maturity		63,463			-			50,722			13,496			64,218
FHLB Stock		7,677			N/	A		N/	A		N/	A		N/	A
Loans & Leases, Net of Deferred Fees & Allowance:
Commercial Real Estate		521,596			-			-			519,698			519,698
Agricultural Real Estate		344,965			-			-			346,742			346,742
Real Estate Construction		99,700			-			-			99,861			99,861
Residential 1st Mortgages		181,758			-			-			185,210			185,210
Home Equity Lines and Loans		29,628			-			-			31,332			31,332
Agricultural		211,629			-			-			210,769			210,769
Commercial		227,200			-			-			224,783			224,783
Consumer & Other		4,703			-			-			4,747			4,747
Leases		48,347									48,779			48,779
Unallocated Allowance		(3,146	)		-			-			(3,146	)		(3,146	)
Total Loans & Leases, Net of Deferred Fees & Allowance		1,666,380			-			-			1,668,775			1,668,775
Accrued Interest Receivable		7,324			-			7,324			-			7,324
Liabilities:
Deposits:
Demand		578,820			578,820			-			-			578,820
Interest Bearing Transaction		340,045			340,045			-			-			340,045
Savings and Money Market		699,308			699,308			-			-			699,308
Time		493,600			-			493,600			-			493,600
Total Deposits		2,111,773			1,618,173			493,600			-			2,111,773
Subordinated Debentures		10,310			-			6,250			-			6,250
Accrued Interest Payable		433			-			433			-			433

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Dividends and Basic Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2016

Dividends and Basic Earnings Per Common Share [Abstract]

Calculation of Basic Earnings per Share

The following table calculates the basic earnings per common share for the three months ended March 31, 2016 and 2015.

(net income in thousands)	2016		2015
Net Income	$	7,172	$	6,403
Weighted Average Number of Common Shares Outstanding		791,895		785,366
Basic Earnings Per Common Share Amount	$	9.06	$	8.15

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Significant Accounting Policies (Details)	3 Months Ended
	Mar. 31, 2016 USD ($) Component Category Factor Segment	Mar. 31, 2015 USD ($)
Investment Securities [Abstract]
Number of components into which amount of impairment is split	2
Loans & Leases [Abstract]
Period after which loans are placed on non accrual status, minimum	90 days
Allowance for Credit Losses [Abstract]
Consecutive months of payments	6 months
Number of primary components of overall allowance for credit losses	3
Number of categories into which risk ratings are grouped | Category	5
Number of risk factors on agricultural loans | Factor	2
Income Taxes [Abstract]
Interest expense or penalties related to unrecognized tax benefits | $	$ 0	$ 0
Segment Reporting [Abstract]
Number of reportable segments | Segment	1
Buildings [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	30 years
Buildings [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	40 years
Furniture and Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	3 years
Furniture and Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	7 years
Leasehold Improvements [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	5 years
Leasehold Improvements [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	10 years

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Investment Securities, Amortized Cost, Fair Values, and Unrealized Gains and Losses of Securities (Details) - USD ($) $ in Thousands		Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Amortized cost, fair values, and unrealized gains and losses of securities available-for-sale [Abstract]
Amortized cost		$ 336,259	$ 368,109	$ 359,187
Gross unrealized gains		5,520	2,842	6,194
Gross unrealized losses		8	1,814	197
Fair/Book value		341,771	369,137	365,184
Book values, estimated fair values and unrealized gains and losses of investments classified as held-to-maturity [Abstract]
Book value		61,535	61,396	63,463
Gross unrealized gains		1,357	993	766
Gross unrealized losses		0	1	11
Fair value		62,892	62,388	64,218
Government Agency & Government Sponsored Entities [Member]
Amortized cost, fair values, and unrealized gains and losses of securities available-for-sale [Abstract]
Amortized cost		63,157	33,536	68,064
Gross unrealized gains		190	134	69
Gross unrealized losses		1	419	1
Fair/Book value		63,346	33,251	68,132
US Treasury Notes [Member]
Amortized cost, fair values, and unrealized gains and losses of securities available-for-sale [Abstract]
Amortized cost		65,571	73,048	19,818
Gross unrealized gains		217	0	148
Gross unrealized losses		0	164	0
Fair/Book value		65,788	72,884	19,966
Mortgage Backed Securities [Member]
Amortized cost, fair values, and unrealized gains and losses of securities available-for-sale [Abstract]
Amortized cost	[1]	207,021	261,016	270,820
Gross unrealized gains	[1]	5,113	2,708	5,977
Gross unrealized losses	[1]	7	1,231	196
Fair/Book value	[1]	212,127	262,493	276,601
Other [Member]
Amortized cost, fair values, and unrealized gains and losses of securities available-for-sale [Abstract]
Amortized cost		510	509	485
Gross unrealized gains		0	0	0
Gross unrealized losses		0	0	0
Fair/Book value		510	509	485
Obligations of States and Political Subdivisions [Member]
Book values, estimated fair values and unrealized gains and losses of investments classified as held-to-maturity [Abstract]
Book value		61,535	61,396	61,324
Gross unrealized gains		1,357	993	766
Gross unrealized losses		0	1	11
Fair value		$ 62,892	$ 62,388	62,079
Other [Member]
Book values, estimated fair values and unrealized gains and losses of investments classified as held-to-maturity [Abstract]
Book value				2,139
Gross unrealized gains				0
Gross unrealized losses				0
Fair value				$ 2,139

[1] All Mortgage Backed Securities consist of securities collateralized by residential real estate and were issued by an agency or government sponsored entity of the U.S. government.

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Investment Securities, Contract Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Amortized Cost [Abstract]
Within one year	$ 60,504
After one year through five years	68,734
After five years through ten years	0
After ten years	0
Amortized cost, excluding investment securities not due at a single maturity date	129,238
Investment securities not due at a single maturity date, mortgage-backed securities	207,021
Amortized cost	336,259
Fair/Book Value [Abstract]
Within one year	60,503
After one year through five years	69,141
After five years through ten years	0
After ten years	0
Fair/Book value, excluding investment securities not due at a single maturity date	129,644
Investment securities not due at a single maturity date, mortgage-backed securities	212,127
Fair/Book value	341,771	$ 369,137	$ 365,184
Book Value [Abstract]
Within one year	225
After one year through five years	12,034
After five years through ten years	11,425
After ten years	37,851
Book value, excluding investment securities not due at a single maturity date	61,535
Investment securities not due at a single maturity date, mortgage-backed securities	0
Book value	61,535	61,396	63,463
Fair Value [Abstract]
Within one year	225
After one year through five years	12,087
After five years through ten years	11,615
After ten years	38,965
Fair value, excluding investment securities not due at a single maturity date	62,892
Investment securities not due at a single maturity date, mortgage-backed securities	0
Fair value	$ 62,892	$ 62,388	$ 64,218

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Investment Securities, Securities in Continuous Unrealized Loss Position (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($) Security	Dec. 31, 2015 USD ($)	Mar. 31, 2015 USD ($)
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, fair value	$ 41,525	$ 153,730	$ 38,031
Less than 12 months, unrealized loss	8	1,672	29
12 months or more, fair value	0	7,277	25,942
12 months or more, unrealized loss	0	142	168
Total, fair value	41,525	161,007	63,973
Total, unrealized loss	$ 8	1,814	197
Number of investment securities held | Security	227
Less than 12 months, number of positions | Security	3
12 months or more, number of positions | Security	0
Held-to-maturity Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, fair value		839	1,340
Less than 12 months, unrealized loss		1	11
12 months or more, fair value		0	0
12 months or more, unrealized loss		0	0
Total, fair value		839	1,340
Total, unrealized loss		1	11
Government Agency & Government Sponsored Entities [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, fair value	$ 39,996	29,944	24,998
Less than 12 months, unrealized loss	1	419	1
12 months or more, fair value	0	0	0
12 months or more, unrealized loss	0	0	0
Total, fair value	39,996	29,944	24,998
Total, unrealized loss	$ 1	419	1
Less than 12 months, number of positions | Security	2
12 months or more, number of positions | Security	0
US Treasury Notes [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, fair value		44,887
Less than 12 months, unrealized loss		164
12 months or more, fair value		0
12 months or more, unrealized loss		0
Total, fair value		44,887
Total, unrealized loss		164
Less than 12 months, number of positions | Security	0
12 months or more, number of positions | Security	0
Mortgage Backed Securities [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, fair value	$ 1,529	78,899	13,033
Less than 12 months, unrealized loss	7	1,089	28
12 months or more, fair value	0	7,277	25,942
12 months or more, unrealized loss	0	142	168
Total, fair value	1,529	86,176	38,975
Total, unrealized loss	$ 7	1,231	196
Less than 12 months, number of positions | Security	1
12 months or more, number of positions | Security	0
Obligations of States and Political Subdivisions [Member]
Held-to-maturity Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, fair value		839	1,340
Less than 12 months, unrealized loss		1	11
12 months or more, fair value		0	0
12 months or more, unrealized loss		0	0
Total, fair value		839	1,340
Total, unrealized loss		$ 1	$ 11
Less than 12 months, number of positions | Security	0
12 months or more, number of positions | Security	0
Municipal Bonds [Member]
Held-to-maturity Securities, Continuous Unrealized Loss Position [Abstract]
Percentage of bank qualified municipal bond portfolio rated	98.00%
Percentage of portfolio not rated	2.00%

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Investment Securities, Proceeds from Sales (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Proceeds from sales and calls of securities [Abstract]
Proceeds	$ 102,895	$ 475
Gains	244	1
Losses	$ 1	$ 0

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Investment Securities, Pledged Securities (Details) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Investment Securities [Abstract]
Securities pledged to secure public deposits, FHLB borrowings, and other government agency deposits as required by law	$ 184.9	$ 189.2	$ 196.4

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Loans & Leases and Allowance for Credit Losses, Allocation of The Allowance For Credit Losses by Portfolio Segment and By Impairment Methodology (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Allowance for Credit Losses [Roll Forward]
Beginning Balance	$ 41,523	$ 35,401	$ 35,401
Charge-Offs	(44)	(29)	(96)
Recoveries	50	2,968	5,468
Provision	2,600	600	750
Ending Balance	44,129	38,940	41,523
Ending Balance Individually Evaluated for Impairment	1,088	1,470	1,213
Ending Balance Collectively Evaluated for Impairment	43,041	37,470	40,310
Loans & Leases [Abstract]
Ending Balance	1,993,071	1,705,320	1,996,359
Ending Balance Individually Evaluated for Impairment	12,345	17,025	12,044
Ending Balance Collectively Evaluated for Impairment	1,980,726	1,688,295	1,984,315
Commercial Real Estate [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	10,063	7,842	7,842
Charge-Offs	0	0	0
Recoveries	2	2,938	2,939
Provision	34	(2,826)	(718)
Ending Balance	10,099	7,954	10,063
Ending Balance Individually Evaluated for Impairment	59	61	61
Ending Balance Collectively Evaluated for Impairment	10,040	7,893	10,002
Loans & Leases [Abstract]
Ending Balance	611,511	529,550	603,650
Ending Balance Individually Evaluated for Impairment	3,376	3,573	3,420
Ending Balance Collectively Evaluated for Impairment	608,135	525,977	600,230
Agricultural Real Estate [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	6,881	4,185	4,185
Charge-Offs	0	0	0
Recoveries	0	0	0
Provision	2,281	2,716	2,696
Ending Balance	9,162	6,901	6,881
Ending Balance Individually Evaluated for Impairment	0	0	0
Ending Balance Collectively Evaluated for Impairment	9,162	6,901	6,881
Loans & Leases [Abstract]
Ending Balance	432,281	351,866	424,034
Ending Balance Individually Evaluated for Impairment	163	0	0
Ending Balance Collectively Evaluated for Impairment	432,118	351,866	424,034
Real Estate Construction [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	2,485	1,669	1,669
Charge-Offs	0	0	0
Recoveries	0	0	2,225
Provision	109	247	(1,409)
Ending Balance	2,594	1,916	2,485
Ending Balance Individually Evaluated for Impairment	0	0	0
Ending Balance Collectively Evaluated for Impairment	2,594	1,916	2,485
Loans & Leases [Abstract]
Ending Balance	166,455	101,616	151,974
Ending Balance Individually Evaluated for Impairment	0	4,363	0
Ending Balance Collectively Evaluated for Impairment	166,455	97,253	151,974
Residential 1st Mortgages [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	789	1,022	1,022
Charge-Offs	0	0	0
Recoveries	6	0	8
Provision	1	(349)	(241)
Ending Balance	796	673	789
Ending Balance Individually Evaluated for Impairment	66	72	69
Ending Balance Collectively Evaluated for Impairment	730	601	720
Loans & Leases [Abstract]
Ending Balance	212,205	182,431	206,405
Ending Balance Individually Evaluated for Impairment	1,944	2,080	2,010
Ending Balance Collectively Evaluated for Impairment	210,261	180,351	204,395
Home Equity Lines and Loans [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	2,146	2,426	2,426
Charge-Offs	(19)	0	0
Recoveries	2	5	87
Provision	(65)	(335)	(367)
Ending Balance	2,064	2,096	2,146
Ending Balance Individually Evaluated for Impairment	65	53	35
Ending Balance Collectively Evaluated for Impairment	1,999	2,043	2,111
Loans & Leases [Abstract]
Ending Balance	31,639	31,724	33,056
Ending Balance Individually Evaluated for Impairment	1,513	1,668	1,214
Ending Balance Collectively Evaluated for Impairment	30,126	30,056	31,842
Agricultural [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	6,308	6,104	6,104
Charge-Offs	0	0	0
Recoveries	0	1	4
Provision	(404)	(1,503)	200
Ending Balance	5,904	4,602	6,308
Ending Balance Individually Evaluated for Impairment	115	129	115
Ending Balance Collectively Evaluated for Impairment	5,789	4,473	6,193
Loans & Leases [Abstract]
Ending Balance	253,655	216,231	293,966
Ending Balance Individually Evaluated for Impairment	605	457	606
Ending Balance Collectively Evaluated for Impairment	253,050	215,774	293,360
Commercial [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	7,836	8,195	8,195
Charge-Offs	0	(12)	(12)
Recoveries	27	2	136
Provision	(138)	756	(483)
Ending Balance	7,725	8,941	7,836
Ending Balance Individually Evaluated for Impairment	757	1,118	905
Ending Balance Collectively Evaluated for Impairment	6,968	7,823	6,931
Loans & Leases [Abstract]
Ending Balance	213,479	236,141	210,804
Ending Balance Individually Evaluated for Impairment	4,714	4,840	4,760
Ending Balance Collectively Evaluated for Impairment	208,765	231,301	206,044
Consumer & Other [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	175	218	218
Charge-Offs	(25)	(17)	(84)
Recoveries	13	22	69
Provision	24	(11)	(28)
Ending Balance	187	212	175
Ending Balance Individually Evaluated for Impairment	26	37	28
Ending Balance Collectively Evaluated for Impairment	161	175	147
Loans & Leases [Abstract]
Ending Balance	7,066	4,915	6,592
Ending Balance Individually Evaluated for Impairment	30	44	34
Ending Balance Collectively Evaluated for Impairment	7,036	4,871	6,558
Leases [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	3,294	2,211	2,211
Charge-Offs	0	0	0
Recoveries	0	0	0
Provision	(55)	288	1,083
Ending Balance	3,239	2,499	3,294
Ending Balance Individually Evaluated for Impairment	0	0	0
Ending Balance Collectively Evaluated for Impairment	3,239	2,499	3,294
Loans & Leases [Abstract]
Ending Balance	64,780	50,846	65,878
Ending Balance Individually Evaluated for Impairment	0	0	0
Ending Balance Collectively Evaluated for Impairment	64,780	50,846	65,878
Unallocated [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	1,546	1,529	1,529
Charge-Offs	0	0	0
Recoveries	0	0	0
Provision	813	1,617	17
Ending Balance	2,359	3,146	1,546
Ending Balance Individually Evaluated for Impairment	0	0	0
Ending Balance Collectively Evaluated for Impairment	2,359	3,146	1,546
Loans & Leases [Abstract]
Ending Balance	0	0	0
Ending Balance Individually Evaluated for Impairment	0	0	0
Ending Balance Collectively Evaluated for Impairment	0	0	0
Restructured Loans [Member]
Loans & Leases [Abstract]
Ending Balance Individually Evaluated for Impairment	$ 5,300	$ 9,800	$ 4,900

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Loans & Leases and Allowance for Credit Losses, Loan Portfolio Allocated by Management's Internal Risk Ratings (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	$ 1,993,071	$ 1,996,359	$ 1,705,320
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	1,961,069	1,972,059	1,675,723
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	25,670	18,169	23,896
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	6,332	6,131	5,701
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	0	0	0
Loss [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	0	0	0
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	611,511	603,650	529,550
Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	602,242	595,011	520,613
Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	8,573	7,917	8,834
Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	696	722	103
Agricultural Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	432,281	424,034	351,866
Agricultural Real Estate [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	429,785	424,034	351,866
Agricultural Real Estate [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	2,496	0	0
Agricultural Real Estate [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	0	0	0
Real Estate Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	166,455	151,974	101,616
Real Estate Construction [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	164,895	150,379	99,920
Real Estate Construction [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	1,560	1,595	1,696
Real Estate Construction [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	0	0	0
Residential 1st Mortgages [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	212,205	206,405	182,431
Residential 1st Mortgages [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	210,884	205,135	181,021
Residential 1st Mortgages [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	410	413	744
Residential 1st Mortgages [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	911	857	666
Home Equity Lines & Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	31,639	33,056	31,724
Home Equity Lines & Loans [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	30,701	32,419	30,772
Home Equity Lines & Loans [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	72	75	83
Home Equity Lines & Loans [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	866	562	869
Agricultural [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	253,655	293,966	216,231
Agricultural [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	252,387	293,325	215,507
Agricultural [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	638	9	453
Agricultural [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	630	632	271
Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	213,479	210,804	236,141
Commercial [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	202,878	199,467	220,491
Commercial [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	7,582	8,160	12,086
Commercial [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	3,019	3,177	3,564
Consumer & Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	7,066	6,592	4,915
Consumer & Other [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	6,856	6,411	4,687
Consumer & Other [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	0	0	0
Consumer & Other [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	210	181	228
Leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	64,780	65,878	50,846
Leases [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	60,441	65,878	50,846
Leases [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	4,339	0	0
Leases [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	$ 0	$ 0	$ 0

XML

Loans & Leases and Allowance for Credit Losses, Aging Analysis of Loan Portfolio by the Time Past Due (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	$ 0	$ 0	$ 0
Nonaccrual	2,297	2,156	2,393
Total Past Due	2,998	3,159	3,220
Current	1,990,073	1,993,200	1,702,100
Total Loans & Leases	1,993,071	1,996,359	1,705,320
30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	701	809	827
60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	194	0
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	0	0	0
Nonaccrual	0	19	103
Total Past Due	696	724	822
Current	610,815	602,926	528,728
Total Loans & Leases	611,511	603,650	529,550
Commercial Real Estate [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	696	705	719
Commercial Real Estate [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Agricultural Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	0	0	0
Nonaccrual	163	0	0
Total Past Due	163	0	0
Current	432,118	424,034	351,866
Total Loans & Leases	432,281	424,034	351,866
Agricultural Real Estate [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Agricultural Real Estate [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Real Estate Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	0	0	0
Nonaccrual	0	0	0
Total Past Due	0	0	0
Current	166,455	151,974	101,616
Total Loans & Leases	166,455	151,974	101,616
Real Estate Construction [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Real Estate Construction [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Residential 1st Mortgages [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	0	0	0
Nonaccrual	62	65	74
Total Past Due	62	356	173
Current	212,143	206,049	182,258
Total Loans & Leases	212,205	206,405	182,431
Residential 1st Mortgages [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	97	99
Residential 1st Mortgages [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	194	0
Home Equity Lines & Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	0	0	0
Nonaccrual	564	538	616
Total Past Due	564	538	616
Current	31,075	32,518	31,108
Total Loans & Leases	31,639	33,056	31,724
Home Equity Lines & Loans [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Home Equity Lines & Loans [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Agricultural [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	0	0	0
Nonaccrual	0	0	14
Total Past Due	0	0	14
Current	253,655	293,966	216,217
Total Loans & Leases	253,655	293,966	216,231
Agricultural [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Agricultural [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	0	0	0
Nonaccrual	1,499	1,524	1,573
Total Past Due	1,499	1,524	1,573
Current	211,980	209,280	234,568
Total Loans & Leases	213,479	210,804	236,141
Commercial [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Commercial [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Consumer & Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	0	0	0
Nonaccrual	9	10	13
Total Past Due	14	17	22
Current	7,052	6,575	4,893
Total Loans & Leases	7,066	6,592	4,915
Consumer & Other [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	5	7	9
Consumer & Other [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Leases [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	0	0	0
Nonaccrual	0	0	0
Total Past Due	0	0	0
Current	64,780	65,878	50,846
Total Loans & Leases	64,780	65,878	50,846
Leases [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Leases [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 0	$ 0	$ 0

XML

Loans & Leases and Allowance for Credit Losses, Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
With no related allowance recorded [Abstract]
Recorded Investment	$ 4,573	$ 1,484	$ 4,530
Unpaid Principal Balance	4,686	1,600	4,664
Average Recorded Investment	4,552	743	4,113
Interest Income Recognized	40	8	114
With an allowance recorded [Abstract]
Recorded Investment	2,530	5,776	2,585
Unpaid Principal Balance	2,746	5,966	2,822
Related Allowance	945	1,309	1,073
Average Recorded Investment	2,558	6,458	3,416
Interest Income Recognized	16	38	83
Total [Abstract]
Recorded Investment	7,103	7,260	7,115
Unpaid Principal Balance	7,432	7,566	7,486
Related Allowance	945	1,309	1,073
Average Recorded Investment	7,110	7,201	7,529
Interest Income Recognized	56	46	197
Commercial Real Estate [Member]
With no related allowance recorded [Abstract]
Recorded Investment	80	192	102
Unpaid Principal Balance	80	192	104
Average Recorded Investment	91	96	479
Interest Income Recognized	2	2	7
Agricultural Real Estate [Member]
With no related allowance recorded [Abstract]
Recorded Investment	163
Unpaid Principal Balance	163
Average Recorded Investment	82
Interest Income Recognized	3
Residential 1st Mortgages [Member]
With no related allowance recorded [Abstract]
Recorded Investment	329	569	551
Unpaid Principal Balance	371	632	618
Average Recorded Investment	440	285	560
Interest Income Recognized	2	4	16
With an allowance recorded [Abstract]
Recorded Investment	242	359	348
Unpaid Principal Balance	282	429	420
Related Allowance	12	18	17
Average Recorded Investment	295	648	354
Interest Income Recognized	3	4	16
Total [Abstract]
Related Allowance	12	18	17
Home Equity Lines & Loans [Member]
With no related allowance recorded [Abstract]
Recorded Investment	725	661	581
Unpaid Principal Balance	796	701	646
Average Recorded Investment	653	331	620
Interest Income Recognized	0	1	3
With an allowance recorded [Abstract]
Recorded Investment	218	138	134
Unpaid Principal Balance	231	156	151
Related Allowance	35	7	7
Average Recorded Investment	176	545	136
Interest Income Recognized	1	1	5
Total [Abstract]
Related Allowance	35	7	7
Agricultural [Member]
With no related allowance recorded [Abstract]
Recorded Investment	193	14	193
Unpaid Principal Balance	193	27	193
Average Recorded Investment	193	7	105
Interest Income Recognized	0	0	3
With an allowance recorded [Abstract]
Recorded Investment	413	443	412
Unpaid Principal Balance	413	443	413
Related Allowance	115	129	115
Average Recorded Investment	413	452	431
Interest Income Recognized	6	7	28
Total [Abstract]
Related Allowance	115	129	115
Commercial [Member]
With no related allowance recorded [Abstract]
Recorded Investment	3,083	48	3,103
Unpaid Principal Balance	3,083	48	3,103
Average Recorded Investment	3,093	24	2,349
Interest Income Recognized	33	1	85
With an allowance recorded [Abstract]
Recorded Investment	1,631	4,793	1,657
Unpaid Principal Balance	1,789	4,889	1,798
Related Allowance	757	1,118	905
Average Recorded Investment	1,644	4,768	2,456
Interest Income Recognized	6	25	31
Total [Abstract]
Related Allowance	757	1,118	905
Consumer & Other [Member]
With an allowance recorded [Abstract]
Recorded Investment	26	43	34
Unpaid Principal Balance	31	49	40
Related Allowance	26	37	29
Average Recorded Investment	30	45	39
Interest Income Recognized	0	1	3
Total [Abstract]
Related Allowance	$ 26	$ 37	$ 29

XML

Loans & Leases and Allowance for Credit Losses, Loans by Class Modified as Troubled Debt Restructured Loans (Details)	3 Months Ended		12 Months Ended
	Mar. 31, 2016 USD ($) Loan	Mar. 31, 2015 USD ($) Loan	Dec. 31, 2015 USD ($) Loan
Financing Receivable, Modifications [Line Items]
Specific reserves	$ 919,000	$ 1,300,000	$ 1,100,000
Troubled debt restructured loans	6,400,000	$ 6,500,000	6,600,000
Commitments to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings	$ 0		$ 0
Loans by class modified as troubled debt restructured loans [Abstract]
Number of Loans | Loan	2	1	2
Pre-Modification Outstanding Recorded Investment	$ 305,000	$ 131,000	$ 325,000
Post-Modification Outstanding Recorded Investment	286,000	119,000	313,000
Increase (decrease) in allowance for loan losses due to TDR	(17,000)	114,000	70,000
TDR's charge-offs	$ 20,000	$ 12,000	$ 12,000
Number of loans modified as troubled debt restructurings with subsequent payment defaults | Loan	0	0	0
Threshold period after which loan is considered to be in payment default	90 days
Stated Interest Rate Reduction [Member]
Financing Receivable, Modifications [Line Items]
Period of modifications	5 years	10 years
Stated Interest Rate Reduction [Member] | Minimum [Member]
Financing Receivable, Modifications [Line Items]
Period of modifications			4 years
Stated Interest Rate Reduction [Member] | Maximum [Member]
Financing Receivable, Modifications [Line Items]
Period of modifications			30 years
Extended Maturity [Member]
Financing Receivable, Modifications [Line Items]
Period of modifications	10 years	10 years
Extended Maturity [Member] | Minimum [Member]
Financing Receivable, Modifications [Line Items]
Period of modifications			6 months
Extended Maturity [Member] | Maximum [Member]
Financing Receivable, Modifications [Line Items]
Period of modifications			30 years
Performing [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructured loans	$ 4,800,000	$ 4,900,000	$ 5,000,000
Home Equity Lines & Loans [Member]
Loans by class modified as troubled debt restructured loans [Abstract]
Number of Loans | Loan	2
Pre-Modification Outstanding Recorded Investment	$ 305,000
Post-Modification Outstanding Recorded Investment	$ 286,000
Agricultural [Member]
Loans by class modified as troubled debt restructured loans [Abstract]
Number of Loans | Loan			1
Pre-Modification Outstanding Recorded Investment			$ 194,000
Post-Modification Outstanding Recorded Investment			$ 194,000
Commercial [Member]
Loans by class modified as troubled debt restructured loans [Abstract]
Number of Loans | Loan		1	1
Pre-Modification Outstanding Recorded Investment		$ 131,000	$ 131,000
Post-Modification Outstanding Recorded Investment		$ 119,000	$ 119,000

XML

Fair Value Measurements, Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - USD ($)		3 Months Ended
		Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Percentage of selling costs		10.00%
Consumer mortgage loans in the process of foreclosure value		$ 538,000
Available-for-Sale Securities		341,771,000	$ 369,137,000	$ 365,184,000
Government Agency & Government-Sponsored Entities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		63,346,000	33,251,000	68,132,000
US Treasury Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		65,788,000	72,884,000	19,966,000
Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities	[1]	212,127,000	262,493,000	276,601,000
Other [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		510,000	509,000	485,000
Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		341,771,000	369,137,000	365,184,000
Recurring [Member] | Government Agency & Government-Sponsored Entities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		63,346,000	33,251,000	68,132,000
Recurring [Member] | US Treasury Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		65,788,000	72,884,000	19,966,000
Recurring [Member] | Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		212,127,000	262,493,000	276,601,000
Recurring [Member] | Other [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		510,000	509,000	485,000
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		65,988,000	73,083,000	175,000
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Government Agency & Government-Sponsored Entities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0	0	0
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | US Treasury Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		65,788,000	72,884,000	0
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0	0	0
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		200,000	199,000	175,000
Recurring [Member] | Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		275,783,000	296,054,000	365,009,000
Recurring [Member] | Other Observable Inputs (Level 2) [Member] | Government Agency & Government-Sponsored Entities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		63,346,000	33,251,000	68,132,000
Recurring [Member] | Other Observable Inputs (Level 2) [Member] | US Treasury Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0	0	19,966,000
Recurring [Member] | Other Observable Inputs (Level 2) [Member] | Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		212,127,000	262,493,000	276,601,000
Recurring [Member] | Other Observable Inputs (Level 2) [Member] | Other [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		310,000	310,000	310,000
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0	0	0
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Government Agency & Government-Sponsored Entities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0	0	0
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | US Treasury Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0	0	0
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0	0	0
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Other [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		$ 0	$ 0	$ 0

[1] All Mortgage Backed Securities consist of securities collateralized by residential real estate and were issued by an agency or government sponsored entity of the U.S. government.

XML

Fair Value Measurements, Assets or Liabilities Measured at Fair Value on a Non-recurring Basis (Details) - Nonrecurring [Member] - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	$ 1,766	$ 1,509	$ 4,465
Other Real Estate	585	2,441	3,299
Total Assets Measured at Fair Value On a Non-Recurring Basis	2,351	3,950	7,764
Agricultural Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate			858
Real Estate Construction [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate	585	2,441	2,441
Residential 1st Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	229	329	341
Home Equity Lines & Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	365	125	130
Agricultural [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	298	298	314
Commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	874	752	3,674
Consumer [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans		5	6
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Other Real Estate	0	0	0
Total Assets Measured at Fair Value On a Non-Recurring Basis	0	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Agricultural Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate			0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Real Estate Construction [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate	0	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Residential 1st Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Home Equity Lines & Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Agricultural [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Consumer [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans		0	0
Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Other Real Estate	0	0	0
Total Assets Measured at Fair Value On a Non-Recurring Basis	0	0	0
Other Observable Inputs (Level 2) [Member] | Agricultural Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate			0
Other Observable Inputs (Level 2) [Member] | Real Estate Construction [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate	0	0	0
Other Observable Inputs (Level 2) [Member] | Residential 1st Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Other Observable Inputs (Level 2) [Member] | Home Equity Lines & Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Other Observable Inputs (Level 2) [Member] | Agricultural [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Other Observable Inputs (Level 2) [Member] | Commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Other Observable Inputs (Level 2) [Member] | Consumer [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans		0	0
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	1,766	1,509	4,465
Other Real Estate	585	2,441	3,299
Total Assets Measured at Fair Value On a Non-Recurring Basis	2,351	3,950	7,764
Significant Unobservable Inputs (Level 3) [Member] | Agricultural Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate			858
Significant Unobservable Inputs (Level 3) [Member] | Real Estate Construction [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate	585	2,441	2,441
Significant Unobservable Inputs (Level 3) [Member] | Residential 1st Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	229	329	341
Significant Unobservable Inputs (Level 3) [Member] | Home Equity Lines & Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	365	125	130
Significant Unobservable Inputs (Level 3) [Member] | Agricultural [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	298	298	314
Significant Unobservable Inputs (Level 3) [Member] | Commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	$ 874	752	3,674
Significant Unobservable Inputs (Level 3) [Member] | Consumer [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans		$ 5	$ 6

XML

Fair Value Measurements, Quantitative Information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)
Residential 1st Mortgage [Member] | Sales Comparison Approach [Member]
Quantitative Information [Abstract]
Impaired Loans	$ 229
Unobservable inputs	Adjustment for Difference Between Comparable Sales
Residential 1st Mortgage [Member] | Sales Comparison Approach [Member] | Minimum [Member]
Quantitative Information [Abstract]
Adjustment for difference between comparable sales	2.00%
Residential 1st Mortgage [Member] | Sales Comparison Approach [Member] | Maximum [Member]
Quantitative Information [Abstract]
Adjustment for difference between comparable sales	4.00%
Residential 1st Mortgage [Member] | Sales Comparison Approach [Member] | Weighted Average [Member]
Quantitative Information [Abstract]
Adjustment for difference between comparable sales	3.00%
Home Equity Lines and Loans [Member] | Sales Comparison Approach [Member]
Quantitative Information [Abstract]
Impaired Loans	$ 365
Unobservable inputs	Adjustment for Difference Between Comparable Sales
Home Equity Lines and Loans [Member] | Sales Comparison Approach [Member] | Minimum [Member]
Quantitative Information [Abstract]
Adjustment for difference between comparable sales	1.00%
Home Equity Lines and Loans [Member] | Sales Comparison Approach [Member] | Maximum [Member]
Quantitative Information [Abstract]
Adjustment for difference between comparable sales	2.00%
Home Equity Lines and Loans [Member] | Sales Comparison Approach [Member] | Weighted Average [Member]
Quantitative Information [Abstract]
Adjustment for difference between comparable sales	1.00%
Agricultural [Member] | Income Approach [Member]
Quantitative Information [Abstract]
Impaired Loans	$ 298
Unobservable inputs	Capitalization Rate
Agricultural [Member] | Income Approach [Member] | Minimum [Member]
Quantitative Information [Abstract]
Capitalization rate	16.00%
Agricultural [Member] | Income Approach [Member] | Maximum [Member]
Quantitative Information [Abstract]
Capitalization rate	16.00%
Agricultural [Member] | Income Approach [Member] | Weighted Average [Member]
Quantitative Information [Abstract]
Capitalization rate	16.00%
Commercial [Member] | Income Approach [Member]
Quantitative Information [Abstract]
Impaired Loans	$ 874
Unobservable inputs	Capitalization Rate
Commercial [Member] | Income Approach [Member] | Minimum [Member]
Quantitative Information [Abstract]
Capitalization rate	16.00%
Commercial [Member] | Income Approach [Member] | Maximum [Member]
Quantitative Information [Abstract]
Capitalization rate	16.00%
Commercial [Member] | Income Approach [Member] | Weighted Average [Member]
Quantitative Information [Abstract]
Capitalization rate	16.00%
Real Estate Construction [Member] | Sales Comparison Approach [Member]
Quantitative Information [Abstract]
Other Real Estate	$ 585
Unobservable inputs	Adjustment for Difference Between Comparable Sales
Real Estate Construction [Member] | Sales Comparison Approach [Member] | Minimum [Member]
Quantitative Information [Abstract]
Adjustment for difference between comparable sales	10.00%
Real Estate Construction [Member] | Sales Comparison Approach [Member] | Maximum [Member]
Quantitative Information [Abstract]
Adjustment for difference between comparable sales	10.00%
Real Estate Construction [Member] | Sales Comparison Approach [Member] | Weighted Average [Member]
Quantitative Information [Abstract]
Adjustment for difference between comparable sales	10.00%

XML

Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands		Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Assets [Abstract]
Available-for-Sale Securities		$ 341,771	$ 369,137	$ 365,184
Investment Securities Held-to-Maturity		62,892	62,388	64,218
Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Investment Securities Held-to-Maturity		62,892	62,388	62,079
Other [Member]
Assets [Abstract]
Investment Securities Held-to-Maturity				2,139
Government Agency & Government-Sponsored Entities [Member]
Assets [Abstract]
Available-for-Sale Securities		63,346	33,251	68,132
US Treasury Notes [Member]
Assets [Abstract]
Available-for-Sale Securities		65,788	72,884	19,966
Mortgage Backed Securities [Member]
Assets [Abstract]
Available-for-Sale Securities	[1]	212,127	262,493	276,601
Other [Member]
Assets [Abstract]
Available-for-Sale Securities		510	509	485
Carrying Amount [Member]
Assets [Abstract]
Cash and Cash Equivalents		73,716	59,446	143,936
Available-for-Sale Securities		341,771	369,137	365,184
Investment Securities Held-to-Maturity		61,535	61,396	63,463
FHLB Stock		7,795	7,795	7,677
Loans & Leases, Net of Deferred Fees & Allowance		1,948,942	1,954,836	1,666,380
Accrued Interest Receivable		8,118	9,240	7,324
Liabilities [Abstract]
Deposits		2,256,464	2,277,532	2,111,773
Subordinated Debentures		10,310	10,310	10,310
Accrued Interest Payable		471	513	433
Carrying Amount [Member] | Demand [Member]
Liabilities [Abstract]
Deposits		637,140	711,029	578,820
Carrying Amount [Member] | Interest Bearing Transaction [Member]
Liabilities [Abstract]
Deposits		409,360	377,594	340,045
Carrying Amount [Member] | Savings and Money Market [Member]
Liabilities [Abstract]
Deposits		725,823	707,885	699,308
Carrying Amount [Member] | Time [Member]
Liabilities [Abstract]
Deposits		484,141	481,024	493,600
Carrying Amount [Member] | Commercial Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		601,412	593,587	521,596
Carrying Amount [Member] | Agricultural Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		423,119	417,153	344,965
Carrying Amount [Member] | Real Estate Construction [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		163,861	149,489	99,700
Carrying Amount [Member] | Residential 1st Mortgages [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		211,409	205,616	181,758
Carrying Amount [Member] | Home Equity Lines and Loans [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		29,575	30,910	29,628
Carrying Amount [Member] | Agricultural [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		247,751	287,658	211,629
Carrying Amount [Member] | Commercial [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		205,754	202,968	227,200
Carrying Amount [Member] | Consumer & Other [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		6,879	6,417	4,703
Carrying Amount [Member] | Leases [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		61,541	62,584	48,347
Carrying Amount [Member] | Unallocated Allowance [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		(2,359)	(1,546)	(3,146)
Carrying Amount [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Investment Securities Held-to-Maturity		61,535	61,396	61,324
Carrying Amount [Member] | Other [Member]
Assets [Abstract]
Investment Securities Held-to-Maturity				2,139
Carrying Amount [Member] | Government Agency & Government-Sponsored Entities [Member]
Assets [Abstract]
Available-for-Sale Securities		63,346	33,251	68,132
Carrying Amount [Member] | US Treasury Notes [Member]
Assets [Abstract]
Available-for-Sale Securities		65,788	72,884	19,966
Carrying Amount [Member] | Mortgage Backed Securities [Member]
Assets [Abstract]
Available-for-Sale Securities		212,127	262,493	276,601
Carrying Amount [Member] | Other [Member]
Assets [Abstract]
Available-for-Sale Securities		510	509	485
Estimated Fair Value [Member]
Assets [Abstract]
Cash and Cash Equivalents		73,716	59,446	143,936
Available-for-Sale Securities		341,771	369,137	365,184
Investment Securities Held-to-Maturity		62,892	62,388	64,218
Loans & Leases, Net of Deferred Fees & Allowance		1,947,030	1,939,575	1,668,775
Accrued Interest Receivable		8,118	9,240	7,324
Liabilities [Abstract]
Deposits		2,256,112	2,276,842	2,111,773
Subordinated Debentures		6,437	6,424	6,250
Accrued Interest Payable		471	513	433
Estimated Fair Value [Member] | Demand [Member]
Liabilities [Abstract]
Deposits		637,140	711,029	578,820
Estimated Fair Value [Member] | Interest Bearing Transaction [Member]
Liabilities [Abstract]
Deposits		409,361	377,594	340,045
Estimated Fair Value [Member] | Savings and Money Market [Member]
Liabilities [Abstract]
Deposits		725,822	707,885	699,308
Estimated Fair Value [Member] | Time [Member]
Liabilities [Abstract]
Deposits		483,789	480,334	493,600
Estimated Fair Value [Member] | Commercial Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		604,707	591,271	519,698
Estimated Fair Value [Member] | Agricultural Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		414,223	405,295	346,742
Estimated Fair Value [Member] | Real Estate Construction [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		163,917	149,371	99,861
Estimated Fair Value [Member] | Residential 1st Mortgages [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		214,885	207,431	185,210
Estimated Fair Value [Member] | Home Equity Lines and Loans [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		30,806	32,360	31,332
Estimated Fair Value [Member] | Agricultural [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		246,626	285,733	210,769
Estimated Fair Value [Member] | Commercial [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		204,828	201,105	224,783
Estimated Fair Value [Member] | Consumer & Other [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		6,938	6,416	4,747
Estimated Fair Value [Member] | Leases [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		62,459	62,139	48,779
Estimated Fair Value [Member] | Unallocated Allowance [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		(2,359)	(1,546)	(3,146)
Estimated Fair Value [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Investment Securities Held-to-Maturity		62,892	62,388	62,079
Estimated Fair Value [Member] | Other [Member]
Assets [Abstract]
Investment Securities Held-to-Maturity				2,139
Estimated Fair Value [Member] | Government Agency & Government-Sponsored Entities [Member]
Assets [Abstract]
Available-for-Sale Securities		63,346	33,251	68,132
Estimated Fair Value [Member] | US Treasury Notes [Member]
Assets [Abstract]
Available-for-Sale Securities		65,788	72,884	19,966
Estimated Fair Value [Member] | Mortgage Backed Securities [Member]
Assets [Abstract]
Available-for-Sale Securities		212,127	262,493	276,601
Estimated Fair Value [Member] | Other [Member]
Assets [Abstract]
Available-for-Sale Securities		510	509	485
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets [Abstract]
Cash and Cash Equivalents		73,716	59,446	143,936
Available-for-Sale Securities		65,988	73,083	175
Investment Securities Held-to-Maturity		0	0	0
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Accrued Interest Receivable		0	0	0
Liabilities [Abstract]
Deposits		1,772,323	1,796,508	1,618,173
Subordinated Debentures		0	0	0
Accrued Interest Payable		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Demand [Member]
Liabilities [Abstract]
Deposits		637,140	711,029	578,820
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Interest Bearing Transaction [Member]
Liabilities [Abstract]
Deposits		409,361	377,594	340,045
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Savings and Money Market [Member]
Liabilities [Abstract]
Deposits		725,822	707,885	699,308
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Time [Member]
Liabilities [Abstract]
Deposits		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Commercial Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Agricultural Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Real Estate Construction [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Residential 1st Mortgages [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Home Equity Lines and Loans [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Agricultural [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Commercial [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Consumer & Other [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Leases [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Unallocated Allowance [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Investment Securities Held-to-Maturity		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other [Member]
Assets [Abstract]
Investment Securities Held-to-Maturity				0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Government Agency & Government-Sponsored Entities [Member]
Assets [Abstract]
Available-for-Sale Securities		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | US Treasury Notes [Member]
Assets [Abstract]
Available-for-Sale Securities		65,788	72,884	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Mortgage Backed Securities [Member]
Assets [Abstract]
Available-for-Sale Securities		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other [Member]
Assets [Abstract]
Available-for-Sale Securities		200	199	175
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member]
Assets [Abstract]
Cash and Cash Equivalents		0	0	0
Available-for-Sale Securities		275,783	296,054	365,009
Investment Securities Held-to-Maturity		50,436	44,675	50,722
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Accrued Interest Receivable		8,118	9,240	7,324
Liabilities [Abstract]
Deposits		483,789	480,334	493,600
Subordinated Debentures		6,437	6,424	6,250
Accrued Interest Payable		471	513	433
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Demand [Member]
Liabilities [Abstract]
Deposits		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Interest Bearing Transaction [Member]
Liabilities [Abstract]
Deposits		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Savings and Money Market [Member]
Liabilities [Abstract]
Deposits		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Time [Member]
Liabilities [Abstract]
Deposits		483,789	480,334	493,600
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Commercial Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Agricultural Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Real Estate Construction [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Residential 1st Mortgages [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Home Equity Lines and Loans [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Agricultural [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Commercial [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Consumer & Other [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Leases [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Unallocated Allowance [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Investment Securities Held-to-Maturity		50,436	44,675	48,583
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Other [Member]
Assets [Abstract]
Investment Securities Held-to-Maturity				2,139
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Government Agency & Government-Sponsored Entities [Member]
Assets [Abstract]
Available-for-Sale Securities		63,346	33,251	68,132
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | US Treasury Notes [Member]
Assets [Abstract]
Available-for-Sale Securities		0	0	19,966
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Mortgage Backed Securities [Member]
Assets [Abstract]
Available-for-Sale Securities		212,127	262,493	276,601
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Other [Member]
Assets [Abstract]
Available-for-Sale Securities		310	310	310
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member]
Assets [Abstract]
Cash and Cash Equivalents		0	0	0
Available-for-Sale Securities		0	0	0
Investment Securities Held-to-Maturity		12,456	17,713	13,496
Loans & Leases, Net of Deferred Fees & Allowance		1,947,030	1,939,575	1,668,775
Accrued Interest Receivable		0	0	0
Liabilities [Abstract]
Deposits		0	0	0
Subordinated Debentures		0	0	0
Accrued Interest Payable		0	0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Demand [Member]
Liabilities [Abstract]
Deposits		0	0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Interest Bearing Transaction [Member]
Liabilities [Abstract]
Deposits		0	0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Savings and Money Market [Member]
Liabilities [Abstract]
Deposits		0	0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Time [Member]
Liabilities [Abstract]
Deposits		0	0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Commercial Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		604,707	591,271	519,698
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Agricultural Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		414,223	405,295	346,742
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Real Estate Construction [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		163,917	149,371	99,861
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Residential 1st Mortgages [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		214,885	207,431	185,210
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Home Equity Lines and Loans [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		30,806	32,360	31,332
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Agricultural [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		246,626	285,733	210,769
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Commercial [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		204,828	201,105	224,783
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Consumer & Other [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		6,938	6,416	4,747
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Leases [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		62,459	62,139	48,779
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Unallocated Allowance [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		(2,359)	(1,546)	(3,146)
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Investment Securities Held-to-Maturity		12,456	17,713	13,496
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Other [Member]
Assets [Abstract]
Investment Securities Held-to-Maturity				0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Government Agency & Government-Sponsored Entities [Member]
Assets [Abstract]
Available-for-Sale Securities		0	0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | US Treasury Notes [Member]
Assets [Abstract]
Available-for-Sale Securities		0	0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Mortgage Backed Securities [Member]
Assets [Abstract]
Available-for-Sale Securities		0	0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Other [Member]
Assets [Abstract]
Available-for-Sale Securities		$ 0	$ 0	$ 0

[1] All Mortgage Backed Securities consist of securities collateralized by residential real estate and were issued by an agency or government sponsored entity of the U.S. government.

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Dividends and Basic Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Dividends and Basic Earnings Per Common Share [Abstract]
Cash dividends	$ 0	$ 0
Earnings per share for the period [Abstract]
Net Income	$ 7,172	$ 6,403
Weighted Average Number of Common Shares Outstanding (in shares)	791,895	785,366
Basic Earnings Per Common Share Amount (in dollars per share)	$ 9.06	$ 8.15