10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2022

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 001-38084

FARMERS & MERCHANTS BANCORP, INC.

OHIO	34-1469491
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)
307 North Defiance Street Archbold, Ohio	43502
(Address of principal Executive offices)	(Zip Code)

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

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

Title of each class	Trading Symbol(s)	Name of each exchange
Common Stock, No Par Value	FMAO	NASDAQ Capital Market

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

As of June 30, 2022, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $433,654,732.

As of February 17, 2023, the Registrant had 14,564,425 shares of common stock issued of which 13,608,422 shares are outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of Form 10-K – Portions of the definitive Proxy Statement for the 2023 Annual Meeting of Shareholders of Farmers & Merchants Bancorp, Inc.

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FARMERS & MERCHANTS BANCORP, INC.

TABLE OF CONTENTS

Form 10‑K Items		PAGE
Item 1.	Business	3-10
Item 1a.	Risk Factors	11-18
Item 1b.	Unresolved Staff Comments	18
Item 2.	Properties	18
Item 3.	Legal Proceedings	19
Item 4.	Mine Safety Disclosures	19
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters	20-21
Item 6.	Reserved	21
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21-43
Item 7a.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 8.	Financial Statements and Supplementary Data	44-44
Item 9.	Changes In and Disagreements on Accounting and Financial Disclosure	109
Item9a.	Controls and Procedures	109
Item 9b.	Other Information	109
Item 9c.	Disclosure Regarding Foreign Jurisdictions That Prevent Inspections	109
Item 10.	Directors and Executive Officers of the Registrant	110-112
Item 11.	Executive Compensation	113
Item 12.	Security Ownership of Certain Beneficial Owners and Management	113
Item 13.	Certain Relationships and Related Transactions	114
Item 14.	Principal Accountant Fees and Services	114
Item 15.	Exhibits, Financial Schedules and Reports on Form 8-K	115-116
Item 16.	Form 10-K Summary	116
Signatures		117
Exhibit 21.	Subsidiaries of Farmers & Merchants Bancorp, Inc.	119
Exhibit 23.	Consent of FORVIS, LLP	120
Exhibit 31.	Certifications Under Section 302	121
Exhibit 32.	Certifications Under Section 906	123
Exhibit 101.INS	Inline XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. (1)
Exhibit 101.SCH	Inline XBRL Taxonomy Extension Schema Document (1)
Exhibit 101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)
Exhibit 101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document (1)
Exhibit 101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document (1)
Exhibit 101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document (1)
(1) Pursuant to Rule 406T of Regulation S-T, the interactive Data Files in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
Total Pages:		124

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Forward Looking Statements

Statements contained in the Company's Annual Report on Form 10-K may be forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of such words as "intend," "believe," "expect," "anticipate," "should," "planned," "estimated," and "potential." Such forward-looking statements are based on current expectations but may differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time. Other factors which could have a material adverse effect on the operations of the Company and its subsidiaries which include, but are not limited to, changes in interest rates, general economic conditions, legislative and regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Bank's market area, changes in relevant accounting principles and guidelines and other factors over which management has no control. The forward-looking statements are made as of the date of this report, and the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.

PART I

ITEM 1. BUSINESS

General

Farmers & Merchants Bancorp, Inc. (Company) is a bank holding company incorporated under the laws of Ohio in 1985 and elected to become a financial holding company under the Federal Reserve in 2014. Our primary subsidiary, The Farmers & Merchants State Bank (Bank) is a local independent community bank that has been primarily serving Northwest Ohio and Northeast Indiana since 1897. Our other subsidiary, Farmers & Merchants Risk Management (Captive) is a captive insurance company formed in December 2014 and located in Nevada. We report our financial condition and net income on a consolidated basis and we report only one segment.

Our executive offices are located at 307 North Defiance Street, Archbold, Ohio 43502, and our telephone number is (419) 446-2501.

For a discussion of the general development of the Company’s business throughout 2022, please see the portion of Management’s Discussion and Analysis of Financial Condition and Results of Operations captioned “2022 in Review.”

Nature of Activities

The Farmers & Merchants State Bank engages in general commercial banking business. Its activities include commercial, agricultural and residential mortgage as well as consumer and credit card lending activities. Because the majority of the Bank's offices are located in Northwest Ohio and Northeast Indiana, a substantial amount of the loan portfolio is comprised of loans made to customers in the farming industry for such things as farm land, farm equipment, livestock and operating loans for seed, fertilizer, and feed. Other types of lending activities include loans for home improvements and loans for such items as autos, trucks, recreational vehicles and motorcycles. With the expansion into newer market areas, the most recent increases in loan activity have been in commercial real estate, providing operating lines of credit and machinery purchases. Consumer real estate also increased substantially with the acquisition of Perpetual Federal Savings Bank on October 1, 2021. The Bank also operates four Loan Production Offices (LPOs) , two in Ohio and one in Indiana and Michigan.

The Bank also provides checking account services, as well as savings and time deposit services such as certificates of deposits. In addition, Automated Teller Machines (ATMs) or Interactive Teller Machines (ITMs) are provided at most branch locations along with other independent locations in the market area. The Bank has custodial services for Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs). The Bank provides on-line banking access for consumer and business customers. For consumers, this includes bill-pay, on-line statement opportunities and mobile banking. For business customers, it provides the option of electronic transaction origination such as wire and Automated Clearing House (ACH) file transmittal. In addition, the Bank offers remote deposit capture or electronic deposit processing and merchant credit card services. Upgrades to our digital products and services continue to occur in both retail and business lines.

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The Bank has established underwriting policies and procedures which facilitate operating in a safe and sound manner in accordance with supervisory and regulatory guidance. Within this sphere of safety and soundness, the Bank's practice has been to not promote innovative, unproven credit products which may not be in the best interest of the Bank or its customers. The Bank does offer a hybrid mortgage loan. Hybrid loans are loans that start out as a fixed rate mortgage but after a set number of years automatically adjust to an adjustable rate mortgage. The Bank offers a three year, a five year, a seven year and a ten year fixed rate mortgage and a fifteen year jumbo fixed rate mortgage after which the interest rate will adjust annually for all. In order to offer longer term fixed rate mortgages, the Bank does participate in the Freddie Mac, Farmer Mac and Small Business Lending programs. The Bank also normally retains the servicing rights on these partially or 100% sold loans. In order for the customer to participate in these programs they must meet the requirements established by those agencies. In addition, the Bank does sell some of its longer term fixed rate agricultural mortgages into the secondary market with the aid of brokers. With the acquisition in the 4th quarter of 2021, the Bank saw an increase in fixed rate, long-term mortgage loans to our portfolio from that banking service area.

The Bank does not have a program to fund sub-prime loans. Sub-prime loans are characterized as a lending program or strategy that targets borrowers who pose a significantly higher risk of default than traditional retail banking customers.

All loan requests are reviewed as to credit worthiness and are subject to the Bank's underwriting guidelines as to secured versus unsecured credit. Secured loans are in turn subject to loan to value (LTV) requirements based on collateral types as set forth in the Bank's Loan Policy. In addition, credit scores of those seeking consumer credit are reviewed and if they do not meet the Bank's Loan Policy guidelines an additional officer approval is required.

Consumer Loans:

•Maximum loan to value (LTV) for cars, SUVs, and trucks is 110%.

•Loans above 100% are generally the result of sales tax.

•Boats, campers, motorcycles, RV's and Motor Coaches range from 80%-90% based on age of vehicle.

•1st or 2nd mortgages on 1-4 family homes maximum LTV range from 80%-85%.

•Raw land LTV maximum ranges from 65%-75% depending on whether or not the property has been improved.

Commercial/Agriculture:

Accounts Receivable:

•Up to 80% LTV less retainages and greater than 90 days.

Inventory:

•Agriculture:

oLivestock and grain up to 80% LTV, crops (insured) up to 75% and Warehouse Receipts up to 87%.

•Commercial:

oMaximum LTV of 50% on raw and finished goods.

•Floor plan:

oNew/used vehicles to 100% of wholesale.

oNew/Used recreational vehicles and manufactured homes to 80% of wholesale.

Equipment:

•New not to exceed (NTE) 80% of invoice, used NTE 50% of listed book or 75% of appraised value.

•Restaurant equipment up to 35% of market value.

•Heavy trucks, titled trailers NTE 75% LTV and aircraft up to 75% of appraised value.

Real Estate:

•Maximum LTVs range from 70%-80% depending on type.

•Maximum LTV on non-traditional borrower loans up to 85%.

FM Investment Services, the brokerage department of the Bank, has served the Bank’s customers, providing investment services, since April of 1999. In November of 2020, FM Investment Services purchased the assets and clients of Adams County Financial Resources (ACFR) which is discussed in further detail in Note 2 to the Company’s financial statements. Securities are offered through Raymond James Financial Services, Inc.

In December of 2014, the Company became a financial holding company within the meaning of the Bank Holding Company Act of 1956 as amended, in order to provide the flexibility to take advantage of the expanded powers available to a financial holding company under the Act. Our subsidiary Bank is in turn regulated and examined by the Ohio Division of Financial Institutions and the Federal Deposit Insurance Corporation. The activities of our Bank subsidiary are also subject to other federal and state laws and regulations. The Company also formed a Captive insurance company in December 2014. The Captive is located in Nevada and regulated by the State of Nevada Division of Insurance.

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The Bank’s primary market includes communities located in the Ohio counties of Champaign, Defiance, Fulton, Hancock, Henry, Lucas, Shelby, Williams, Wood and in the Indiana counties of Adams, Allen, DeKalb, Jay, Steuben and Wells. The commercial banking business in this market is highly competitive, with approximately 34 other depository institutions currently doing business in the Bank’s primary market. In our banking activities, we compete directly with other commercial banks, credit unions, farm credit services, and savings and loan institutions in each of our operating localities. In a number of our locations, we compete against entities which are much larger than us, including Huntington National Bank, Fifth Third Bank, PNC, Wells Fargo Bank, NA, KeyBank NA and JPMorgan Chase Bank, NA. Based on deposit data as of June 30, 2022 from the FDIC and using zip codes in our markets, the Bank ranked 1st with a 14.94% market share in markets served. The primary factors in competing for loans and deposits are the rates charged as well as location and quality of the services provided.

At December 31, 2022, we had 431 full time equivalent employees. The employees are not represented by a collective bargaining unit. We provide our employees with a comprehensive benefit program, some of which is contributory. We consider our employee relations to be good.

Supervision and Regulation

General

The Company is a corporation organized under the laws of the State of Ohio. The business in which the Company and its subsidiaries are engaged is subject to extensive supervision, regulation and examination by various bank regulatory authorities. The supervision, regulation and examination to which the Company and its subsidiaries are subject to are intended primarily for the protection of depositors and the deposit insurance funds that insure the deposits of banks, rather than for the protection of shareholders.

Several of the more significant regulatory provisions applicable to banks and bank holding companies to which the Company and its subsidiaries are subject are discussed below along with certain regulatory matters concerning the Company and its subsidiaries. To the extent that the following information describes statutory or regulatory provisions, it is qualified in its entirety by reference to the particular statutory provisions. Any change in applicable law or regulation may have a material effect on the business and prospects of the Company and its subsidiaries.

Safety and Soundness Standards

The federal banking agencies have adopted guidelines that establish operational and managerial standards to promote the safety and soundness of federally insured depository institutions. The guidelines set forth standards for internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, asset quality and earnings.

In general, the safety and soundness guidelines prescribe the goals to be achieved in each area, and each institution is responsible for establishing its own procedures to achieve those goals. If an institution fails to comply with any of the standards set forth in the guidelines, the institution’s primary federal regulator may require the institution to submit a plan for achieving and maintaining compliance. If an institution fails to submit an acceptable compliance plan, or fails in any material respect to implement a compliance plan that has been accepted by its primary federal regulator, the regulator is required to issue an order directing the institution to cure the deficiency. Until the deficiency cited in the regulator’s order is cured, the regulator may restrict the institution’s rate of growth, require the institution to increase its capital, restrict the rates the institution pays on deposits or require the institution to take any action the regulator deems appropriate under the circumstances. Noncompliance with the standards established by the safety and soundness guidelines may also constitute grounds for other enforcement action by the federal banking regulators, including cease and desist orders and civil money penalty assessments.

Regulatory Agencies

The Company is a financial holding company and is subject to inspection, examination and supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) pursuant to the Bank Holding Company Act of 1956, as amended. As a financial holding company, the Company is still subject to all the bank holding company regulations.

The Bank is an Ohio chartered commercial bank. It is subject to regulation and examination by both the Ohio Division of Financial Institutions (ODFI) and the Federal Deposit Insurance Corporation (FDIC).

The Captive is an insurance company incorporated in Nevada and regulated by the State of Nevada, Division of Insurance.

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Holding Company Activities

As a financial holding company incorporated and doing business within the State of Ohio, the Company is subject to regulation and supervision under the Bank Holding Act of 1956, as amended (the "Act"). The Company is required to file with the Federal Reserve Board on a quarterly basis information pursuant to the Act. The Federal Reserve Board may conduct examinations or inspections of the Company and its subsidiaries.

On November 12, 1999, the Gramm-Leach-Bliley Act (the "GLB Act") was enacted into law. The GLB Act made sweeping changes with respect to the permissible financial services which various types of financial institutions may provide. The Glass-Steagall Act, which had generally prevented banks from affiliation with securities and insurance firms, was repealed. Pursuant to the GLB Act, bank holding companies may elect to become a "financial holding company," provided that all of the depository institution subsidiaries of the bank holding company are “well capitalized” and “well managed” under applicable regulatory standards.

Under the GLB Act, a bank holding company that has elected to become a financial holding company may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature. Activities that are "financial in nature" include securities underwriting, dealing and market-making, sponsoring mutual funds and investment companies, insurance underwriting and agency, merchant banking, and activities that the Federal Reserve Board has determined to be closely related to banking. Federal Reserve Board approval is not required for the Company to acquire a company, other than a bank holding company, bank or savings association, engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the Federal Reserve Board. Prior Federal Reserve Board approval is required before the Company may acquire the beneficial ownership or control of more than 5% of the voting shares, or substantially all of the assets, of a bank holding company, bank or savings association. If any subsidiary bank of the Company ceases to be "well capitalized" or "well managed" under applicable regulatory standards, the Federal Reserve Board may, among other actions, order the Company to divest the subsidiary bank. Alternatively, the Company may elect to conform its activities to those permissible for a bank holding company that is not also a financial holding company. If any subsidiary bank of the Company receives a rating under the Community Reinvestment Act of 1977 of less than satisfactory, the Company will be prohibited from engaging in new activities or acquiring companies other than bank holding companies, banks or savings associations.

Affiliate Transactions

Various governmental requirements, including Sections 23A and 23B of the Federal Reserve Act and Regulation W promulgated thereunder limit borrowings by holding companies and non-bank subsidiaries from affiliated insured depository institutions, and also limit various other transactions between holding companies and their non-bank subsidiaries, on the one hand, and their affiliated insured depository institutions on the other. Section 23A of the Federal Reserve Act also generally requires that an insured depository institution's loans to its non-bank affiliates be secured, and Section 23B of the Federal Reserve Act generally requires that an insured depository institution's transactions with its non-bank affiliates be on arms-length terms.

Interstate Banking and Branching

Under the Riegle-Neal Interstate Banking and Branching Efficiency Act ("Riegle-Neal"), subject to certain concentration limits and other requirements, adequately capitalized bank holding companies such as the Company are permitted to acquire banks and bank holding companies located in any state. Any bank that is a subsidiary of a bank holding company is permitted to receive deposits, renew time deposits, close loans, service loans and receive loan payments as an agent for any other bank subsidiary of that bank holding company. Banks are permitted to acquire branch offices outside their home states by merging with out-of-state banks, purchasing branches in other states and establishing de novo branch offices in other states. The Company could from time to time use Riegle-Neal to acquire banks in additional states.

Control Acquisitions

The Change in Bank Control Act prohibits a person or group of persons from acquiring "control" of a bank holding company, unless the Federal Reserve Board has been notified and has not objected to the transaction. Under the rebuttable presumption established by the Federal Reserve Board, the acquisition of 10% or more of a class of voting stock of a bank holding company with a class of securities registered under Section 12 of the Exchange Act, such as the Company, would, under the circumstances set forth in the presumption, constitute acquisition of control of the bank holding company. In addition, a company is required to obtain the approval of the Federal Reserve Board under the Bank Holding Company Act before acquiring 25% (5% in the case of an acquirer that is a bank holding company) or more of any class of outstanding voting stock of a bank holding company, or otherwise obtaining control or a "controlling influence" over that bank holding company.

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Liability for Banking Subsidiaries

Under the current Federal Reserve Board policy, a bank holding company is expected to act as a source of financial and managerial strength to each of its subsidiary banks and to maintain resources adequate to support each subsidiary bank. This support may be required at times when the bank holding company may not have the resources to provide it. In the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a U.S. federal bank regulatory agency to maintain the capital of a subsidiary bank would be assumed by the bankruptcy trustee and entitled to priority of payment. Any depository institution insured by the FDIC can be held liable for any loss incurred, or reasonably expected to be incurred, by the FDIC in connection with (1) the "default" of a commonly controlled FDIC-insured depository institution; or (2) any assistance provided by the FDIC to both a commonly controlled FDIC-insured depository institution "in danger of default." The Bank is an FDIC-insured depository institution. If a default occurred with respect to the Bank, any capital loans to the Bank from its parent holding company would be subordinate in right of payment to payment of the Bank's depositors and certain of its other obligations.

Regulatory Capital Requirements

The Company is required by the various regulatory authorities to maintain certain capital levels. Bank holding companies are required to maintain minimum levels of capital in accordance with Federal Reserve Board capital adequacy guidelines. If capital falls below minimum guideline levels, a bank holding company, among other things, may be denied approval to acquire or establish additional banks or non‑bank businesses. The required capital levels along with the Bank’s capital position at December 31, 2022 and 2021 are summarized in the table included in Note 15 to the consolidated financial statements.

Beginning in 2015, the Company and Bank were required to measure capital adequacy using Basel III accounting. Basel III is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector. Implementation of the rules is overseen by the Federal Reserve, the FDIC and the OCC.

FDICIA

The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), and the regulations promulgated under FDICIA, among other things, established five capital categories for insured depository institutions-well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized-and requires U.S. federal bank regulatory agencies to implement systems for "prompt corrective action" for insured depository institutions that do not meet minimum capital requirements based on these categories. Unless a bank is well capitalized, it is subject to restrictions on its ability to offer brokered deposits and on certain other aspects of its operations. An undercapitalized bank must develop a capital restoration plan and its parent bank holding company must guarantee the bank's compliance with the plan up to the lesser of 5% of the bank’s assets at the time it became undercapitalized and the amount needed to comply with the plan. As of December 31, 2022, the Bank was well capitalized pursuant to these prompt corrective action guidelines.

Dividend Restrictions

The ability of the Company to obtain funds for the payment of dividends and for other cash requirements will be largely dependent on the amount of dividends which may be declared by its banking subsidiary, which are limited to the Bank’s retained earnings during the current year and its prior two years. Various U.S. federal statutory provisions limit the amount of dividends the Company's banking subsidiary can pay to the Company without regulatory approval. In 2009, The Board of Governors of the Federal Reserve Division of Banking Supervision and Regulation issued SR09-4 regarding the safe and sound payment of dividends by bank holding companies. See Note 16 to the consolidated financial statements for additional information on applicable dividend restrictions.

Deposit Insurance Assessments

The deposits of the Bank are insured up to the regulatory limits set by the FDIC. The FDIC maintains the Deposit Insurance fund (“DIF”) by assessing depository institutions an insurance premium (assessment). The amount assessed to each institution is based on statutory factors that take into consideration the degree of risk the institution poses to the DIF. The primary purposes of the DIF are to (1) insure the deposits and protect the depositors of insured depository institutions; and (2) resolve failed banks. The DIF is primarily funded through quarterly assessments on insured depository institutions, but it also earns interest income on its securities. Decreases in the DIF result from loss provisions associated with the resolution of failed banks and FDIC operating expenses.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) revised the statutory authorities governing the FDIC’s management of the DIF. A key requirement from the Dodd-Frank Act resulted in the FDIC’s adoption

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of new rules in February 2011 regarding Assessments, Dividends, Assessment Base, and Large Bank Pricing. The new rules implemented the following changes: (1) redefined the definition of an institution’s deposit insurance assessment base from one based on domestic deposits to one based on assets now defined as “average consolidated total assets minus average tangible equity”; (2) changed the assessment rate adjustments to better account for risk based on an institution’s funding sources; (3) revised the deposit insurance assessment rate schedule in light of the new assessment base and assessment rate adjustments; (4) implemented Dodd-Frank Act dividend provisions; (5) revised the large insured depository institution assessment system to better differentiate for risk and to take into account losses the FDIC may incur from large institution failures; and (6) provided technical and other changes to the FDIC’s assessment rules. Though deposit insurance assessments maintain a risk-based approach, the FDIC imposed a more extensive risk-based assessment system on large insured depository institutions with at least $10 billion in total assets since they are more complex in nature and could pose greater risk.

The Dodd-Frank Act permanently raised the standard maximum deposit insurance coverage amount to $250,000 and applies per depositor, per insured depository institution for each account ownership category.

Depositor Preference Statute

In the "liquidation or other resolution" of an institution by any receiver, U.S. federal legislation provides that deposits and certain claims for administrative expenses and employee compensation against the insured depository institution would be afforded a priority over general unsecured claims against that institution, including federal funds and letters of credit.

Government Monetary Policy

The earnings of the Company are affected primarily by general economic conditions and to a lesser extent by the fiscal and monetary policies of the federal government and its agencies, particularly the Federal Reserve. Its policies influence, to some degree, the volume of bank loans and deposits, and interest rates charged and paid thereon, and thus have an effect on the earnings of the Company's subsidiary Bank.

Additional Regulation

Provisions of the Dodd-Frank Act have resulted in additional rulemaking by the federal regulatory agencies and new rules yet to be issued. Implementing the new and expanded regulations involved extreme diligence to ensure compliance with the complexities of the rules, as well as extensive new disclosure and reporting requirements.

The Dodd-Frank Act created an independent regulatory body, the Bureau of Consumer Financial Protection (“Bureau”), with authority and responsibility to set rules and regulations for most consumer protection laws applicable to all banks – large and small – which added another regulator to scrutinize and police financial activities. Transfer to the Bureau of all consumer financial protection functions for designated laws by the other federal agencies was completed in July 2011. The Bureau was given responsibility for mortgage reform and enforcement, as well as broad new powers over consumer financial activities, including consumer financial products and services and how they are provided.

In accordance with the Gramm-Leach-Bliley Financial Modernization Act of 1999 (the “GLB Act”), federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers to non-affiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a non-affiliated third party. The privacy provisions of the GLB Act affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors.

A major focus of governmental policy on financial institutions has been aimed at combating money laundering and terrorist financing. The USA PATRIOT Act of 2001 (the “USA Patriot Act”) substantially broadened the scope of United States anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the United States. The U. S. Treasury Department has issued a number of regulations that apply various requirements of the USA Patriot Act to financial institutions such as the Bank. These regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal and reputational consequences for the institution.

Significant mortgage rules mandated by the Dodd-Frank Act provisions were enacted in response to the breakdown in the mortgage lending markets and to provide for consumer protections. Final rules issued by the Bureau or jointly with other regulatory agencies implemented requirements under the Dodd-Frank Act regarding mortgage-related matters such as ability-to-repay, qualified mortgage standards, mortgage servicing, mortgage loan originator compensation, escrow requirements for

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higher-priced mortgage loans, and providing appraisals. These mortgage rules addressed problems consumers faced in the three major steps in buying a home – shopping for a mortgage, closing on a mortgage, and paying off a mortgage.

Final rules and amendments to the integrated mortgage disclosure rules under the Real Estate Settlement Act (RESPA) and Truth in Lending Act (TILA) became effective in October 2015. The TILA-RESPA Integrated Disclosure rule commonly referred to as TRID combined required disclosures into two single forms: 1) The Loan Estimate which is provided shortly after a mortgage loan application and 2) The Closing Disclosure which is provided prior to loan consummation. In addition, a mandated appraisal notice under the Equal Credit Opportunity Act and the servicing application disclosure under RESPA were also combined into the new integrated disclosures. Process and procedural adjustments were necessary to appropriately implement the new requirements. Implementation to achieve TRID compliance involved extensive collaboration with the Mortgage Loan Origination software vendor, as well as outreach and coordination efforts with real estate agents, attorneys, and closing agents to cultivate preparedness for the new integrated mortgage loan disclosure forms. Amendments to the TRID rules effective in October 2017 with a mandatory compliance in October 2018 were intended to provide further clarity to certain provisions. Remaining attentive to the complexities of the TRID rules ensure practices and procedures remain compliant and not subject the Bank to unnecessary liability.

Final rules, mostly effective in October 2015, were issued by the Board of Governors of the Federal Reserve System (FRB), the Farm Credit Administration, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Office of the Comptroller of the Currency (OCC) to implement provisions of the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA) and the Biggert-Waters Flood Insurance Reform Act of 2012 (the Biggert-Waters Act). These provisions amended regulations which apply to loans secured by properties located in special flood hazard areas. Final rules for acceptance of private flood insurance policies became effective on July 1, 2019. Fines and penalties continue to be assessed by regulators for non-compliance with flood insurance requirements. A continued focus on adherence to the flood rules and requirements is necessary.

The Department of Defense (DOD) rules amending its regulation that implements the Military Lending Act (MLA) became effective in October 2016. The MLA enacted as part of the John Warner National Defense Act of 2007, significantly expanded the scope of the Act to cover all consumer credit except residential mortgages and purchase money loans. Compliance requirements for credit cards became effective in October 2017. Coverage applies to consumer credit defined as “credit offered or extended for personal, family, or household purpose and that is subject to a finance charge or payable by written agreement in more than four installments.” A covered borrower is a consumer who at the time of becoming obligated on a consumer credit transaction or establishing an account for consumer credit, is a covered member or dependent (including a spouse) of a covered member. A covered member is a member of the armed forces serving on active duty or active guard or reserve duty.

Providing a loan to a MLA-covered borrower that exceeds the 36% Military Annual Percentage Rate is prohibited. Any covered loans made without providing proper disclosures or in violation of the MLA is void. Creditors who knowingly or willfully violate the rules could be subject to a fine, imprisonment up to one year or both. Reliance on and collaboration with Loan Origination System vendors for assistance with calculations and required disclosures along with an efficient and effective process for identifying covered borrowers remains the best defense to prevent violations.

Under the TILA Ability to Repay requirements, the Bank meets the criteria to qualify as a small creditor based on the number of first-lien mortgage loans transactions and due to its asset size; however it is not a creditor that operates predominantly in rural or underserved areas. The Bank focuses on Qualified Mortgage (QM) status for mortgage loans originated as they provide certain presumptions of compliance under the Ability to Repay rules adopted under the Dodd-Frank Act. In satisfying QM requirements, any mortgage lender regardless of their size can make loans which are entitled to the QM presumption of compliance. New final rules, effective October 2022, amending the Ability to Repay/Qualified Mortgage Rules were implemented. The General QM Final Rule amended the definition of the QM category to offset the impact of the sunsetting of the temporary Government Sponsored Enterprise (GSE) QMs. The amended General QM loan definition removed the 43% debt-to-income limit, eliminated Appendix Q underwriting standards and any requirement to use them as a qualification for General QM status, and instead implemented price-based thresholds. The Bank's Loan Policy was revised accordingly. For General QM status, applicable to first-lien mortgage loans offered by the Bank, a loan must still observe existing product features, underwriting requirements and limits on points and fees. Since the Bank, on occasion, does make Non-Qualified Mortgages, approvals and originations of both Non-QM loans and Higher Priced Mortgage Loans are periodically reported to the Bank’s Loan Committee.

Revised Regulation C rules which implement the Home Mortgage Disclosure Act (HMDA) published by the Bureau become effective on January 1, 2018 for reportable loan applications. Dodd-Frank Act provisions added new data points for HMDA and authorized the Bureau to require additional information. The types of transactions reportable have expanded to include most consumer purpose transactions that are dwelling-secured loans or open-end lines of credit. Reportable data points were significantly expanded to 52 fields which included applicant age, credit score, automated underwriting system information, property value, application channel, points and fees, borrower-paid origination charges, discount points, lender credits, loan

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term, prepayment penalty, interest rate, loan originator identifier, as well as other data fields. Ethnicity categories were expanded to include certain subcategories along with a means to capture information on how an applicant’s or borrower’s ethnicity, race, and sex were collected by the institution. A thorough review and validation of data fields to be reported for each application was conducted throughout the year. Year-end submission of HMDA data utilizes the web-based tool developed by the Bureau. With the expiration of the temporary threshold, the Bank commenced HMDA data collection on certain open-end lines of credit secured by a dwelling with final action taken as of January 1, 2022 or thereafter.

Enactment of the Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA) on May 24, 2018, resulted in a regulatory reform law deemed to be relief from certain burdensome provisions of the Dodd-Frank Act. The EGRRCPA included provisions with various effective dates, including some that were effective immediately. Matters impacted included access to mortgage credit; access to credit; protections for veterans, consumers, and homeowners; rules for holding companies; capital access; and protections for student borrowers. Though effective immediately, conforming regulations were required for certain provisions such as Reciprocal Deposits, Examination Cycles, and High Volatility Commercial Real Estate (HVCRE). The Protecting Tenants in Foreclosure Act was restored and permanently extended as of June 23, 2018. An interim final rule was jointly issued by the OCC, FRB, and FDIC allowing an extended examination cycle for qualifying insured depository institutions with less than $3 billion in total assets. Effective September 21, 2018, consumers could freeze their credit information and place one-year fraud alerts for free. Additionally, parents can freeze the credit information of their children under age 16 for free. In some instances, regulators still need to issue proposals, provide guidance, and publish final rules for various provisions. Thus, issuance of guidance and final rules must be monitored in order to be effectively implemented.

Unfair or deceptive acts or practices (UDAP) standards originally developed years ago by the Federal Trade Commission focused on unacceptable practices that may not specifically be addressed elsewhere in banking or consumer finance law. Banking regulatory agencies have increasingly used this authority over the years to address acts or practices that are deemed harmful, deceptive, or misleading to consumers. The authority of the Federal Trade Commission (FTC) for credit practice rules was repealed as a result of the Dodd-Frank Act. Guidance issued collectively by the FDIC, FRB, the Bureau, NCUA, and OCC in August 2014 clearly indicated certain consumer credit practices were not permissible and remained subject to Section 5 of the Federal Trade Commission Act, as well as Sections 1031 and 1036 of the Dodd-Frank Act. The interagency guidance further noted that the Agencies will continue to have supervisory authority and enforcement authority for unfair or deceptive acts or practices, which could include those practices previously addressed in the former credit practices rules. Awareness of UDAP standards, and the Bureau’s unfair, deceptive or abusive acts or practices (UDAAP) in relation to the offering and marketing of Bank products and services remains important.

The Bank is also subject to federal regulation relating to such matters as required reserves, limitation as to the nature and amount of its loans and investments, regulatory approval of any merger or consolidation, issuance or retirement of their own securities, limitations upon the payment of dividends and other aspects of banking operations. In addition, the activities and operations of the Bank are subject to numerous additional detailed, complex and sometimes overlapping laws and regulations. These include state usury and consumer credit laws, state laws relating to fiduciaries, the federal Equal Credit Opportunity Act and Regulation B, the federal Electronic Funds Transfer Act and Regulation E, the federal Fair Credit Reporting Act and Regulation V, the federal Real Estate Settlement Procedures Act (RESPA) and Regulation X, the federal Truth in Lending Act and Regulation Z, the federal Truth in Savings Act and Regulation DD, the Bank Secrecy Act, the federal Community Reinvestment Act, anti-discrimination laws and legislation, and antitrust laws.

Future Legislation

Changes to the laws and regulations, both at the federal and state levels, can affect the operating environment of the Company and its subsidiaries in substantial and unpredictable ways. The Company cannot accurately predict whether those changes in laws and regulations will occur, and, if those changes occur, the ultimate effect they would have upon the financial condition or results of operations of the Company or its subsidiaries.

Available Information

The Company maintains an Internet web site at the following internet address: www.fm.bank. The Company files reports with the Securities and Exchange Commission (SEC). Because the Company makes its filings with the SEC electronically, you may access such reports at the SEC’s website (www.sec.gov). The Company makes available, free of charge through its internet address, copies of its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to these reports as soon as reasonably practicable after such materials have been filed with or furnished to the SEC. Copies of these documents may also be obtained, either in electronic or paper form, by contacting Barbara J. Britenriker, Chief Financial Officer of the Company at (419) 446-2501.

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ITEM 1a. RISK FACTORS

Significant Competition from an Array of Financial Service Providers

Our ability to achieve strong financial performance and a satisfactory return on investment to shareholders will depend in part on our ability to expand our available financial services. In addition to the challenge of attracting and retaining customers for traditional banking services, our competitors now include securities dealers, brokers, mortgage bankers, investment advisors and finance and insurance companies who seek to offer one-stop financial services to their customers that may include services that banks have not been able or allowed to offer to their customers in the past. The increasingly competitive environment is a result primarily of changes in regulation, changes in technology and product delivery systems and the accelerating pace of consolidation among financial services providers. If we fail to adequately address each of the competitive pressures in the banking industry, our financial condition and results of operations could be adversely affected.

Credit Risk

The risk of nonpayment of loans is inherent in commercial banking. Such nonpayment could have an adverse effect on the Company’s earnings and our overall financial condition as well as the value of our common stock. Management attempts to reduce the Bank’s credit exposure by carefully monitoring the concentration of its loans within specific industries and through the loan approval process. However, there can be no assurance that such monitoring and procedures will totally mitigate the risks. Credit losses can cause insolvency and failure of a financial institution and, in such event, its shareholders could lose their entire investment. For more information on the exposure of the Company and the Bank to credit risk, see the section under Part II, Item 7 of this Form 10-K captioned “Loan Portfolio.”

Dependence upon the Accuracy and Completeness of Information

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information furnished by or on behalf of customers and counterparties, including financial statements and other financial information. We also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors and accountants if made available. If this information is inaccurate, we may be subject to regulatory action, reputational harm or other adverse effects with respect to the operation of our business, our financial condition and our results of operation.

Our loan portfolio has a large concentration of real estate loans

Real estate loans, which constitute a large portion of our loan portfolio, include home equity, agricultural, commercial, construction and residential loans, and such loans are concentrated in the Bank’s primary markets in Northwest Ohio, Northeast Indiana and complimented with additional exposure in new areas from our LPOs. The market value of real estate can fluctuate significantly in a short period of time as a result of market conditions in the geographic area in which the real estate is located. Adverse developments affecting real estate values in our market could increase the credit risk associated with our loan portfolio. Also, real estate lending typically involves higher loan principal amounts and the repayment of the loans generally is dependent, in large part, on sufficient income from the properties securing the loans to cover operating expenses and debt service. Economic events or governmental regulations outside of the control of the borrower could negatively impact the future cash flow and market values of the affected properties.

If the loans that are collateralized by real estate become troubled during a time when market conditions are declining or have declined, then we may not be able to realize the amount of security that we anticipated at the time of originating the loan, which could cause us to increase our provision for loan losses and adversely affect our operating results and financial condition.

Our real estate loans also include construction loans, including land acquisition and development. Construction, land acquisition and development lending involve additional risks because funds are advanced based upon estimates of costs and the estimated value of the completed project. Because of the uncertainties inherent in estimating construction costs, as well as the market value of the completed project and the effects of governmental regulation on real property, it is relatively difficult to evaluate accurately the total funds required to complete a project and the related loan-to-value ratio. As a result, commercial construction loans often involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project and the ability of the borrower to sell or lease the property, rather than the ability of the borrower or guarantor to repay principal and interest. If our appraisal of the value of the completed project proves to be overstated, we may have inadequate security for the repayment of the loan upon completion of construction of the project.

Payments on agricultural real estate loans are dependent on the profitable operation or management of the farm property securing the loan. The success of the farm may be affected by many factors outside the control of the borrower, including adverse weather conditions that prevent the planting of a crop or limit crop yields (such as hail, drought and floods), loss of livestock due to

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disease or other factors, declines in market prices for agricultural products (both domestically and internationally) and the impact of government regulations (including changes in price supports, subsidies and environmental regulations). In addition, many farms are dependent on a limited number of key individuals whose injury or death may significantly affect the successful operation of the farm. If the cash flow from a farming operation is diminished, the borrower’s ability to repay the loan may be impaired. The primary crops in our market areas are corn, wheat and soybeans. Accordingly, adverse circumstances affecting these crops could have an adverse effect on our agricultural real estate loan portfolio.

Commercial loans make up a significant portion of our loan portfolio

Our commercial loans are primarily made based on the identified cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. Repayment of our commercial loans is often dependent on the cash flows of the borrower, which may be unpredictable. Most often, this collateral is accounts receivable, inventory, machinery or real estate. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. The other types of collateral securing these loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business.

We also originate agricultural operating loans. As with agricultural real estate loans, the repayment of operating loans is dependent on the successful operation or management of the farm property. Likewise, agricultural operating loans involve a greater degree of risk than lending on residential properties, particularly in the case of loans that are unsecured or secured by rapidly depreciating assets such as farm equipment or assets such as livestock or crops. The primary livestock in our market areas is hogs. In these cases, any repossessed collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. The majority of our agricultural customers utilize crop insurance to mitigate the possibility of a large loss within one year on their grain operations. Crop insurance can be structured to be triggered by different factors and claim payment may also be customized, such as based on harvest yields, income generation. Farmers may also use hedging techniques to lock in crop prices, input costs for future production.

Susceptibility to Changes in Regulation

Any changes to state and federal banking laws and regulations may negatively impact our ability to expand services and to increase the value of our business. We are subject to extensive state and federal regulation, supervision, and legislation that govern almost all aspects of our operations. These laws may change from time to time and are primarily intended for the protection of consumers, depositors and the deposit insurance funds. In addition, the Company’s earnings are affected by the monetary policies of the Board of Governors of the Federal Reserve. These policies, which include regulating the national supply of bank reserves and bank credit, can have a major effect upon the source and cost of funds and the rates of return earned on loans and investments. The Federal Reserve influences the size and distribution of bank reserves through its open market operations and changes in cash reserve requirements against member bank deposits. We cannot predict what effect any presently contemplated or future changes in the laws or regulations or their interpretations would have on us, but such changes could be materially adverse to our financial performance. For more information on this subject, see the section under Part I, Item 1 of this Form 10-K captioned “Supervision and Regulation.”

Changes in U.S. Trade Policies

From 2018 through 2022, the U.S. government implemented tariffs on certain products from countries or entities such as Mexico, Canada, China and the European Union. These countries have issued or continue to threaten retaliatory tariffs against products from the United States, including agricultural products. The United States and these countries may impose additional tariffs and retaliatory tariffs in the future. Tariffs, retaliatory tariffs or other trade restrictions on products and materials that our customers import or export, including agricultural products such as soybeans, could cause the prices of our customers’ products to increase which could reduce demand for such products, or reduce our customer margins, and adversely impact their revenues, financial results and ability to service debt. This could adversely affect our financial condition and results of operations. In addition, to the extent changes in the political environment have a negative impact on us or on the markets in which we operate, our business, results of operations and financial condition could be materially and adversely impacted in the future. In January 2020, passage of the United States-Mexico-Canada (USMCA) trade agreement helped to alleviate some of these risks. The USMCA updates trading rules to better reflect 21st century technology, regulates labor and environmental standards in Mexico, tightens the rules the auto industry must follow to trade vehicles duty free across the three countries and provides tariff-free trade in North America.

Global Economic and Geopolitical Instability and Inflationary Risks

Instability in global economic conditions and geopolitical matters, as well as volatility in financial markets, could have a material adverse effect on the Company’s results of operations and financial condition. The macroeconomic environment in the United

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States is susceptible to global events and volatility in financial markets. For example, global demand for products continues to exceed supply during the economic recovery from the COVID-19 pandemic, creating significant inflationary pressures which, in turn, may adversely impact regional and global economic conditions, as well as the Company’s financial condition and results of operations.

Interest Rate Risk

Changes in interest rates affect our operating performance and financial condition in diverse ways. Our profitability depends in substantial part on our “net interest spread,” which is the difference between the rates we receive on loans and investments and the rates we pay for deposits and other sources of funds. Our net interest spread will depend on many factors that are partly or entirely outside our control, including competition, federal economic, monetary and fiscal policies, and economic conditions generally. Historically, net interest spreads for other financial institutions have widened and narrowed in response to these and other factors, which are often collectively referred to as “interest rate risk.” After many years of a low and flat rate environment, the Federal Reserve began increasing the Federal Funds rate in 2015. The Company did not experience improvement in its asset yield on loans until such time that the rate increases enabled the loan rates to rise above the floors which had been on the majority of the variable rate loans. During 2017, the increasing rates, having reached over 100 basis points, triggered rate changes above the floors and the Company experienced improvement in the interest spread. The improvement in the net interest spread during 2017 through 2019 directly correlated to the improvement of the Bank’s loan to asset ratio. The Federal Reserve began decreasing the Federal Funds rate in the second half of 2019, and made further cuts in 2020, which contributed to a deterioration in the interest rate spread in 2020 and continued in 2021. The Federal Reserve began increasing the Federal Funds rate in 2022 in an effort to tame inflation. These seven rate increases totaling 425 basis points have negatively impacted our loan revenue.

The Bank manages interest rate risk within an overall asset/liability framework. The principal objectives of asset/liability management are to manage sensitivity of net interest spreads and net interest income to potential changes in interest rates. Funding positions are kept within predetermined limits designed to ensure that risk-taking is not excessive and that liquidity is properly managed. In the event that our asset/liabilities management strategies are unsuccessful, our profitability may be adversely affected. For more information regarding the Company’s exposure to interest rate risk, see Part II, Item 7A of this Form 10-K.

Attraction and Retention of Key Personnel

Our success depends upon the continued service of our senior management team and upon our ability to attract and retain qualified financial services personnel. Competition for qualified employees is intense. In our experience, it can take a significant period of time to identify and hire personnel with the combination of skills and attributes required in carrying out our strategy. If we lose the services of our key personnel or are unable to attract additional qualified personnel, our business, financial condition, results of operations and cash flows could be adversely affected.

A key component of employee retention is providing a fair compensation base combined with the opportunity for additional compensation for above average performance. In this regard, the Company and the Bank use two incentive programs. The Company uses a stock award program to recognize and incentivize officers of the Bank. Under the long-term incentive compensation plan, restricted stock awards may be granted to officers. The amount of shares to be granted each year is determined by the Board Compensation Committee and may vary each year in its amount of shares and the number of recipients. The Compensation Committee determines the number of shares to be awarded overall and to the Chief Executive Officer (“CEO”) specifically. The CEO then makes recommendations to the committee as to the recipients of the remaining shares. The full Board of Directors approves the action of the Committee. Since the plan’s inception in 2005, all granted stock awards have utilized a three year cliff vesting feature. This is viewed as a retention aid as the awards may be forfeited should an officer leave employment during the vesting period.

A second incentive program of the Bank is based on cash compensation of which almost all employees participate (excluding commission based employees and other employees paid for specific higher paid positions, such as peak time). A discussion of executive officer pay is incorporated within the proxy and as such, this discussion will pertain to all other employees. Non-officer employees are paid a cash incentive based on the projected overall performance of the Bank in terms of Return of Average Assets (“ROA”) and the achievement of pre-established team and/or individual goals. The Compensation Committee determines the target performance levels on which the percentage of pay will be based. The Committee takes into account the five and ten year trend of ROA along with budget forecasted for the next year and the Bank’s past year performance. The Committee also considers the predicted banking environment under which the Bank will be operating. With the formation of the Captive, the ROA goal has been exclusive of the effect of the additional insurance expense at the Bank level, as well as other expenses as agreed upon by the Compensation Committee. The majority of non-officers receive incentive pay in December of the same year based on the year-to-date base compensation through the last pay received in November.

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Officers, other than executive officers, and specified non-officers based on their Job Roles (“non-executive officers”) receive incentive pay based on additional criterion. These individuals are rewarded based on overall ROA of the Bank along with individual pre-established goals. Non-executive officers, therefore, have incentive pay at risk for individual performance. The individualized goals are recommended by each individual’s supervisor and are approved by an incentive committee of the Bank. The goals are designed to improve the performance of the Bank while also limiting the risk of a short-term performance focus. For example, a lending officer may be given two goals of which one is to grow loans within specific targets and another is tied to a specific level of past dues and charge-offs. The second goal limits the ability to be rewarded for growth at all costs along with the specific target levels within the growth goal itself. Non-executive officers in a support department may be given goals which create efficiencies, ensure compliance with procedures, or generate new fee or product opportunities. On average, three to four goals were given to each non-executive officer in 2022. Non-executive officers are paid cash incentives based on the year-end ROA of the Bank and receive it within the first quarter of the following year. Should the ROA be forecasted to be positive but below the base target set by the Board, the covered non-executive officers are paid an incentive under the same basis and timing as non-officers disclosed above.

The percentages of base pay on which the incentive is calculated graduates higher as does the responsibility level of the employee and their ability to impact the financial performance of the Bank. These percentages are recommended by management to the Compensation Committee and Board for approval. The cash incentive plan along with its targets and goals are subject to modification at the Compensation Committee and Board’s discretion throughout each year.

Dividend Payout Restrictions

We currently pay a quarterly dividend on our common shares. However, there is no assurance that we will be able to pay dividends in the future. Dividends are subject to determination and declaration by our Board of Directors, which takes into account many factors. The declaration of dividends by us on our common stock is subject to the discretion of our Board and to applicable state and federal regulatory limitations. The Company may receive dividends from the Bank which is subject to restrictions and limitations in the amount and timing of the dividends it may pay to the Company. The Bank has been declaring additional dividends each quarter to provide this liquidity to the Company. The Captive also upstreams dividends to the Company when reserve levels are adequately provided for and may not exceed the net income of the prior twelve months. Please see Note 16 in the notes to consolidated financial statements for additional information on dividend payout restrictions.

Maintaining Compliance with Regulatory Capital Requirements

Under regulatory capital adequacy guidelines, we must meet guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items. Failure to meet minimum capital requirements could have a material effect on our financial condition and could subject us to a variety of enforcement actions, as well as certain restrictions on our business. Failure to maintain the status of “well-capitalized” under the regulatory framework could adversely affect the confidence that our customers have in us, which may lead to a decline in the demand for or a reduction in the prices that we are able to charge for our products and services. Failure to meet the guidelines could also limit our access to liquidity sources.

Access to New Capital

We may at some point need to raise additional capital to maintain our “well-capitalized” status. Any capital we obtain may result in the dilution of the interests of existing holders of our stock. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside our control, and on our financial condition and performance. Accordingly, we cannot make assurances of our ability to raise additional capital if needed, or if the terms will be acceptable to us.

Anti-Takeover Provisions

Provisions of our Articles of Incorporation and Ohio law could have the effect of discouraging takeover attempts which certain stockholders might deem to be in their interest. These anti-takeover provisions may make us a less attractive target for a takeover bid or merger, potentially depriving shareholders of an opportunity to sell their shares of common stock at a premium over prevailing market prices as a result of a takeover bid or merger.

Compliance with Environmental Laws

A significant portion of our loan portfolio is secured by real property. We may foreclose on and take title to certain real property. There is a risk that hazardous substances could be found on the property and we may be liable for remediation costs, personal injury and/or property damage. We may incur substantial expenses to comply with environmental laws which may materially reduce the property's value or limit our ability to dispose of the property. The remediation costs and any other financial liabilities associated with the property could have a material adverse effect on our financial condition and results of operations.

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Technological Change

Our industry is susceptible to significant technological changes in the future as there continue to be a high level of new technology driven products and services introduced. Technological advancement aids the Company in providing customer service and increases efficiency. Our national competitors have more resources to invest in technological changes and associated required resources. As a result, they may be able to offer products and services that are more technologically advanced and that may put us at a competitive disadvantage. Our future depends on our ability to analyze technological changes to determine the best course of action for our business, customers and shareholders.

Operational Risks

We are subject to certain operational risks, including, but not limited to, data processing system failures and errors, customer or employee fraud and catastrophic failures resulting from terrorist acts or natural disasters. We maintain a system of internal controls to mitigate against such occurrences and maintain insurance coverage for such risks that are insurable, but should such an event occur that is not prevented or detected by our internal controls, uninsured or in excess of applicable insurance limits, it could have a significant adverse impact on our business, financial condition or results of operations.

Our operations are dependent on our ability to process financial transactions in a secure manner. Failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers, could disrupt our business or the businesses of our customers, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses. We must ensure that information is properly protected from a variety of threats such as cyber attacks, error, fraud, sabotage, terrorism, industrial espionage, privacy violation, service interruption, and natural disaster. These threats arise from numerous sources including human error, fraud on the part of employees or third parties, technological failure, telecommunication outages, and severe weather conditions. Information security risks for financial institutions like us have increased recently in part because of new technologies, the increased use of the internet and telecommunications technologies (including mobile devices and cloud computing) to conduct financial and other business transactions, political activism, and the increased sophistication and activities of organized crime. Although we employ detection and response mechanisms designed to contain and mitigate security incidents, early detection may be thwarted by persistent sophisticated attacks and malware designed to avoid detection.

We also face risks related to cyber attacks and other security breaches in connection with card transactions that typically involve the transmission of sensitive information regarding our customers through various third parties. Some of these parties have in the past been the target of security breaches and cyber attacks, and because the transactions involve third parties and environments that we do not control or secure, future security breaches or cyber attacks affecting any of these third parties could impact us through no fault of our own, and in some cases we may have exposure and suffer losses for breaches or attacks relating to them. We also rely on numerous other third party service providers to conduct other aspects of our business operations and face similar risks relating to them. While we conduct security assessments on our higher risk third party service providers, we cannot be sure that their information security protocols are sufficient to withstand a cyber attack or other security breach. There can be no assurance that cyber incidents will not occur and they could occur more frequently and on a more significant scale.

We devote significant resources to implement, maintain, monitor and regularly upgrade our systems and networks with measures such as intrusion detection and prevention and firewalls to safeguard critical business applications. The additional cost to the Company of our cyber security monitoring and protection systems and controls includes the cost of hardware and software, third party technology providers, consulting, and legal fees, in addition to the incremental cost of our personnel who focus a substantial portion of their responsibilities on cyber security. In addition, because cyber attacks can change frequently we may be unable to implement effective preventive or proactive measures in time. With the assistance of third-party service providers, we intend to continue to implement security technology and establish procedures to maintain network security, but there is no assurance that these measures will be successful. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.

Any activity that jeopardizes our network and the security of the information stored thereon may result in significant cost and have a significant adverse effect on our reputation. We maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber risks. Such insurance coverage may be insufficient to cover all losses.

Any successful cyber attack or other security breach involving the misappropriation or other unauthorized disclosure of confidential customer information or that compromises our ability to function could severely damage our reputation, erode confidence in the security of our systems, products and services, expose us to the risk of litigation and liability, disrupt our operations and have a material adverse effect on our business. Any successful cyber attack may also subject the Company to regulatory investigations, litigation or enforcement, or require the payment of regulatory fines or penalties or undertaking costly remediation efforts with respect to third parties affected by a cyber security incident, all or any of which could adversely affect the Company’s business, financial condition or results of operations and damage its reputation.

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We are constantly at risk of increased losses from fraud

Criminals are committing fraud at an increasing rate and are using more sophisticated techniques. In some cases, these individuals are part of larger criminal rings, which allow them to be more effective. Such fraudulent activity has taken many forms, ranging from debit card fraud, check fraud, mechanical devices attached to ATM machines, social engineering and phishing attacks to obtain personal information, or impersonation of clients through the use of falsified or stolen credentials. Additionally, an individual or business entity may properly identify itself, yet seek to establish a business relationship for the purpose of perpetrating fraud. An emerging type of fraud even involves the creation of synthetic identification in which fraudsters "create" individuals for the purpose of perpetrating fraud. Further, in addition to fraud committed directly against us, the Company may suffer losses as a result of fraudulent activity committed against third parties. Increased deployment of technologies, such as chip card technology and dual authentication, defray and reduce certain aspects of fraud; however, criminals are turning to other sources to steal personally identifiable information, such as unaffiliated healthcare providers and government entities, in order to impersonate the consumer and thereby commit fraud.

Potential Inadequacy of our Allowance for Loan Losses

Like all financial institutions, we maintain an allowance for loan losses to provide for loan defaults and non-performance. Our allowance for loan losses is based on our historical loss experience as well as an evaluation of the risks associated with our loan portfolio, including the size and composition of the loan portfolio, current economic conditions and concentrations within the portfolio. The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the allowance for loan losses. In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for loan losses or the recognition of further loan charge-offs, based on judgments different than those of management. In addition, if charge-offs in future periods exceed expectations, we will need additional provisions to increase the allowance for loan losses. Any increases in the allowance for loan losses may result in a decrease in net income and capital and may have a material adverse effect on our financial condition and results of operations.

In June 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments," which replaces the current "incurred loss" model for recognizing credit losses with an "expected loss" model referred to as the Current Expected Credit Loss model, or “CECL.” Under the CECL model, we will be required to present certain financial assets carried at amortized cost, such as loans held for investment and held-to-maturity debt securities, at the net amount expected to be collected. The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement will take place at the time the financial asset is first added to the balance sheet and periodically thereafter. This differs significantly from the "incurred loss" model required under current GAAP, which delays recognition until it is probable a loss has been incurred. Accordingly, we expect that the adoption of the CECL model will materially affect how we determine our allowance for loan losses and could require us to significantly increase our allowance. Moreover, the CECL model may create more volatility in the level of our allowance for loan losses. If we are required to increase our level of allowance for loan losses for any reason, such increase could adversely affect our business, financial condition and results of operations.

The new CECL standard will become effective for us for fiscal years beginning after December 15, 2022 and for interim periods during 2023. Please see Note 1 in the notes to consolidated financial statements for additional information.

Attraction of Deposits and other Short-term Funding

In managing our liquidity, our primary source of short-term funding is customer deposits. Our ability to continue to attract these deposits, and other short-term funding sources, is subject to variability based upon a number of factors, including the relative interest rates we are prepared to pay for these liabilities and the perception of safety of those deposits or short-term obligations relative to alternative short-term investments. The availability and cost of credit in short-term markets depends upon market perceptions of our liquidity and creditworthiness. Our efforts to monitor and manage liquidity risk may not be successful or sufficient to deal with dramatic or unanticipated changes in event-driven reductions in liquidity. In such events, our cost of funds may increase, thereby reducing our net interest revenue, or we may need to dispose of a portion of our investment portfolio, which, depending on market conditions, could result in our realizing a loss or experiencing other adverse consequences.

Vendor Relationship Risk

We rely on third-party vendors to provide key components of our business operations such as data processing, recording and monitoring transactions, online and mobile banking interfaces and services, internet connections and network access. While we

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have performed due diligence procedures in selecting vendors, we do not control their actions. In the event that one or more of our vendors suffers a bankruptcy or otherwise becomes unable to continue to provide products or services or fails to protect non-public personal information of our customers or employees, we may suffer operational impairments, reputational damage and financial losses. Replacing these third-party vendors could create significant delay and expense. Accordingly, use of such third parties creates an inherent risk to our business operations.

COVID-19 Pandemic

The ongoing COVID-19 pandemic and measures intended to prevent its spread could have a material adverse effect on our business, results of operations and financial condition, and such effects will depend on future developments, which are highly uncertain and are difficult to predict.

In December 2019, a novel coronavirus (COVID-19) was reported in China, and, in March 2020, the World Health Organization declared it a pandemic. On March 12, 2020, the President of the United States declared the COVID-19 outbreak in the United States a national emergency. The COVID-19 pandemic has caused significant economic dislocation in the United States as many state and local governments have ordered non-essential businesses to close and residents to shelter in place at home. This has resulted in an unprecedented slow-down in economic activity and a related increase in unemployment. Since the COVID-19 outbreak an unprecedented number of individuals have filed claims for unemployment, and stock markets have experienced significant volatility, with bank stocks suffering significant declines in value. In response to the COVID-19 outbreak, the Federal Reserve Board reduced the benchmark fed funds rate to a target range of 0% to 0.25%, and the yields on 10 and 30-year treasury notes declined to historic lows. The federal banking agencies encouraged financial institutions to prudently work with affected borrowers and passed legislation to provide relief from reporting loan classifications due to modifications related to the COVID-19 outbreak.

The ongoing development of variants has led to continued modifications to our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences. We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or will otherwise be satisfactory to government authorities. In addition, the success of our operations substantially depends on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years. The unanticipated loss or unavailability of key employees due to the continued outbreak could harm our ability to operate our business or execute our business strategy.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on our business. As the result, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

•demand for our products and services may decline, making it difficult to grow assets and income;

•if government intervention forces a new wave of economic shutdowns, levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

•collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

•our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;

•the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;

•as the result of the decline in the Federal Reserve Board’s target federal funds rate, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income;

•a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of our quarterly cash dividend;

•we rely on third party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us; and

•Federal Deposit Insurance Corporation premiums may increase if the agency experiences additional resolution costs.

Any one or a combination of the factors identified above could negatively impact our business, financial condition and results of operations and prospects. In addition, ongoing labor shortages and supply chain disruptions associated with the pandemic may continue to negatively impact economic conditions, both nationally and regionally within our geographic banking markets. And while circumstances surrounding the pandemic have stabilized somewhat over prior fiscal, with relative widespread

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vaccination rates, it is still impossible to determine the overall impact that the pandemic will have on the overall economy or predict whether future variants of COVID-19 or other infectious diseases will cause further widespread disruptions.

Limited Trading Market

The Company has its shares of stock listed and traded on the NASDAQ Capital Market. The Company’s trading symbol is “FMAO.”

ITEM 1b. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our principal office is located in Archbold, Ohio.

The Bank operates from its principal office located at 307 North Defiance Street, Archbold, Ohio. In addition, the Bank owns the property from 200 to 208 Ditto Street, Archbold, Ohio, which it uses for Bank parking and a community mini-park area. The Bank owns real estate at two locations, 207 Ditto Street and 209 Ditto Street in Archbold, Ohio upon which the bank built a commercial building to be used for storage, and a parking lot for company vehicles and employee parking. The Bank also owns real estate across from the main facilities to provide for parking.

The Bank occupies an Operations Center at 620 S. Clyde’s Way in Archbold, Ohio to accommodate our growth over the years which includes drive-up services. The Bank owns a parking lot in downtown Montpelier which is provided for community use.

The Bank owns all of its office locations, with the exception of Angola, Indiana, Bowling Green, Ohio and Bluffton, Indiana. These three office locations are leased.

The Bank currently maintains retail banking offices at the following locations:

Office	Location
Archbold, Ohio	307 N Defiance Street
Wauseon, Ohio	1130 N Shoop Avenue
Stryker, Ohio	300 S Defiance Street
West Unity, Ohio	200 W Jackson Street
Bryan, Ohio	1000 S Main Street
Delta, Ohio	101 Main Street
Montpelier, Ohio	1150 E Main Street
Napoleon, Ohio	2255 Scott Street
Swanton, Ohio	7 Turtle Creek Circle
Defiance, Ohio	1175 Hotel Drive
Perrysburg, Ohio	7001 Lighthouse Way
Butler, Indiana	200 S Broadway
Auburn, Indiana	403 Erie Pass
Angola, Indiana	2310 N Wayne Street
Hicksville, Ohio	100 N Main Street
Waterville, Ohio	8720 Waterville-Swanton Road
Custar, Ohio	22973 Defiance Pike
Sylvania, Ohio	5830 Monroe Street
Fort Wayne, Indiana	12106 Lima Road
Bowling Green, Ohio	1072 N. Main Street
Findlay, Ohio	1660 Tiffin Avenue
Geneva, Indiana	215 East Line Street
Monroe, Indiana	150 W Washington Street
Berne, Indiana	718 US Highway 27 N
Portland, Indiana	1451 N Meridian Street
Decatur, Indiana	1061 S 13th Street
Fort Wayne, Indiana	7370 Illinois Road
Ossian, Indiana	102 N Jefferson
Bluffton, Indiana	111 E Oak Forest Drive
Urbana, Ohio	120 N Main Street
Sidney, Ohio	101 E Court Street

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Anna, Ohio	403 S Pike Street
Jackson Center, Ohio	115 E Pike Street

All offices except the Butler, Indiana location have onsite ATM services.

The Bank’s LPOs are at the following locations:

LPO	Location
Muncie, Indiana	1208 W White River Boulevard
Oxford, Ohio	29 N Beech Street
Bryan, Ohio	206 W High Street
West Bloomfield, Michigan	7031 Orchard Lake Road

The Captive operates from leased office space at 101 Convention Center Dr., Suite 850, Las Vegas, NV 89109.

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company’s common stock is listed on the NASDAQ Stock Market LLC under the trading symbol “FMAO.”

The Company utilizes Computershare as its transfer agent.

As of December 31, 2022, there were 2,013 record holders of our common stock of which 50.16% of the outstanding shares are being held in brokerage accounts or “street name” and only considered as one record holder.

Dividends are declared and paid quarterly. Per share dividends declared for the years ended 2022 and 2021 are as follows:

	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Total
2022	$	0.1900	$	0.2025	$	0.2100	$	0.2100	$	0.8125
2021	$	0.1700	$	0.1700	$	0.1800	$	0.1900	$	0.7100

Dividends declared during 2022 were $0.8125 per share totaling $10.6 million, 14.4% higher than 2021 declared dividends of $0.71 per share. During 2022, the Company awarded 56,496 shares to 109 employees and 8,000 shares were forfeited under its long term incentive plan. At year-end 2022, the Company held 956,003 shares in Treasury stock and 128,952 in unearned stock awards.

Dividends declared during 2021 were $0.71 per share totaling $8.2 million, 7.6% higher than 2020 declared dividends of $0.66 per share. During 2021, the Company awarded 48,750 shares to 96 employees and 2,575 shares were forfeited under its long term incentive plan. At year-end 2021, the Company held 997,766 shares in Treasury stock and 111,131 in unearned stock awards.

The Company currently expects to continue to maintain the payment of its quarterly dividend consistent with its past practices.

The Company continues to have a strong capital base.

	2022			2021
Tier I Leverage Ratio		8.39	%		8.47	%
Risk Based Capital Tier I		10.29	%		11.77	%
Total Risk Based Capital		12.39	%		14.60	%
Stockholders' Equity/Total Assets		9.89	%		11.26	%

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On January 24, 2023, the Company announced the authorization by its Board of Directors for the Company’s repurchase, either on the open market, or in privately negotiated transactions, of up to 650,000 shares of its outstanding common stock commencing January 24, 2023 and ending December 31, 2023.

ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan or Programs		Remaining Share Repurchases Authorization
10/1/2022
to		-		-		-		600,000
10/31/2022
11/1/2022
to		-		-		-		600,000
11/30/2022
12/1/2022
to		-		-		-		600,000
12/31/2022
Total		-		-		-		600,000

(1)From time to time, the Company purchases shares in the market pursuant to a stock repurchase program publicly announced on January 25, 2022. On that date, the Board of Directors authorized the repurchase of up to 600,000 common shares between January 25, 2022 and December 31, 2022.

(2)Shares which were repurchased for taxes on vested stock awards are outside of this program.

ITEM 6. RESERVED

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Critical Accounting Policies and Estimates

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, and the Company follows general practices within the financial services industry in which it operates. At times the application of these principles requires management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. These assumptions, estimates and judgments are based on information available as of the date of the financial statements. As this information changes, the financial statements could reflect different assumptions, estimates and judgments. Certain policies inherently have a greater reliance on assumptions, estimates and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Examples of critical assumptions, estimates and judgments are when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not required to be recorded at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability must be recorded contingent upon a future event.

All significant accounting policies followed by the Company are presented in Note 1 to the consolidated financial statements. These policies, along with the disclosures presented in the notes to the consolidated financial statements and in the management discussion and analysis of financial condition and results of operations, provide information on how significant assets and liabilities are valued and how those values are determined for the financial statements. Based on the valuation techniques used and the sensitivity of financial statement amounts to assumptions, estimates and judgments underlying those amounts, management has identified the determination of the Allowance for Loan and Lease Losses (ALLL) and the valuation of its Mortgage Servicing Rights (MSR) and Other Real Estate Owned (OREO) and goodwill as the accounting areas that requires the most subjective or complex judgments, and as such could be the most subject to revision as new information becomes available.

OREO, which is comprised of assets acquired by the Bank, through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value at the date of foreclosure. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell.

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The ALLL represents management's estimate of credit losses inherent in the Bank's loan portfolio at the report date. The estimate is a composite of a variety of factors including experience, collateral value, and the general economy. ALLL includes a specific portion, a formula driven portion, and a general nonspecific portion. The collection and ultimate recovery of the book value of the collateral, in most cases, is beyond our control.

The Company is also required to estimate the value of its MSR. The Company recognizes as separate assets rights to service fixed rate single-family mortgage loans that it has sold without recourse but services for others for a fee. Mortgage servicing assets are initially recorded at fair value, based upon pricing multiples as determined by the purchaser, when the loans are sold. Mortgage servicing assets are carried at the lower of the initial carrying value, adjusted for amortization, or estimated fair value. Amortization is determined in proportion to and over the period of estimated net servicing income using the level yield method. For purposes of determining impairment, the mortgage servicing assets are stratified into like groups based on loan type, term, new versus seasoned and interest rate. The valuation is completed by an independent third party.

The expected and actual rates of mortgage loan prepayments are the most significant factors driving the potential for the impairment of the value of mortgage servicing assets. Increases in mortgage loan prepayments reduce estimated future net servicing cash flows because the life of the underlying loan is reduced.

The Company’s mortgage servicing rights relating to loans serviced for others represent an asset of the Company. This asset is initially capitalized and included on the Company’s consolidated balance sheet. The mortgage servicing rights are then amortized as noninterest expense in proportion to, and over the period of, the estimated future net servicing income of the underlying mortgage servicing rights. There are a number of factors, however, that can affect the ultimate value of the mortgage servicing rights to the Company, including the estimated prepayment speed of the loan and the discount rate used to present value the servicing right. For example, if the mortgage loan is prepaid, the Company will receive fewer servicing fees, meaning that the present value of the mortgage servicing rights is less than the carrying value of those rights on the Company’s balance sheet. Therefore, in an attempt to reflect an accurate expected value to the Company of the mortgage servicing rights, the Company receives a valuation of its mortgage servicing rights from an independent third party. The independent third party’s valuation of the mortgage servicing rights is based on relevant characteristics of the Company’s loan servicing portfolio, such as loan terms, interest rates and recent national prepayment experience, as well as current national market interest rate levels, market forecasts and other economic conditions. Management, with the advice from its third party valuation firm, review the assumptions related to prepayment speeds, discount rates, and capitalized mortgage servicing income on a quarterly basis. Changes are reflected in the following quarter’s analysis related to the mortgage servicing asset. In addition, based upon the independent third party’s valuation of the Company’s mortgage servicing rights, management then establishes a valuation allowance by each strata, if necessary, to quantify the likely impairment of the value of the mortgage servicing rights to the Company. The estimates of prepayment speeds and discount rates are inherently uncertain, and different estimates could have a material impact on the Company’s net income and results of operations. The valuation allowance is evaluated and adjusted quarterly by management to reflect changes in the fair value of the underlying mortgage servicing rights based on market conditions. The accuracy of these estimates and assumptions by management and its third party can be directly tied back to the fact that management has only been required to record minor valuation allowances through its income statement based upon the valuation of each stratum of serving rights.

For more information regarding the estimates and calculations used to establish the ALLL and the value of Mortgage Servicing Rights, please see Note 1 to the consolidated financial statements provided herewith.

2022 in Review

2022 was a year of celebration both in terms of record earnings, strong performance and in the Bank's 125th year of strengthening relationships with our customers, employees, shareholders and our communities in support of our mission to "help people live their best lives." The Company celebrated the latter by ringing the NASDAQ closing bell which commemorated those 125 years and 5 years since F&M had rung the bell and listed on NASDAQ.

F&M Commercial Banking Division worked through a strong pipeline throughout 2022. Client results from 2021 and 2022 performance were good; however, client concerns in 2022 were focused around inflation, rising interest rates, availability of workforce, and interruptions and delays in the supply chain. Overall credit quality of the portfolio remains good, as past dues and delinquencies remained low throughout 2022. 2022 fee income remained strong.

The 2022 harvest throughout our market area was positive with strong yields and profitable prices. The financial health of our grain farmers is sound with several consecutive profitable years. The livestock and agri-business sector of our portfolio continues to remain healthy and concerns remain manageable. The agriculture portfolio saw growth in 2022 and remains sound.

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F&M saw a slow-down in production in the 1-4 Family Consumer Real Estate Division. Refinances slowed significantly with the increase in rates. Growth did remain in new purchase and in home equity originations.

In 2022, the Bank opened three new offices through acquisition. The acquisition of Peoples Federal Savings and Loan Association ("Peoples Bank") was completed on October 1, 2022. The Bank continues to execute its “Next 10 Project”. The Next 10 Project is the identification of the next 10 office locations for brick-and-mortar expansion to be opened in the next 3-5 years. Many factors were considered in developing the plan including potential growth, placement to better connect and service our entire existing footprint. This plan will supplement any future acquisitions. We have learned that it can take more than a year to open a new office.

Yields on earning assets increased as well as the cost of funds. Driving the increase in the earning assets was the increased loan volume which increased $494.9 million at year end 2022 as compared to 2021. Total assets grew $327.1 million during the same one-year time frame.

The Company continues to focus on Talent Optimization as part of its strategic plan. As mentioned previously regarding our commercial customers, the Company is also experiencing pressure for staffing - both in the cost of recruiting new talent and in retaining existing. The acquisition of Peoples Bank helped as the Bank was able to offer and retain more team members to fill much needed support staff. The Bank continues to analyze and adjust our structure and the development of our team members to help us realize our full potential and to handle our current and expected growth plans.

Earnings were a record high with net income at $32.5 million. The Company’s trend of increasing profitability year over year continued as evidenced by the 38.4% increase in net income for 2022 as compared to 2021. This followed a strong 2021 increase of 16.9% over 2020. The Company continues to recognize the importance of our shareholders from the improved earnings as we have increased the declared dividends consistently over the last 28 years. In 2022, declared dividends were 14.4% higher than 2021 at $10.6 million. This included a special dividend of $0.0125 per share in honor of the Company's 125th anniversary.

The Company is positioned to continue its strong earnings performance in 2023, as we focus on new initiatives included in our three-five year strategic plan.

Material Changes in Results of Operations

Net Interest Income

The discussion now centers on the individual line items of the consolidated statement of income and their effect on net income. This section will focus on the most traditional source of revenue contributing to the profitability of the Company which is net interest income.

Net interest income is the difference between interest income earned on interest earning assets, such as loans and securities, and interest expense paid on interest bearing liabilities used to fund those assets, such as interest bearing deposits and other borrowings. Net interest income is affected by changes in both interest rates and the amount and composition of earning assets and liabilities. The change in net interest income is most often measured by two statistics – interest spread and net interest margin. The difference between the yields earned on earning assets and the rates paid for interest bearing liabilities represents the interest spread. The net interest margin is the difference of funds (interest expense) between the yield on earning assets and the cost as a percentage of earning assets. Because noninterest bearing sources of funds such as demand deposits and stockholders’ equity also support earning assets, the net interest margin exceeds the net interest spread.

The largest factor of the record earnings for 2022 was the $17.3 million improvement in net interest income as compared to 2021. In 2021, net interest income increased $9.7 million as compared to 2020. Interest and fee income from loans were responsible for the improvement. Interest income from loans, including fees, increased $22.6 million in 2022 as compared to 2021. This was preceded by an increase in 2021 of $6.3 million as compared to 2020. The prime rate had remained flat since March of 2020 at 3.25%. Beginning in March of 2022, the prime rate increased 25 basis points followed by a 50 basis point increase in May, four 75 basis point increases in June, July, September and November with a final 50 basis point increase in December to end at 7.50%. In 2021 and 2020, PPP loans generated $4.5 and $2.8 million in loan interest and fee income, respectively. In both 2022 and 2021, the volume of loan growth was the largest contributing factor to the improved profitability. The security portfolio increased $51.4 million in average during 2022 as compared to 2021, and $152.3 million in average over 2020 average balances. Increased cash funds from stimulus and acquisitions were placed in securities to earn a greater return. Interest income from that balance sheet component increased $1.1 million over 2021 while 2021 increased $250 thousand over

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2020. Overall, total interest income was $24.3 million higher for 2022 than 2021 and was $6.7 million higher for 2021 than 2020.

Interest expense increased from all interest bearing funding sources in 2022 over the time period of 2021. During 2021, interest expense decreased in all interest bearing funding sources with the exception of subordinated notes as compared to 2020. During 2021, the Company issued subordinated notes and incurred $490 thousand and $1.1 million of interest expense in 2021 and 2022, respectively. Refer to Note 9 of the consolidated financial statements for further discussion regarding subordinated notes. Overall, the funding goal the last three years has been to grow core deposits. Two strategies have been employed through the years, one of allowing expensive time deposits to run off until needed for funding and secondly to offer new non-interest bearing deposit products. Both of these strategies were to assist in controlling interest expense in a rising rate environment. Competition forced us to increase rates for deposits in 2022 while rates were lowered or remained flat in 2020 and 2021 in response to the prime rate drop of 150 basis points in March 2020. Rates have continued to be reviewed and adjusted as necessary in 2022. With the interest rate increases and acquisition, average interest bearing deposits increased $334.0 million compared to 2021. During 2022, interest expense from deposits increased by $4.5 million from 2021 and 2021 decreased $3.2 million from 2020. The majority, approximately 59.7%, of the increased expense of 2022 and approximately 160.0%, of the decreased expense of 2021 was influenced by rates rather than due to additional cost associated with deposit growth.

Total interest expense (which includes deposit, federal funds purchased, securities sold under agreement to repurchase, borrowed funds and subordinated notes) totaled $14.4, $7.3 and $10.4 million for 2022, 2021 and 2020, respectively. The increased expense was approximately 43.2% attributable to the rising interest rate environment in 2022 as compared to 2021 while the decreased interest expense was approximately 189.9% attributable to the falling interest rate environment in the 2021 to 2020 comparison. Borrowed fund balances increased in 2022 as a means to fund the phenomenal loan growth. Borrowed fund balances increased in January of 2019, as a result of the acquisition of Bank of Geneva, in October of 2021 with the acquisition of Perpetual Federal Savings Bank and in October of 2022 with the acquisition of Peoples Federal Savings and Loan Bank.

The success in improving net interest income confirmed that management’s long term strategy of repositioning the balance sheet and increasing loan balances was the correct approach. Funding loan growth with internal funds, whether from the liquidation of investment securities or core deposits, was a beneficial move.

This concludes the discussion by dollar amount of the improvement. Now the discussion moves on to the percentages and the change in the net interest margin and spread.

Overall, we have seen a decrease in the net interest margin and spread from 2020 to 2022. Interest margin slightly increased while interest spread decreased in 2022 as compared to 2021 with the increased cost of funds only being partly offset by the higher asset yields. Looking at the components behind the change in net interest margin for 2022 as compared to 2021, increased average balances in loans of $551.6 million stands out. Loans acquired with the one acquisition in 2022 were $101.8 million. The additional revenue of $22.6 million that those balances were responsible for was the largest contributor to the increased interest income of $24.3 million. In 2022 and 2021, loan revenue was negatively impacted by the change in the interest rate. Roughly 26.5% of the Bank's loans are variable with the majority of those loans with floor rates that had attained the point where rate increases would cause to go above the floor. As mentioned previously, 2022 had seven rate increases totaling 425 basis points. The large revenue gain in loan interest was aided by the increased earnings in securities of $1.1 million. The overall asset yield in 2022 increased by 26 basis points over 2021.

The increased interest expense in 2022 correlated to a much higher rate environment in which competition for deposits forced higher interest rates as compared to 2021 while the decreased interest expense in 2021 correlated to a much lower rate environment. In the area where the strategic plan was to gather core deposits, the average balance in savings grew by $189.6 million during 2022 as compared to 2021’s average balance. Interest bearing deposits acquired with the one acquisition were $104.7 million. The other average balance increase for core deposits was the change in non-interest bearing demand deposits. 2022’s average balance in this portfolio was $79.6 million higher than 2021’s average balance. Non-interest bearing demand deposits acquired with the one acquisition were $7.1 million. Overall, cost of funds increased 26 basis points for 2022 over 2021. The reason behind the increase was 43.2% due to rate increases and 56.8% due to volume increases.

The net interest margin for 2022 was 3.32% compared to 2021 which was 3.31%. The 0.01% increase for 2022 was related to the increased interest income which was greater than the increased interest expense. Net interest spread was 3.13% for 2022 compared to 2021’s 3.18%, creating a 5 basis point difference in the spread. Loans as a percentage of earning assets was 79.2% while loans to total assets was 74.7% for 2022. The goal is, as always, to improve the net interest margin and spread and thereby improve profitability.

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In comparing 2021 to 2020, loan volume was primarily responsible for the improvement in interest income; however, the yield on the overall loan portfolio decreased 27 basis points during 2021. All categories of asset yield decreased in 2021. Overall, asset yield decreased 59 basis points in 2021 as compared to 2020.

The net interest margin fell in 2021, ending 31 basis points below 2020. Asset yield decreased 59 basis points while the cost of funds decreased 39 basis points. The yields on the individual segments did not cause improvement as all decreased in 2021 from 2020. In addition, loans as a percentage of earning assets decreased to 72.3% in 2021 compared to 79.3% in 2020. Loans to total assets also decreased to 68.3% for 2021 compared to 2020’s 74.2%. Overall yield improves when the balances of the highest yield asset increases, which is loans.

With respect to the cost of funds, the Bank’s goal is to grow the least expensive category of funding sources. The largest average balance increase for 2021 was $266.0 million in savings deposits over 2020’s average balances. This growth was mostly responsible for the decrease in funding expense of 23 basis points when comparing 2021 to 2020.

The Company will always prefer to see improvement in real dollars over percentages. The strategy for increasing core deposits, in order to mitigate the higher cost of funds and to continue to establish the opportunity for fee dollars from services provided, remains for 2023.

Total assets of the Company increased overall as did the earning assets in both average and year-end during 2022 and 2021. This matched the movement in interest dollars. The percentage of average earning assets to total average assets reflects the best utilization of funds. For 2022, the percentage at 94.29% was slightly lower than 2021 at 94.41%. The addition of new offices increased the non-earning assets with cash balances held at the new offices and also the investment in the capital assets of their building and furniture. One of the things that helped to improve the profitability of 2022 was the percentage of average loans to total assets. For 2022 the average balance of loans to total average assets was 74.73%, for 2021, 68.26%, for 2020, 74.21%. Loans are the highest yielding asset for the Company.

Net interest spread is the difference between what the Company earns on its assets and what it pays on its liabilities. It is generally from this spread that the Company must fund its operations and generate profit. When the asset yield decreases so must funding costs in order to maintain profitability. It becomes increasingly challenging as the asset yield gets closer to the prime lending rate, or the break-even point, of operations. In a rising rate environment, the challenge is to hold the cost steady while allowing time for the asset portfolio to rise. Floors and ceilings on variable products also impact the level of increase in either scenario. The floors provide yield protection in a lower rate environment while the rising rates will not benefit the asset yield until the spread plus prime is higher than the floor. The challenge is to increase the spread during renewals and on new loans. With the rate decreases in 2020, many loans reverted back to the floors. After the rate hikes in 2022, the majority of loans have increased over the floors.

In terms of interest expense, 2022’s increase as compared to 2021 was approximately 43.2% due to the increase in rates. 2021’s decrease was approximately 189.9% due to the decrease in rates as compared to 2020.

The impact of the change in the portfolio mix was a factor in the liabilities as it was in the assets. In comparing to 2021, 2022 had movements as average balances increased in all categories. In comparing to 2020, 2021 had movements as average balances increased in savings deposits, time deposits, other borrowed money and subordinated notes. Other borrowed money, consisting of both short and long term borrowings, and subordinated notes increased with the acquisition of Perpetual Federal Savings Bank. Federal funds purchased and securities sold under agreement to repurchase decreased in 2021 from 2020.

The following tables present net interest income, interest spread and net interest margin for the three years 2020 through 2022, comparing average outstanding balances of earning assets and interest bearing liabilities with the associated interest income and expense. The tables show the corresponding average rates of interest earned and paid. Average outstanding loan balances include non-performing loans and mortgage loans held for sale. Average outstanding security balances are computed based on carrying values including unrealized gains and losses on available-for-sale securities. The average cost of funds for 2022 was 0.74%, 26 basis points higher than 2021’s 0.48% for interest bearing liabilities.

The yield on tax-exempt investment securities shown in the following charts were computed on a tax equivalent basis. The yield on loans has been tax adjusted for the portion of tax-exempt IDB loans included in the total. Total interest earning assets is therefore also reflecting a tax equivalent yield in both line items, also with the net interest spread and margin. The adjustments were based on a 21% tax rate for all years. The tax-exempt interest income was $614, $551 and $694 thousand for 2022, 2021 and 2020, respectively which resulted in a federal income tax savings of $129, $116, and $146 thousand, respectively.

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	2022
	(In Thousands)
	Average		Interest/
	Balance		Dividends		Yield/Rate
ASSETS
Interest Earning Assets:
Loans	$	2,073,737	$	94,264		4.55	%
Taxable investment securities		424,229		5,621		1.32	%
Tax-exempt investment securities		23,472		337		1.82	%
Federal funds sold & other		95,301		927		0.97	%
Total Interest Earning Assets		2,616,739	$	101,149		3.87	%
Non-Interest Earning Assets:
Cash and cash equivalents		35,696
Other assets		122,665
Total Assets	$	2,775,100
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest Bearing Liabilities:
Savings deposits	$	1,335,271	$	6,378		0.48	%
Other time deposits		451,013		3,505		0.78	%
Other borrowed money		74,379		2,160		2.90	%
Federal funds purchased and securities sold under    agreement to repurchase		45,314		1,197		2.64	%
Subordinated notes		34,524		1,122		3.25	%
Total Interest Bearing Liabilities		1,940,501	$	14,362		0.74	%
Non-Interest Bearing Liabilities:
Non-interest bearing demand deposits		480,389
Other		66,342
Total Liabilities		2,487,232
Shareholders' Equity		287,868
Total Liabilities and Shareholders' Equity	$	2,775,100
Interest/Dividend income/yield			$	101,149		3.87	%
Interest Expense/cost				14,362		0.74	%
Net Interest Spread			$	86,787		3.13	%
Net Interest Margin						3.32	%

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	2021
	(In Thousands)
	Average		Interest/
	Balance		Dividends		Yield/Rate
ASSETS
Interest Earning Assets:
Loans	$	1,522,088	$	71,645		4.71	%
Taxable investment securities		377,887		4,514		1.19	%
Tax-exempt investment securities		18,365		326		2.25	%
Federal funds sold & other		187,003		355		0.19	%
Total Interest Earning Assets		2,105,343	$	76,840		3.66	%
Non-Interest Earning Assets:
Cash and cash equivalents		31,829
Other assets		92,820
Total Assets	$	2,229,992
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest Bearing Liabilities:
Savings deposits	$	1,145,636	$	2,467		0.22	%
Other time deposits		306,600		2,951		0.96	%
Other borrowed money		29,479		785		2.66	%
Federal funds purchased and securities sold under    agreement to repurchase		29,831		649		2.18	%
Subordinated notes		14,777		490		3.32	%
Total Interest Bearing Liabilities		1,526,323	$	7,342		0.48	%
Non-Interest Bearing Liabilities:
Non-interest bearing demand deposits		400,801
Other		44,343
Total Liabilities		1,971,467
Shareholders' Equity		258,525
Total Liabilities and Shareholders' Equity	$	2,229,992
Interest/Dividend income/yield			$	76,840		3.66	%
Interest Expense/cost				7,342		0.48	%
Net Interest Spread			$	69,498		3.18	%
Net Interest Margin						3.31	%

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	2020
	(In Thousands)
	Average		Interest/
	Balance		Dividends		Yield/Rate
ASSETS
Interest Earning Assets:
Loans	$	1,313,675	$	65,317		4.98	%
Taxable investment securities		219,044		4,136		1.89	%
Tax-exempt investment securities		24,958		454		2.30	%
Federal funds sold & interest bearing deposits		99,304		262		0.26	%
Total Interest Earning Assets		1,656,981	$	70,169		4.25	%
Non-Interest Earning Assets:
Cash and cash equivalents		25,276
Other assets		88,027
Total Assets	$	1,770,284
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest Bearing Liabilities:
Savings deposits	$	879,669	$	3,942		0.45	%
Other time deposits		264,827		4,696		1.77	%
Other borrowed money		21,245		980		4.61	%
Federal funds purchased and securities sold under    agreement to repurchase		32,363		775		2.39	%
Subordinated notes		-		-		0.00	%
Total Interest Bearing Liabilities		1,198,104	$	10,393		0.87	%
Non-Interest Bearing Liabilities:
Non-interest bearing demand deposits		304,276
Other		28,206
Total Liabilities		1,530,586
Shareholders' Equity		239,698
Total Liabilities and Shareholders' Equity	$	1,770,284
Interest/Dividend income/yield			$	70,169		4.25	%
Interest Expense/cost				10,393		0.87	%
Net Interest Spread			$	59,776		3.38	%
Net Interest Margin						3.62	%

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

	2022 vs 2021
	(In Thousands)
	Net		Change Due to			Change Due to
	Change		Volume			Rate
Interest Earning Assets:
Loans	$	22,619	$	25,988		$	(3,369	)
Taxable investment securities		1,107		554			553
Tax-exempt investment securities		11		115			(104	)
Federal funds sold & other		572		(174	)		746
Total Interest Earning Assets	$	24,309	$	26,483		$	(2,174	)
Interest Bearing Liabilities:
Savings deposits	$	3,911	$	408		$	3,503
Other time deposits		554		1,390			(836	)
Other borrowed money		1,375		1,196			179
Federal funds purchased and securities sold    under agreement to repurchase		548		337			211
Subordinated notes		632		655			(23	)
Total Interest Bearing Liabilities	$	7,020	$	3,986		$	3,034

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	2021 vs 2020
	(In Thousands)
	Net			Change Due to			Change Due to
	Change			Volume			Rate
Interest Earning Assets:
Loans	$	6,328		$	10,373		$	(4,045	)
Taxable investment securities		378			2,999			(2,621	)
Tax-exempt investment securities		(128	)		(152	)		24
Federal funds sold & interest bearing deposits		93			231			(138	)
Total Interest Earning Assets	$	6,671		$	13,451		$	(6,780	)
Interest Bearing Liabilities:
Savings deposits	$	(1,475	)	$	1,192		$	(2,667	)
Other time deposits		(1,745	)		741			(2,486	)
Other borrowed money		(195	)		380			(575	)
Federal funds purchased and securities sold    under agreement to repurchase		(126	)		(61	)		(65	)
Subordinated notes		490			490			-
Total Interest Bearing Liabilities	$	(3,051	)	$	2,742		$	(5,793	)

Non-Interest Income

The discussion now focuses on the noninterest income and expense generated by the Company for the years ended 2020 through 2022. Noninterest income decreased by 11.8% in total for 2022 as compared to 2021, ending at $15.5 million. 2021 had noninterest income of $17.6 million which exceeded 2020’s $16.8 million by 4.9%.

The two line items of noninterest income on the consolidated income statement for 2022 which improved over both 2021 and 2020 were customer service fee revenue and other service charges and fees. 2022 customer service fee revenue was $287 thousand higher than 2021, mostly due to increased credit card income while 2021 was $778 million higher than 2020, mainly due to increased debit card income. The increase of other service charges and fees in 2022 was attributed to overdraft, returned check charges and recurring overdraft fees from combined business accounts and consumer accounts. Other service charges and fees increased $477.8 thousand from 2021 which increased $164.0 thousand over 2020’s $4.4 million. The majority of the increase for 2021 was related to services charges from business and consumer accounts while the decrease for 2020 was attributed to overdraft, returned check charges and recurring overdraft fees from combined business accounts and consumer accounts. Upgrades to our digital products and services continue to occur in both retail and business lines. In 2020, the Bank purchased additional bank owned life insurance policies which contributed $302.5 thousand of income in 2021. 2020 included a one-time $429.9 thousand gain on the settlement of a bank owned life insurance contract.

The Bank has long promoted the use of debit cards by its customers and continues to build on that philosophy with the introduction of new products. During 2022 the Bank collected interchange revenue, combined with fees collected on foreign ATM usage (noncustomers utilizing our ATMs), of $5.0 million which was $149.3 thousand higher than 2021 and $1.1 million higher than 2020. 2022 included a Mastercard growth credit of $188 thousand. For 2021, the Mastercard growth credit was $151 thousand. In December of 2019, the Bank became a principal with MasterCard and received a $1.75 million signing bonus. The signing bonus is based on achieving $1.1 billion in signature transactions within the next five years. The bonus is being recognized over 60 months with $350.8 thousand included in 2022 and 2021’s $5.0 million and $4.8 million, respectively. While this revenue stream continues to improve with more depositors using electronic methods for purchasing, the expense attributable to card fraud has offset a portion of the revenue gain. Further discussion can be found in the noninterest expense section regarding the net effect of debit card activity.

Noninterest income from net gain on sales of loans was the highest in 2020 of the three year periods shown. Net gain on sales of loans was $1.4 million, $3.9 million and $4.0 million, respectively in 2022, 2021 and 2020. The change was related to the decrease in rates after a couple of years of a rising interest rate environment. The net gain on sale of loans is derived from sales of real estate loans into the secondary market. Of these loan types, the Bank sells 100% of the residential loans and 90% of the agricultural loans. 37.6% of the gains were attributed to the residential loans in 2022, 47.4% in 2021 and 65.2% in 2020. In conjunction with these sales, the Bank maintains servicing rights and those income amounts during all three years are included in the customer service fee income line item and accounted for $537 thousand in 2022, $1.4 million in 2021 and $1.7 million in revenue for 2020.

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The last item in the noninterest income section is the net gain of sale of investments. Due to the available for sale security portfolio remaining in an unrealized loss position in 2022, the Bank did not sell any securities in 2022. The Bank has sold securities in 2021 and 2020 for two main purposes: to provide funds for loan growth and to take advantage of the position of the yield curve when a gain can be recognized on sales without extending the duration of the portfolio longer than wanted. In March of 2021, the Company sold and recognized a gain on the sale of securities from the holding company of $293 thousand in preparation for the acquisition of Ossian State Bank. In February of 2020, the Bank completed security swap transactions that resulted in a gain of $270 thousand. The Bank will not increase short-term gains at the sacrifice of long-term profitability. The available for sale security portfolio switched from an unrealized gain position in 2020 into an unrealized loss position in 2021 that continued through 2022.

Non-Interest Expense

Noninterest expense increased 5.7% in 2022 as compared to 2021 and was preceded by a 22.1% increase in 2021 as compared to 2020. Represented in dollars, 2022 was $3.1 million higher than 2021 and 2021 was $9.8 million higher than 2020. Acquisition costs incurred in 2022 and 2021 totaled $2.5 million and $3.9 million, respectively with expenses being recorded in multiple line items. The largest factor behind the increase in both years was the expense of employee salaries and wages. During 2022, an additional $2.5 million was spent over 2021 which correlates to a 12.5% increase. When making the same analysis for 2021 as compared to 2020, 2021’s costs increased $1.7 million or 9.2%. Three main components flow into salaries and wages: base salary, deferred costs, and incentives comprised of the expense of restricted stock awards and performance incentives. 2022 increased with the acquisition of Peoples Federal Savings and Loan offices. 2021 increased with the addition of one new office and the acquisition of Ossian State Bank and Perpetual Federal Savings Bank offices. Base pay increased in 2020 with the creation of pay grades and a minimum living wage of $26,000 or $12.50 per hour. Normal yearly increases to the employees would be included in all years. Base pay was up $2.7 million for 2022 over the previous year and 2021 was up $1.2 million over 2020. The full time equivalent number of employees at each year-end increased to 431 for 2022, to 385 for 2021 compared to 2020’s 367.

Incentive pay as it related to performance was up $464.1 thousand in 2022 over 2021 and up $320.9 thousand in 2021 over 2020. The Return on Assets multiple used to award incentive pay increased in 2022 to 1.196 compared to 1.165 in 2021 and 1.0 in 2020. In 2022 and 2021, acquisition costs were eliminated from the calculation and 2020 excluded the accelerated net fee income recognized with the forgiveness of PPP loans. The expense for the restricted stock awards increased in 2022 due to more shares being granted to a slightly larger number of employees and the market value of the shares increasing compared to 2021. 7,746 additional shares were awarded in 2022 with a higher value as compared to 2021. The expense for 2022 was higher by $77.4 thousand which included reduced expense due to retirement of $56.9 thousand as compared to 2021. 11,368 additional shares were awarded in 2021 with a higher value as compared to 2020; however, the expense for 2021 was lower by $201.6 thousand which included accelerated expense due to retirement of $32.6 thousand as compared to 2020. The awards incorporate a three year vesting period so the increase of any one year carries forward through the next two years. This expense should continue to increase as the Company continues its expansion strategy. For further discussion in incentive pay and restricted stock awards, see Note 11 of the consolidated financial statements.

Employee benefits expense decreased in 2022 as compared to 2021. Miscellaneous personnel expense accounted for the largest portion of the decrease, which was a decrease of $528.1 thousand over 2021. Acquisition related costs included in this line were $217.3 thousand. The cost of the 401-K retirement plan decreased $251.6 thousand for 2022 as compared to 2021. The contribution portion relating to the discretionary profit-sharing percentage was 5.5% in 2022 compared to 5.0% for 2021. Overall, employee benefits decreased $418.8 thousand or 5.7% from 2021.

Along with the salary and wage increase was an increase in employee benefits in 2021 as compared to 2020. Miscellaneous personnel expense accounted for the largest portion of the cost, which was an increase of $774.3 thousand over 2020. Acquisition related costs included in this line were $825.5 thousand. The cost of the 401-K retirement plan increased $856.5 thousand for 2021 as compared to 2020. The contribution portion relating to the discretionary profit-sharing percentage was 5.0% in 2021 compared to 4.6% for 2020. Workers compensation increased $184 thousand compared to 2020 with the bureau issuing three dividend checks totaling $185.9 thousand in 2020. Overall, employee benefits increased $1.7 million or 30.7% from 2020.

Net occupancy expense typically increases as the Company expands. Net occupancy expense increased for 2022 $381.8 thousand but decreased in 2021. One factor that can offset occupancy expense is the receipt by the Company of building rent as it is netted out of occupancy expense. The greatest contributor to building rent comes from the division of FM Investments within the Bank. For 2022, building rent as generated from FM Investments was higher by $106.5 thousand. Rent is received in lieu of commissions. This increase of revenue was able to partially offset increased building repair and maintenance expenses

30

of $14.0 thousand and lease expense of $46.9 thousand and increased automobile expense of $123.3 thousand. Building rent as generated by FM Investments was higher by $407.9 thousand in 2021 which offset building repair and maintenance expenses of $230.9 thousand contributing to the overall decrease to net occupancy of $87.0 thousand in 2021 as compared to 2020.

The 1-4 family mortgage refinancing activity saw a significant decrease in 2022 with the increase in interest rates. 2020 accounted for the largest number of loans being closed in the Bank’s history. A correlating expense to that activity as it relates to loans sold to the secondary market, is the amortization of mortgage servicing rights. The amortization is the expense that offsets the income recognized when the loan is first made. Income is recorded when the mortgage loan is first sold with servicing retained and is therefore recognized within one year. The amortization, however, is calculated over the life of the loan and accelerated as loans are paid off early. An increase in this expense can be driven by two activities: an increase in the number of sold loans and/or by the acceleration of the expense from payoff and refinance activity. The best picture of the bottom line impact is achieved by netting the income with the expense each year. 2022 had a net loss of $22 thousand which excluded the reversal of the $414 thousand valuation allowance established the prior year. The net income for 2021 was $251 thousand with a carrying value that was greater than the $3.2 million market value thus creating the need to establish a $414 thousand valuation allowance. 2020 had net income of $691 thousand. Of course, the value (or income) of the mortgage servicing right when the loans are sold also impacts the net position. As of December 31, 2022, 3,861 loans are being serviced with corresponding balances of $375.6 million. 2021 had 3,961 loans serviced with corresponding balances of $380.8 million. As of December 2020, 4,034 loans were being serviced with balances of $377.5 million.

The impact of mortgage servicing rights to both noninterest income and expense is shown in the following table:

	(In Thousands)
	2022			2021			2020
Beginning of Year	$	3,571		$	3,320		$	2,629
Capitalized Additions		537			1,417			1,722
Amortization		(559	)		(1,166	)		(1,031	)
Ending Balance, December 31		3,549			3,571			3,320
Valuation Allowance		-			(414	)		-
Mortgage Servicing Rights net, December 31	$	3,549		$	3,157		$	3,320

Furniture and equipment steadily increase as we continue to add facilities and invest in technology. Annual maintenance costs continue to grow and become a greater piece of the overall cost. As new services are provided to our customers, the backroom cost to supply them continues to rise. The Company accepts it is an expected cost of doing business and keeping our services relevant to the industry.

Data processing costs were higher in 2022 as compared to 2021 by $454.2 thousand. Acquisition related data processing expense decreased $257.2 thousand in 2022 compared to 2021. As the pricing on many services is based on number of accounts which the Bank fully expects to increase with the growth from the newer offices and overall Bank growth, data processing costs are expected to increase. Data processing expense increased by $1.7 million during 2021 as compared to 2020 of which $1.4 million was acquisition related.

ATM expense increased $371.2 thousand over 2021 while 2021 increased $156.0 thousand from 2020. Included in this line are the debit card fees incurred which offset the debit card income as discussed above.

The FDIC assessment decreased from 2021 due to a decreased assessment rate that has offset an increased assessment base while 2021 increased as compared to 2020. This line item speaks to the health of the Bank and the financial industry. With continued growth, the assessment base increases which leads to a greater expense. 2022’s assessment was $168.3 thousand under 2021. The assessment for 2021 was up $440 thousand compared to 2020 as a result of the total assessment base increasing.

Advertising and public relations increased in 2022 by $210.1 thousand and increased in 2021 by $104.0 thousand. With the addition of new offices, 2022 was expected to increase. The Bank also celebrates the anniversary of office openings with a special event in each community. 2022 also saw the celebration and promotion of the Bank's 125th anniversary.

The last line items with significant variation in noninterest expense to discuss is “consulting fees” and “other general and administrative.” Consulting fees decreased by $332.8 thousand in 2022 from 2021 and increased $666.0 thousand in 2021 compared to 2020. Acquisition expenses included in the other general and administrative line were $590.3 thousand for 2022 and $743.3 thousand for 2020. Customer list intangible expense which is included in the other general and administrative line increased in 2021 compared to 2020 by $107.0 thousand with the acquisition of Adams County Financial Resources in

31

November of 2020. Loan and collection expenses increased $287.0 thousand over 2021 and legal expenses decreased $223.3 thousand from 2021 of which $205.1 thousand of the decrease was acquisition related. Auditing and exam fees increased $103.1 thousand which included $77.3 thousand of acquisition related costs over 2021 and 2021 increased $210.3 thousand over 2020 which included $81.1 thousand of acquisition related costs.

Allowance for Credit Losses

Provision expense increased by $1.2 million for 2022 as compared to 2021 and decreased by $3.5 million for 2021 as compared to 2020. The increase in provision expense for 2022 was attributed to the net charge-off activity and significant loan growth. Sustained strong asset quality kept the provision expense lower than the growth alone would have warranted. The larger provision expense for 2020 was attributable to the uncertainties associated with COVID-19 and its effects on the ability of individuals, businesses and other entities to meet their financial obligations. Therefore, it was prudent to incorporate the impact of COVID-19 in the evaluation of the adequacy of Allowance for Loan and Lease Losses (ALLL). The portfolios for which we had concerns with the COVID-19 impact in 2020 have performed and recovered nicely and have allowed us not to allocate funds to the ALLL in 2021. Management continues to monitor asset quality, making adjustments to the provision as necessary. The commercial and industrial portfolio had the highest level of charge-off activity in 2022 and 2021 at $418 and $814 thousand, respectively. The consumer portfolio had the highest levels of charge-off activity in 2020 at $380 thousand. Net charge-offs in the commercial and industrial portfolio were $325 and $557 thousand in 2022 and 2021, respectively while the consumer portfolio net charge-offs were $240 for 2020. Total net charge-offs were $529, $874 and $537 thousand for 2022, 2021 and 2020, respectively.

The Company segregates its Allowance for Credit Losses (ACL) into two reserves: The ALLL and the Allowance for Unfunded Loan Commitments and Letters of Credit (AULC). When combined, these reserves constitute the total ACL. The AUCL is included in other liabilities on the consolidated balance sheets.

The Bank’s ALLL methodology captures trends in leading, current, and lagging indicators which will directly affect the Bank’s allocation amount. The Bank monitors trends in such leading indicators as delinquency, unemployment changes in the Bank’s service area, experience and ability of staff, regulatory trends, and credit concentrations. A current indicator such as the total watch list loan amount to Capital, and a lagging indicator such as the charge-off amount are referenced as well. A matrix formed by loan type from these indicators is used in making ALLL adjustments.

Watch list loan balances are comprised of loans graded 5-8. At year-end December 31, 2022, these loans totaled $60.0 million and were $4.6 million higher than December 31, 2021. Grade 5 increased $2.6 million in 2022 as compared to 2021 and Grade 6 increased $2.0 million in the same comparison.

At year-end December 31, 2021, these loans totaled $55.4 million and were approximately $1.0 million lower than December 31, 2020. Grade 5 increased $4.4 million in 2021 as compared to 2020 and Grade 6 decreased $4.3 million in the same comparison. Grade 7 decreased $1.1 million in 2021 as compared to 2020.

At year-end December 31, 2020 these loans totaled $56.3 million and were $3.9 million lower than December 31, 2019. Grade 5 decreased $6.1 million in 2020 as compared to 2019 and Grade 6 increased by $2.2 million in the same comparison. Grade 7 increased a mere $29 thousand in 2020 as compared to 2019.

At December 31, 2022, of the $60.0 million watch list loans, 41.0% were classified as special mention and 59.0% were classified as substandard. At year-end 2021, of the $55.4 million watch list loans, 39.7% were classified as special mention and 60.3% were classified as substandard.

Of the aggregate watch list loan balances, as of December 31, 2020, 31.2% of the watch list was classified as special mention, with an additional 66.8% classified as substandard and a small 2.0% or $1.1 million of the $56.3 million watch list was classified as doubtful.

In response to these fluctuations and the offset by loan growth during 2020 through 2022, the Bank’s ALLL to outstanding loan coverage percentage changed to 0.86% as of December 31, 2022, 0.87% as of December 31, 2021 and 1.05% as of December 31, 2020. In addition, for 2022, 2021 and 2020, our allowance for loan and lease losses does not include a $785 thousand, $1.2 million and $1.7 million credit mark associated with the Limberlost acquisition. For 2022 and 2021, our allowance for loan and lease losses also does not include a $480 thousand or $966 thousand credit mark associated with the Ossian acquisition. The credit mark not included in the allowance for loan losses associated with the Perpetual Federal Savings Bank acquisition for 2022 and 2021 was $4.4 million and $5.5 million, respectively. 2022 also includes a $798 thousand credit mark associated with

32

the Peoples Federal Savings and Loan Bank acquisition. Together, all of the credit marks further support the current position of the ALLL.

The above indicators impacting the ALLL are reviewed at a minimum quarterly. Some of the indicators are quantifiable and, as such, will automatically adjust the ALLL once calculated. These indicators include the ratio of past due loans to total loans, loans past due greater than 30 days, and the ratio of watch list loans to capital, with the watch list made up of loans graded 5, 6 or 7 on a scale of 1 (best) to 7 (worst). Other indicators consist of more subjective data used to evaluate the potential for inherent losses in the Bank’s loan portfolio. For example, the economic indicator uses the unemployment statistics from the communities in our market area to help determine whether the ALLL should be adjusted. In 2020, a COVID-19 factor was added and adjusted during the year. The COVID-19 factor was eliminated by the end of 2022.

All commercial and agricultural relationships with lines of credit greater than $50,000 and aggregate loan exposure greater than $250,000 are reviewed annually by the Bank’s Credit Department. All commercial and agricultural relationships with term debt only and aggregate loan exposure greater than $750,000 are also reviewed by the Bank’s Credit Department. These reviews are conducted to identify early signs of deterioration.

To establish the specific reserve allocation for real estate, a discount to the market value is established to account for liquidation expenses. The discounting percentage used for real estate mirrors the discounting of real estate as provided for in the Bank’s Loan Policy. However, unique or unusual circumstances may be present which will affect the real estate value and, when appropriately identified, can adjust the discounting percentage at the discretion of management.

The ACL increased $4.3 million during 2022 while increasing $3.0 million and $6.6 million during 2021 and 2020, respectively. The percentage of ACL to the total loan portfolio was 1.10% as of December 31, 2020 and 0.93% as of December 31, 2021, and 0.92% as of December 31, 2022. December 31, 2021 had the lowest loans past due 30+ day percentage at 0.09% in the last ten years. December 31, 2020 and 2022 were still at respectable lows of 0.29% and 0.26%.

Please see Note 4 in the consolidated financial statement for additional tables regarding the composition of the ACL.

Income Taxes

Income tax expense was $1.9 million more for 2022 than 2021 as result of approximately $11.0 million of additional income. Effective tax rates were 19.67%, 20.35% and 20.28% for 2022, 2021 and 2020 respectively. The effect of tax-exempt interest from holding tax-exempt securities and Industrial Development Bonds (IDBs) was $137, $119 and $150 thousand for 2022, 2021 and 2020, respectively less the TEFRA adjustments of $5, $3 and $4 thousand respectively. One of the benefits from the establishment of the Captive subsidiary was a lower effective tax rate.

Material Changes in Financial Condition

The shifts in the balance sheet during 2022 through 2020 have positioned the Company for continued improvement in profitability. On the asset side, interest income increased primarily from loan growth with funding for the increase provided by growth in core deposits and growth in other borrowings primarily related to the acquisition of the Bank of Geneva and Perpetual Federal Savings Bank. The cost of funds has been impacted by the increase of both interest bearing liabilities, the pressure on rates from competition for funds and a rising rate environment. In 2020, the rate pressure from competition basically subsided. Increased balances in non-interest bearing deposits aided in profitability also. Loan growth contributed to an increase in profitability in 2022 through 2020.

Average earning assets increased in balances through 2022 and 2020. Loan growth in the three years was the main factor.

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SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA

Summary of Consolidated Statement of Income
	(In Thousands, except share data)
	2022			2021			2020			2019			2018
Summary of Income:
Interest income	$	101,149		$	76,840		$	70,169		$	68,306		$	46,429
Interest expense		14,362			7,342			10,393			14,759			6,572
Net Interest Income		86,787			69,498			59,776			53,547			39,857
Provision for loan losses		4,600			3,444			6,981			1,138			324
Net interest income after provision for loan losses		82,187			66,054			52,795			52,409			39,533
Noninterest income (expense), net		(41,712	)		(36,557	)		(27,589	)		(29,647	)		(21,283	)
Net income before income taxes		40,475			29,497			25,206			22,762			18,250
Income taxes		7,960			6,002			5,111			4,360			3,301
Net income	$	32,515		$	23,495		$	20,095		$	18,402		$	14,949
Per Share of Common Stock:
Earnings per common share outstanding *
Net income	$	2.46		$	2.01		$	1.80		$	1.66		$	1.61
Dividends	$	0.8125		$	0.7100		$	0.6600		$	0.6100		$	0.5600
Weighted average number of shares    outstanding, including participating    securities		13,206,713			11,664,852			11,146,270			11,113,810			9,272,964

* Based on weighted average number of shares outstanding

Summary of Consolidated Balance Sheet
	(In Thousands)
	2022			2021			2020			2019			2018
Total assets	$	3,015,351		$	2,638,300		$	1,909,544		$	1,607,330		$	1,116,163
Loans, net		2,336,074			1,841,177			1,289,318			1,211,771			839,599
Total deposits		2,468,864			2,193,462			1,596,162			1,288,347			928,790
Stockholders' equity		298,140			297,167			249,160			230,258			143,287
Key Ratios
Return on average equity		11.30	%		9.09	%		8.38	%		8.26	%		10.86	%
Return on average assets		1.17	%		1.05	%		1.14	%		1.23	%		1.34	%
Loans to deposits		94.62	%		83.94	%		80.78	%		94.06	%		90.40	%
Capital to assets		9.89	%		11.26	%		13.05	%		14.33	%		12.84	%
Dividend payout		32.74	%		35.08	%		36.36	%		36.59	%		34.40	%

Securities

The investment portfolio is primarily used to provide overall liquidity for the Bank. It is also used to provide required collateral for pledging to the Bank’s Ohio public depositors for amounts on deposit in excess of the FDIC coverage limits. It may also be used to pledge for additional borrowings from third parties. Investments are made with the above criteria in mind while still seeking a fair market rate of return and looking for maturities that fall within the projected overall strategy of the Bank. The possible need to fund future loan growth is also a consideration.

The Bank uses Promontory’s ICS product which utilizes a nation-wide bank network to provide FDIC insurance coverage to the Bank’s depositors to protect balances over $250 thousand. The Bank is using the product to replace pledging securities for the Bank’s Ohio public customers and commercial sweep customers; thereby increasing liquidity.

All of the Bank’s security portfolio is categorized as available for sale and as such is recorded at market value.

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Our cash position increased with each of the acquisitions and the excess cash was partially invested in the security portfolio. Security balances as of December 31 are summarized below:

	(In Thousands)
	2022		2021		2020
U.S. Treasury	$	94,678	$	89,177	$	-
U.S. Government agencies		139,767		156,886		124,241
Mortgage-backed securities		86,927		117,927		113,056
State and local governments		69,417		65,941		70,515
	$	390,789	$	429,931	$	307,812

The following table sets forth the maturities of investment securities as of December 31, 2022 and the weighted average yields of such securities calculated on the basis of cost and effective yields weighted for the scheduled maturity of each security. Tax-equivalent adjustments, using a twenty-one percent rate, have been made in yields on obligations of state and political subdivisions. Stocks of domestic corporations have not been included. Maturities of mortgage-backed securities are based on the stated maturity date of the security. Due to prepayments, actual maturities may be different.

	Maturities
	(Amounts in Thousands)
						After One Year
	Within One Year					Within Five Years
	Amount		Yield			Amount		Yield
U.S. Treasury	$	11,810		0.89	%	$	51,673		0.82	%
U.S. Government agencies		4,928		1.12	%		108,945		1.12	%
Mortgage-backed securities		492		2.43	%		17,510		2.27	%
State and local governments		3,545		2.19	%		10,760		1.62	%
Taxable state and local governments		-		0.00	%		18,955		1.98	%

	After Five Years
	Within Ten Years					After Ten Years
	Amount		Yield			Amount		Yield
U.S. Treasury	$	31,195		1.00	%	$	-		0.00	%
U.S. Government agencies		25,894		1.08	%		-		0.00	%
Mortgage-backed securities		68,925		1.71	%		-		0.00	%
State and local governments		5,562		2.83	%		-		0.00	%
Taxable state and local governments		28,728		2.21	%		1,867		4.24	%

As of December 31, 2022, the Bank also holds stock in the Federal Home Loan Bank of Cincinnati and Indianapolis at a cost of $8.1 million. This is required in order to obtain Federal Home Loan Bank loans.

Loan Portfolio

The Bank’s various loan portfolios are subject to varying levels of credit risk. Management mitigates these risks through portfolio diversification and through standardization of lending policies and procedures.

Risks are mitigated through an adherence to the Bank’s loan policies, with any exception being recorded and approved by senior management or committees comprised of senior management. The Bank’s loan policies define parameters to essential underwriting guidelines such as loan-to-value ratio, cash flow and debt-to-income ratio, loan requirements and covenants, financial information tracking, collection practice and others. The maximum loan amount to any one borrower is limited by the Bank’s legal lending limits and is stated in policy. On a broader basis, the Bank restricts total aggregate funding in comparison to Bank capital to any one business or agricultural sector by an approved sector percentage to capital limitation.

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The following table shows the Bank’s loan portfolio, excluding loans held for sale, by category of loan as of December 31 of each year, net of deferred fees and costs:

	(In Thousands)
Loans:	2022		2021		2020		2019		2018
Consumer Real Estate	$	494,423	$	395,873	$	175,588	$	165,349	$	80,766
Agricultural Real Estate		220,819		198,343		189,159		199,105		68,609
Agricultural		128,733		118,368		94,358		111,820		108,495
Commercial Real Estate		1,152,603		848,477		588,825		551,309		419,784
Commercial and Industrial		242,360		208,270		189,246		135,631		121,793
Consumer		89,147		57,737		52,540		49,237		41,953
Other		29,818		32,089		15,757		8,314		5,889
	$	2,357,903	$	1,859,157	$	1,305,473	$	1,220,765	$	847,289

The following table shows the maturity of loans excluding fair value adjustments as of December 31, 2022:

	(In Thousands)
			After One
	Within		Year Within		After
	One Year		Five Years		Five Years
Consumer Real Estate	$	8,890	$	34,961	$	456,556
Agricultural Real Estate		525		7,116		214,297
Agricultural		59,119		47,113		22,544
Commercial Real Estate		26,670		336,890		789,304
Commercial and Industrial		81,552		108,729		52,715
Consumer		2,089		47,052		40,357
Other		235		1,219		28,375
	$	179,080	$	583,080	$	1,604,148

The following table presents the total of loans excluding fair value adjustments due after one year which has either 1) predetermined interest rates (fixed) or 2) floating or adjustable interest rates (variable):

	(In Thousands)
	Fixed		Variable
	Rate		Rate		Total
Consumer Real Estate	$	469,336	$	22,181	$	491,517
Agricultural Real Estate		194,679		26,734		221,413
Agricultural		67,934		1,723		69,657
Commercial Real Estate		996,833		129,361		1,126,194
Commercial and Industrial		150,905		10,539		161,444
Consumer		87,409		-		87,409
Other		19,794		9,800		29,594
	$	1,986,890	$	200,338	$	2,187,228

The following table summarizes the Company’s nonaccrual, past due 90 days or more and still accruing loans, and accruing troubled debt restructurings as of December 31 for each of the last five years:

	(In Thousands)
	2022		2021		2020		2019		2018
Nonaccrual loans	$	4,689	$	8,076	$	9,404	$	3,400	$	542
Accruing loans past due 90 days or more		-		-		-		-		-
Troubled Debt Restructurings, not included above		1,184		1,076		941		980		104
Total	$	5,873	$	9,152	$	10,345	$	4,380	$	646

Although loans may be classified as non-performing, some pay on a regular basis, and many continue to pay interest irregularly or at less than original contractual rates. Interest income that would have been recorded under the original terms of these loans

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would have aggregated $157 thousand for 2022, $502 thousand for 2021 and $272 thousand for 2020. Any collections of interest on nonaccrual loans are included in interest income when collected unless it is on an impaired loan with a specific allocation. A collection of interest on an impaired loan with a specific allocation is applied to the loan balance to decrease the allocation. Total interest collections, whether on an accrued or cash basis, amounted to $361 thousand for 2022, $292 thousand for 2021 and $269 thousand for 2020.

Loans are placed on nonaccrual status in the event that the loan is in past due status for more than 90 days or payment in full of principal and interest is not expected. The Bank had nonaccrual loan balances of $4.7 million at December 31, 2022 compared to balances of $8.1 million and $9.4 million as of year-end 2021 and 2020. All of the balances of nonaccrual loans for the past three years were collaterally secured.

As of December 31, 2022, the Bank had $60.0 million of loans which it considers to be “potential problem loans” in that the borrowers are experiencing financial difficulties which are not reflected in the table above. At December 31, 2021, the Bank had $55.4 million of these loans and at December 31, 2020, the Bank had $56.3 million of these loans. These loans are subject to constant management attention and are reviewed at least monthly. The amount of the potential problem loans was considered in management’s review of the loan loss reserve at December 31, 2022 and 2021.

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

As of December 31, 2022, the Bank had loans outstanding to individuals and firms engaged in the various fields of agriculture in the amount of $128.7 million with an additional $220.9 million in agricultural real estate loans which compared to $118.4 and $198.3 million respectively as of December 31, 2021. The ratio of this segment of loans to the total loan portfolio is not considered unusual for a bank engaged in and servicing rural communities.

Interest rate modification to reflect a decrease in market interest rates or maintain a relationship with the debtor, where the debtor is not experiencing financial difficulty and can obtain funding from other sources, is not considered a troubled debt restructuring. As of December 31, 2022, the Bank had $3.6 million of its loans that were classified as troubled debt restructurings, of which $2.5 million are included in nonaccrual loans. This compares to $7.6 million of troubled debt restructurings, of which $6.5 million are included in nonaccrual loans for 2021 and $6.5 million of troubled debt restructuring, of which $5.6 million are included in nonaccrual loans for 2020.

Updated appraisals are required on all collateral dependent loans once they are deemed impaired. The Bank may also require an updated appraisal of a watch list loan which the Bank monitors under its loan policy. On a quarterly basis, Bank management reviews properties supporting asset dependent loans to consider market events that may indicate a change in value has occurred.

To determine observable market value, collateral asset values securing an impaired loan are periodically evaluated. Maximum time of re-evaluation is every 12 months for chattels and titled vehicles and every two years for real estate. In this process, third party evaluations are obtained and heavily relied upon. Until such time that updated appraisals are received, the Bank may discount the existing collateral value used.

Performing “non-watch list” loans secured in whole or in part by real estate, do not require an updated appraisal unless the loan is rewritten and additional funds advanced. Watch List loans secured in whole or in part by real estate require updated appraisals every two years. All loans are subject to loan to values as found in the Bank’s loan policies irrespective of their grade. The Bank’s watch list is reviewed on a quarterly basis by management and any questions to value are addressed at that time.

The majority of the Bank’s loans are made in the market by lenders who live and work in the market. Thus, their evaluation of the independent valuation is also valuable and serves as a double check.

On extremely rare occasions, the Bank will make adjustments to the recorded values of collateral securing commercial real estate loans without acquiring an updated appraisal for the subject property. The Bank has no formalized policy for determining when collateral value adjustments between regularly scheduled appraisals are necessary, nor does it use any specific methodology for applying such adjustments. However, on a quarterly basis as part of its normal operations, the Bank’s senior management and the Loan Review Committee will meet to review all commercial credits either deemed to be impaired or on the Bank’s watch list. In addition to analyzing the recent performance of these loans, management and the Enterprise Risk Management Committee will also consider any general market conditions that might warrant adjustments to the value of particular real estate collateralizing commercial loans. In addition, management conducts annual reviews of all commercial loans

37

exceeding certain outstanding balance thresholds. In each of these situations, any information available to management regarding market conditions impacting a specific property or other relevant factors are considered, and lenders familiar with a particular commercial real estate loan and the underlying collateral may be present to provide their opinion on such factors. If the available information leads management to conclude a valuation adjustment is warranted, such an adjustment may be applied on the basis of the information available. If management concludes that an adjustment is warranted but lacks the specific information needed to reasonably quantify the adjustment, management will order a new appraisal on the subject property even though one may not be required under the Bank’s general policies for updating appraisal.

Note 4 of the Consolidated Financial Statements may also be reviewed for additional tables dealing with the Bank’s loans and ALLL.

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

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

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

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

As presented in the table on the next page, charge-offs decreased to $827 thousand for 2022. 50.5% of the charge-offs stemmed from the commercial and industrial portfolio. Charge-offs were $1.3 million for 2021, $720 thousand for 2020, preceded by $841 thousand for 2019 and $580 thousand for 2018. Recoveries were $298 thousand in 2022 compared to $458, $183, $156 and $163 thousand for 2021, 2020, 2019 and 2018, respectively. The net charge-offs for the last five years were all under $900 thousand with 2021 the highest at $874 thousand and 2018 the lowest at $417 thousand.

Higher provision expense was used to fund the ALLL for loan growth in 2022 and 2019. 2021 and 2020 had higher provision expense due to the uncertainty surrounding COVID-19 and its impact on individuals and businesses. For 2018, the provision was used to replenish the balance decreased by the net charge-off activity. Overall, the ALLL increased from $6.8 million at year-end 2018 to $20.3 million at year-end 2022. After adding the allowance for unfunded loan commitments, the ACL ended 2022 at $21.6 million. As the ratios on the bottom of the following table show, the trends for each have improved or remained fairly constant over the five years shown. Asset quality and the ACL are both strong and emphasize the level of credit quality.

In reviewing the bigger picture of the allowance for loan and lease loss, the years with the higher percentage of ALLL to total nonperforming loans ratio account for the lower level of nonaccrual loans. This demonstrates the extended time period with which it has taken to achieve resolution and/or collection of these loans. The ratio of ALLL to nonperforming loans increased beginning in 2018 with a significant drop in 2019 followed by a slight drop in 2020 and slight increases in 2021 and 2022. 2020’s provision expense was the highest of the five years shown largely due to the uncertainty surrounding COVID-19. Loan growth in 2022, 2021 and 2020 reached double-digit percentage increases for all three years. The ALLL to nonperforming loans for all years remained more than adequate and emphasizes the existing strong level of credit quality.

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The following table presents a reconciliation of the allowance for credit losses for the years ended December 31, 2022, 2021, 2020, 2019 and 2018:

	(In Thousands)
	2022			2021			2020			2019			2018
Loans	$	2,356,387		$	1,857,419		$	1,302,990		$	1,218,999		$	846,374
Daily average of outstanding loans	$	2,073,737		$	1,522,088		$	1,313,675		$	1,129,231		$	831,614
Nonaccrual loans	$	4,689		$	8,076		$	9,404		$	3,400		$	542
Nonperforming loans	$	4,689		$	8,076		$	9,404		$	3,400		$	542
Allowance for Loan Losses - Jan 1	$	16,242		$	13,672		$	7,228		$	6,775		$	6,868
Loans Charged off:
Consumer Real Estate		-			19			35			98			63
Agricultural Real Estate		-			105			-			-			-
Agricultural		-			143			-			37			-
Commercial Real Estate		-			-			8			-			16
Commercial and Industrial		418			814			297			215			142
Consumer		409			251			380			491			359
		827			1,332			720			841			580
Loan Recoveries:
Consumer Real Estate		20			13			9			-			18
Agricultural Real Estate		-			-			-			-			-
Agricultural		7			14			-			3			8
Commercial Real Estate		9			10			10			11			10
Commercial and Industrial		93			257			24			22			13
Consumer		169			164			140			120			114
		298			458			183			156			163
Net Charge-offs:
Consumer Real Estate		(20	)		6			26			98			45
Agricultural Real Estate		-			105			-			-			-
Agricultural		(7	)		129			-			34			(8	)
Commercial Real Estate		(9	)		(10	)		(2	)		(11	)		6
Commercial and Industrial		325			557			273			193			129
Consumer		240			87			240			371			245
		529			874			537			685			417
Provision for loan loss		4,600			3,444			6,981			1,138			324
Acquisition provision for loan loss		-			-			-			-			-
Allowance for Loan & Lease Losses - Dec 31		20,313			16,242			13,672			7,228			6,775
Allowance for Unfunded Loan    Commitments & Letters of Credit - Dec 31		1,262			1,041			641			479			274
Total Allowance for Credit Losses - Dec 31	$	21,575		$	17,283		$	14,313		$	7,707		$	7,049
Ratio of Net Charge-offs to Average    Outstanding Loans		0.03	%		0.06	%		0.04	%		0.06	%		0.05	%
Ratio of Nonaccrual Loans to Loans		0.20	%		0.43	%		0.72	%		0.28	%		0.06	%
Ratio of the Allowance for Loan & Lease    Losses to Loans		0.86	%		0.87	%		1.05	%		0.59	%		0.80	%
Ratio of the Allowance for Loan & Lease    Losses to Nonaccrual Loans		273.67	%		201.11	%		145.47	%		209.70	%		1249.57	%
Ratio of the Allowance for Loan & Lease    Losses to Nonperforming Loans		273.67	%		201.11	%		145.47	%		209.70	%		1249.57	%

*Nonperforming loans are defined as all loans on nonaccrual, plus any loans past due 90 days not on nonaccrual.

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Allocation of ALLL per Loan Category in terms of dollars and percentage of loans in each category to total loans is as follows:

	2022				2021				2020				2019				2018
	Amount				Amount				Amount				Amount				Amount
	(000's)		%		(000's)		%		(000's)		%		(000's)		%		(000's)		%
Balance at End of Period    Applicable To:
Consumer Real Estate	$	998		20.98	$	857		21.31	$	633		13.45	$	311		13.51	$	247		9.48
Agricultural Real Estate		349		9.36		1,040		10.66		958		14.49		314		16.31		250		8.10
Agricultural		751		5.47		709		6.38		701		7.25		691		9.18		768		12.83
Commercial Real Estate		11,924		48.83		9,130		45.61		7,415		45.10		3,634		45.14		3,217		49.52
Commercial and Industrial		5,382		11.55		3,847		11.20		3,346		15.67		1,727		11.81		1,305		15.10
Consumer		891		3.81		625		3.11		606		4.04		551		4.05		484		4.97
Unallocated		18		0.00		34		1.73		13		0.00		-		0.00		504		0.00
Allowance for Loan & Lease    Losses	$	20,313		100.00	$	16,242		100.00	$	13,672		100.00	$	7,228		100.00	$	6,775		100.00
Off Balance Sheet    Commitments		1,262				1,041				641				479				274
Total Allowance for    Credit Losses	$	21,575			$	17,283			$	14,313			$	7,707			$	7,049

Deposits

The amount of outstanding time certificates of deposits and other time deposits in amounts of $100,000 or more by maturity both in total and uninsured greater than $250,000 as of December 31, 2022 are as follows:

	(In Thousands)
			Over Three		Over Six
			Months		Months Less			Over
	Under		Less than		Than One			One
	Three Months		Six Months		Year			Year
Time Deposits	$	74,723	$	72,617	$	119,424		$	87,219
Uninsured Time Deposits	$	8,366	$	10,604	$	16,283	`	$	26,835

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

	(In Thousands)
	Non-Interest			Interest			Savings			Time
	DDAs			DDAs			Accounts			Accounts
December 31, 2022:
Average balance	$	480,389		$	688,908		$	646,363		$	451,013
Average rate		0.00	%		0.71	%		0.21	%		1.29	%
December 31, 2021:
Average balance	$	400,801		$	635,544		$	510,092		$	306,600
Average rate		0.00	%		0.24	%		0.18	%		1.16	%
December 31, 2020:
Average balance	$	304,276		$	503,771		$	375,898		$	264,827
Average rate		0.00	%		0.66	%		0.26	%		1.68	%

Uninsured deposits greater than $250,000 are presented by year in the table below:

	(In Thousands)
	2022		2021		2020
Uninsured Deposits	$	511,291	$	436,628	$	320,483

Liquidity

Liquidity remains adequate as the Bank has increased the investment portfolio in 2021 and 2022. The Bank has access to $73.0 million of unsecured borrowings through correspondent banks, $130.4 million through a Cash Management Advance with the Federal Home Loan Bank and $249.6 million of unpledged securities which may be sold or used as collateral. The amount of unpledged securities decreased almost $64.1 million as compared to 2021. For the Bank, an additional $2.3 million is also

40

available from the Federal Home Loan Bank based on current collateral pledging. At the present time, only 1-4 family and home equity portfolios are pledged. Additional borrowings would be available if additional portfolios (i.e. commercial real estate) were pledged.

Maintaining sufficient funds to meet depositor and borrower needs on a daily basis continues to be among management’s top priorities. This is accomplished not only by immediate liquid resources of cash, due from banks and federal funds sold, but also by the Bank’s available for sale securities portfolio. The average aggregate balance of these assets was $447.7 for 2022, $396.3 for 2021 and $244.0 million for 2020. This represented 16.1%, 17.8% and 13.8% of total average assets, respectively. Of the almost $382.1 million of debt securities in the Bank’s portfolio as of December 31, 2022, $19.8 million, or 5.2% of the portfolio, is expected to receive payments or mature in 2023. This liquidity provides the opportunity to fund loan growth by analysis of the lowest cost and source of funds whether by increasing deposits, sales or runoff of investments or utilizing debt.

In addition to the Bank’s investment portfolio, the Company has $7.5 million held in the holding company’s investment portfolio. $3.0 million of those investments will mature or receive payments in the next twelve months. These funds provide liquidity to the Company. The Bank has been declaring additional dividends each quarter to provide this liquidity to the Company. The Captive has also up streamed dividends to the Company and is expected to continue annually as long as reserve levels are adequately provided for. This provides additional liquidity for Company activities.

Historically, the primary source of liquidity has been core deposits that include noninterest bearing and interest bearing demand deposits, savings, money market accounts and time deposits of individuals. Core deposit balances increased in all categories as of December 31, 2022 compared to same date 2021. Average total savings balances increased $189.6 million in 2022 as compared to 2021. Core deposit balances as of year-end 2021 increased in all categories as compared to 2020. The Bank did not purchase Federal Funds during 2021; however, did purchase Federal Funds at times during 2022 and 2020. The average balance for 2022 was $12.7 million and for 2020 $2.2 million. The Bank is comfortable accessing these funds on a regular basis.

Historically, the primary use of new funds is placing the funds back into the community through loans for the acquisition of new homes, consumer products and for business development. The use of new funds for loans is measured by the loan to deposit ratio. The Bank’s average loan to deposit ratio was 89.5% for 2022, 82.1% for 2021 and 90.7% for 2020. The Bank’s goal is for this ratio to be higher in the 80-90 percent range with loan growth being the driver. The Bank ended the year 2022 at an 94.1% loan to deposit ratio.

Short-term debt such as federal funds purchased, and securities sold under agreement to repurchase also provides the Company with liquidity. Short-term debt for both federal funds purchased, and securities sold under agreement to repurchase amounted to $54.2 million at December 31, 2022, $29.3 million at December 31, 2021 and $30.2 million at the end of 2020. These accounts are used to provide a sweep product to the Bank’s commercial customers and for some term deposits. The repurchase agreements are for term deposits only.

“Other borrowings” are also a source of funds. Other borrowings consist of loans from the Federal Home Loan Bank of Cincinnati and Indianapolis and a correspondent bank. These funds are then used to provide loans in our community. During 2022, the Federal Home Loan Bank of Cincinnati loaned $140.0 million to the Bank. During 2022, 2021 and 2020, $37.4 million, $157.8 thousand and $7.5 million, respectively either matured and was paid off or was paid down. On October 1, 2022, the Bank acquired $964.6 thousand of borrowings from the Federal Home Loan Bank of Cincinnati due to the Peoples Savings and Loan acquisition.

Asset/Liability Management

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

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

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

41

Interest rate sensitivity varies with different types of interest-earning assets and interest-bearing liabilities. Overnight federal funds on which rates change daily and loans that are tied to the market rate differ considerably from long-term investment securities and fixed rate loans. Similarly, time deposits over $100,000 and money market certificates are much more interest rate sensitive than passbook savings accounts. The Bank utilizes shock analysis to examine the amount of exposure an immediate rate change of 100, 200, 300 and 400 basis points in both increasing and decreasing directions would have on the financials. Acceptable ranges of earnings and equity at risk are established and decisions are made to maintain those levels based on the shock results.

Impact of Inflation and Changing Prices

The consolidated financial statements and notes thereto presented herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of the Company’s operations. Unlike most industrial companies, nearly all the assets and liabilities of the Company are monetary in nature. As a result, interest rates have a greater impact on the Company’s performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and service.

Contractual Obligations

Contractual Obligations of the Company totaled $792.7 million as of December 31, 2022. Time deposits, contractual agreements for certificates of deposits held by its customers, were $558.0 million. Securities sold under agreement to repurchase were $31.6 million. Short term debt consisted of a line of credit secured for the acquisition of Peoples Federal Savings and Loan Bank of $10.0 million and federal funds purchased of $22.6 million. Long term debt was comprised of borrowings with the Federal Home Loan Bank of $127.5 million and subordinated notes of $35.0 million. Short term and long term debt is further defined in Note 9 of the Consolidated Financial Statements.

Capital Resources

Stockholders’ equity was $298.1 million as of December 31, 2022 compared to $297.2 million at December 31, 2021. Dividends declared during 2022 were $0.8125 per share totaling $10.6 million and dividends declared during 2021 were $0.71 per share totaling $8.2 million. Throughout 2022, the Company awarded 56,496 shares of restricted stock awards to 109 employees. During 2021, the Company awarded 48,750 shares of restricted stock to 96 employees. For a summary of activity as it relates to the Company’s restricted stock awards, please refer to Note 11: Employee Benefit Plans in the consolidated financial statements. On December 31, 2022 the Company held 956,003 shares in Treasury Stock and 128,952 unvested shares of restricted stock. At year-end 2021, the Company held 997,766 shares in Treasury stock and 111,131 unvested shares of restricted stock. On January 24, 2023 the Company announced the authorization by its Board of Directors for the Company’s repurchase, either on the open market, or in privately negotiated transactions, of up to 650,000 shares of its outstanding common stock commencing January 24, 2023 and ending December 31, 2023. The Company has a history of approving a similar resolution to be in effect each year for at least the last five years.

The Company continues to have a strong capital base and maintains regulatory capital ratios that are above the defined regulatory capital ratios. At December 31, 2022, the Bank had total risk-based capital ratio of 12.07%. Core capital to risk-based asset ratio of 11.15% for the Bank, is well in excess of regulatory guidelines. The Bank’s leverage ratio of 9.03% is also substantially in excess of regulatory guidelines. Under Basel III, the common equity Tier 1 Capital to risk-weighted assets ratio is also well above the required 4.50% and the 6.50% well capitalized levels with the Bank at 11.15%. As a result of the passage of the Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA) in 2018, the Company is no longer subject to regulatory capital ratio requirements as long as its total consolidating assets are less than $3.0 billion. For further discussion and analysis of regulatory capital requirements, refer to Note 15 of the Audited Financial Statements.

The Company’s subsidiaries are restricted by regulations from making dividend distributions in excess of certain prescribed amounts. Upon prior regulatory approval, the Bank may be allowed to pay above the prescribed amount.

42

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

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

Interest rate risk is managed within an overall asset/liability framework. The principal objectives of asset/liability management are to manage sensitivity of net interest spreads and net income to potential changes in interest rates. Funding positions are kept within predetermined limits designed to ensure that risk-taking is not excessive and that liquidity is properly managed. In the event that our asset/liabilities management strategies are unsuccessful, our profitability may be adversely affected. The Company employs a sensitivity analysis utilizing interest rate shocks to help in this analysis.

At December 31, 2022, the shocks presented below assume an immediate change of rate in the percentages and directions shown:

Interest Rate Shock on				Interest Rate Shock on
Net Interest Margin				Net Interest Income
Net Interest	% Change	Rate	Rate	Cumulative		% Change
Margin (Ratio)	to Flat Rate	Direction	changes by	Total ($000)		to Flat Rate
3.55%	2.70%	Rising	3.00%		108,158	2.85%
3.56%	3.04%	Rising	2.00%		108,465	3.14%
3.56%	2.89%	Rising	1.00%		108,249	2.94%
3.46%	0.00%	Flat	0.00%		105,163	0.00%
3.24%	-6.31%	Falling	-1.00%		98,500	-6.34%
3.07%	-11.07%	Falling	-2.00%		93,466	-11.12%
2.92%	-15.42%	Falling	-3.00%		88,872	-15.49%

The shock chart currently shows a widening in net interest margin over the next twelve months in an increasing rate environment and a tightening in a falling rate environment. The basis rising rates scenarios are predicted to expand the net interest margin and produce higher levels of net interest income. This would indicate that the assets yield is predicted to increase faster than the cost of funds will rise. In a rising 300 basis point increase, the model is indicating our deposit costs are rising more than asset yields. The Bank continues to enhance its use of the software model and performs additional stress tests whose results management and the director’s review. The Bank also monitors and adjusts the assumptions for decay rates and key rate ties on certain deposit accounts and continues to review and modify those rates as the index rates change. Both directional changes are well within risk exposure guidelines. The effect of the rate shocks may be mitigated to the extent that not all lines of business are directly tied to an external index and actual balance sheet composition may differ from prediction.

43

ITEM 8. FINANCIAL STATEMENTS

Index To Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm.

Consolidated Balance Sheets at December 31, 2022 and 2021.

Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020.

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020.

Consolidated Statements of Changes to Shareholders’ Equity for the years ended December 31, 2022, 2021 and 2020.

Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020.

Notes to Consolidated Financial Statements.

44

 

Report of Independent Registered Public Accounting Firm

To the Shareholders, Board of Directors, and Audit Committee

Farmers & Merchants Bancorp, Inc.

Archbold, Ohio

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Farmers and Merchants Bancorp, Inc. (Company) as of December 31, 2022 and 2021, the related consolidated statements of income (loss), comprehensive income, changes to stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Allowance for Loan Losses

As described in Note 4 to the consolidated financial statements, the Company’s consolidated allowance for loan and lease losses (ALLL) was $20.31 million at December 31, 2022. The Company also describes in Note 1 of the consolidated financial statements the "Allowance for Loan Losses" accounting policy around this estimate. The allowance for loan losses is evaluated on a regular basis by management and is based on management’s periodic review of the collectability of loans in light of historical experiences, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to

45

repay, estimated value of any underlying collateral, and prevailing economic conditions. The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired and an allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. The unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses.

The primary reason for our determination that the allowance for loan losses is a critical audit matter is that it involved significant judgment and complex review as there is a high degree of subjectivity in evaluating management’s estimate, such as evaluating management's assessment of economic conditions and other environmental factors, evaluating the adequacy of specific allowances associated with impaired loans and assessing the appropriateness of loan grades.

Our audit procedures related to the estimated allowance for loan losses included:

•Testing clerical/computational accuracy of the formulas within the Company’s ALLL calculation

•Testing of completeness and accuracy of the underlying data utilized in the ALLL, including reports used in management review controls over the ALLL

•Testing of the loan review function and the accuracy of loan grades determined. Specifically, utilizing internal loan review professionals to assist us in evaluating the appropriateness of loan grades and to assess the reasonableness of specific impairments on impaired loans

•Evaluating the overall reasonableness of qualitative factor adjustments to historical loss and the appropriateness of their direction and magnitude and the Company’s support for the direction and magnitude compared to previous years

We have served as the Company’s auditor since 2014.

 

(Formerly, BKD, LLP)

Fort Wayne, Indiana

February 24, 2023

46

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

December 31, 2022 and 2021

(000’s Omitted, Except Share Data)

	2022			2021
Assets
Assets
Cash and due from banks	$	83,085		$	135,485
Federal funds sold		1,324			45,338
Total cash and cash equivalents		84,409			180,823
Interest-bearing time deposits		4,442			10,913
Securities - available-for-sale		390,789			429,931
Other securities, at cost		9,799			8,162
Loans held for sale		827			7,714
Loans, net		2,336,074			1,841,177
Premises and equipment		28,381			26,913
Construction in progress		278			-
Goodwill		86,358			80,434
Mortgage servicing rights		3,549			3,157
Other real estate owned		-			159
Bank owned life insurance		33,073			27,558
Other assets		37,372			21,359
Total Assets	$	3,015,351		$	2,638,300
Liabilities and Stockholders' Equity
Liabilities
Deposits
Noninterest-bearing	$	532,794		$	473,689
Interest-bearing
NOW accounts		750,887			650,466
Savings		627,203			597,828
Time		557,980			471,479
Total deposits		2,468,864			2,193,462
Federal funds purchased and securities sold under agreement to repurchase		54,206			29,268
Federal Home Loan Bank (FHLB) advances		127,485			24,065
Other borrowings		10,000			40,000
Subordinated notes, net of unamortized issuance costs		34,586			34,471
Dividend payable		2,832			2,461
Accrued expenses and other liabilities		19,238			17,406
Total liabilities		2,717,211			2,341,133
Commitments and Contingencies
Stockholders' Equity
Common stock - No par value 20,000,000 shares authorized; issued and    outstanding 14,564,425 shares 12/31/22 and 14,063,999 shares 12/31/21		135,497			122,674
Treasury stock - 956,003 shares 12/31/22, 997,766 shares 12/31/21		(11,573	)		(11,724	)
Retained earnings		212,449			189,401
Accumulated other comprehensive loss		(38,233	)		(3,184	)
Total stockholders' equity		298,140			297,167
Total Liabilities and Stockholders' Equity	$	3,015,351		$	2,638,300

See Notes to Consolidated Financial Statements

47

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income

Years Ended December 31, 2022, 2021 and 2020

(000’s Omitted, Except Per Share Data)

	2022			2021		2020
Interest Income
Loans, including fees	$	94,264		$	71,645	$	65,317
Debt securities:
U.S. Treasury and government agencies		4,225			3,496		3,369
Municipalities		1,415			1,170		1,079
Dividends		318			174		142
Federal funds sold		21			31		20
Other		906			324		242
Total interest income		101,149			76,840		70,169
Interest Expense
Deposits		9,883			5,418		8,638
Federal funds purchased and securities sold under agreements to    repurchase		1,197			649		775
Borrowed funds		2,160			785		980
Subordinated notes		1,122			490		-
Total interest expense		14,362			7,342		10,393
Net Interest Income Before Provision for Loan Losses		86,787			69,498		59,776
Provision for Loan Losses		4,600			3,444		6,981
Net Interest Income After Provision for Loan Losses		82,187			66,054		52,795
Noninterest Income
Customer service fees		9,958			9,671		8,893
Other service charges and fees		4,226			3,748		3,602
Net gain on sale of loans		1,353			3,897		4,022
Net gain on sale of available-for-sale securities		-			293		270
Total noninterest income		15,537			17,609		16,787
Noninterest Expense
Salaries and wages		22,700			20,184		18,488
Employee benefits		6,903			7,322		5,601
Net occupancy expense		2,566			2,184		2,271
Furniture and equipment		4,207			3,324		3,143
Data processing		3,956			3,501		1,768
Franchise taxes		1,384			1,473		1,346
ATM expense		2,217			1,846		1,690
Advertising		1,646			1,436		1,332
Net (gain) loss on sale of other assets owned		(259	)		434		7
FDIC assessment		905			1,073		633
Mortgage servicing rights amortization		145			1,580		1,031
Consulting fees		1,302			1,634		968
Other general and administrative		9,577			8,175		6,098
Total noninterest expense		57,249			54,166		44,376
Income Before Income Taxes		40,475			29,497		25,206
Income Taxes		7,960			6,002		5,111
Net Income	$	32,515		$	23,495	$	20,095
Basic Earnings Per Share	$	2.46		$	2.01	$	1.80
Diluted Earnings Per Share	$	2.46		$	2.01	$	1.80
Dividends Declared	$	0.8125		$	0.71	$	0.66

See Notes to Consolidated Financial Statements

48

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

Years Ended December 31, 2022, 2021 and 2020

(000’s Omitted)

	2022			2021			2020
Net Income	$	32,515		$	23,495		$	20,095
Other Comprehensive Income (Loss) (Net of Tax):
Net unrealized gain (loss) on available-for-sale securities		(44,366	)		(10,948	)		6,091
Reclassification adjustment for realized gain on sale of    available-for-sale securities		-			(293	)		(270	)
Net unrealized gain (loss) on available-for-sale securities		(44,366	)		(11,241	)		5,821
Tax expense (benefit)		(9,317	)		(2,360	)		1,222
Other comprehensive income (loss)		(35,049	)		(8,881	)		4,599
Comprehensive Income (Loss)	$	(2,534	)	$	14,614		$	24,694

See Notes to Consolidated Financial Statements

49

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Consolidated Statements of Changes to Stockholders’ Equity

For the Years Ended December 31, 2022, 2021 and 2020

(000’s Omitted, Except Per Share Data)

													Accumulated
	Shares of												Other			Total
	Common			Common			Treasury			Retained			Comprehensive			Stockholders'
	Stock			Stock			Stock			Earnings			Income (Loss)			Equity
Balance - January 1, 2020		11,136,935			81,535			(12,456	)		160,081			1,098			230,258
Net income											20,095						20,095
Other comprehensive income														4,599			4,599
Issuance of 40,049 shares of common stock in acquisition		40,049						500			325						825
Purchase of treasury stock		(16,779	)					(383	)								(383	)
Issuance of 37,382 shares of restricted stock    (Net of forfeitures - 2,175)		35,207			(755	)		383			373						1
Stock-based compensation expense					1,024												1,024
Director stock awards		2,132						24			24						48
Cash dividends declared - $0.66 per share											(7,307	)					(7,307	)
Balance - December 31, 2020		11,197,544			81,804			(11,932	)		173,591			5,697			249,160
Net income											23,495						23,495
Other comprehensive loss														(8,881	)		(8,881	)
Issuance of 1,833,845 shares of common stock in acquisition		1,833,845			41,078												41,078
Purchase of treasury stock		(14,611	)					(338	)								(338	)
Issuance of 48,750 shares of restricted stock    (Net of forfeitures - 2,575)		46,175			(1,030	)		507			523						-
Stock-based compensation expense					822												822
Director stock awards		3,280						39			34						73
Cash dividends declared - $0.71 per share											(8,242	)					(8,242	)
Balance - December 31, 2021		13,066,233		$	122,674		$	(11,724	)	$	189,401		$	(3,184	)	$	297,167
Net income											32,515						32,515
Other comprehensive loss														(35,049	)		(35,049	)
Issuance of 500,426 shares and purchase of 125 shares of common stock in acquisition		500,301			13,446			(3	)								13,443
Purchase of treasury stock		(9,488	)					(308	)								(308	)
Issuance of 56,496 shares of restricted stock    (Net of forfeitures - 8,000)		48,496			(1,522	)		428			1,094						-
Stock-based compensation expense					899												899
Director stock awards		2,880						34			86						120
Cash dividends declared - $0.8125 per share											(10,647	)					(10,647	)
Balance - December 31, 2022		13,608,422		$	135,497		$	(11,573	)	$	212,449		$	(38,233	)	$	298,140

See Notes to Consolidated Financial Statements

50

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended December 31, 2022, 2021 and 2020

(000’s Omitted)

	2022			2021			2020
Cash Flows from Operating Activities
Net income	$	32,515		$	23,495		$	20,095
Adjustments to reconcile net income to net cash    from operating activities:
Depreciation		2,739			2,610			2,531
Amortization of premiums on available-for-sale securities, net		2,090			2,203			1,289
Servicing rights amortization and impairment		145			1,580			1,031
Amortization of core deposit intangible		1,011			677			720
Amortization of customer list intangible		123			123			16
Net amortization (accretion) of fair value adjustments		(4,531	)		(1,231	)		455
Amortization of subordinated note issuance costs		115			50			-
Stock-based compensation expense		899			822			1,024
Director stock awards		120			73			48
Deferred income taxes		171			(1,805	)		(1,691	)
Provision for loan losses		4,600			3,444			6,981
Gain on sale of loans held for sale		(1,353	)		(3,897	)		(4,022	)
Originations of loans held for sale		(69,410	)		(121,172	)		(210,029	)
Proceeds from sale of loans held for sale		77,650			125,095			210,559
(Gain) loss on sale of other assets owned		(259	)		434			7
Gain on sales of available-for-sale securities		-			(293	)		(270	)
Increase in cash surrender value of bank owned life insurance		(691	)		(636	)		(359	)
Gain on bank owned life insurance		-			-			(430	)
Change in other assets and other liabilities, net		(5,265	)		3,169			(573	)
Net cash provided by operating activities		40,669			34,741			27,382
Cash Flows from Investing Activities
Activity in available-for-sale securities:
Maturities, prepayments and calls		31,064			56,310			91,003
Sales		-			9,292			11,843
Purchases		(38,377	)		(170,629	)		(183,563	)
Activity in other securities, at cost:
Purchases		(1,615	)		(670	)		(129	)
Purchase of bank owned life insurance		-			-			(10,000	)
Proceeds from bank owned life insurance		-			-			816
Change in interest-bearing time deposits		6,471			20,216			(344	)
Proceeds from redemption of FHLB stock		1,249			1,522			-
Proceeds from sales of other assets owned		440			457			226
Additions to premises and equipment		(2,600	)		(1,965	)		(3,222	)
Loan originations and principal collections, net		(395,610	)		(167,867	)		(84,354	)
Acquisition of Ossian Financial Services, Inc., net of cash received		-			228			-
Acquisition of Perpetual Federal Savings Bank, net of cash received		-			(12,588	)		-
Acquisition of Peoples Federal Savings and Loan, net of cash received		9,074			-			-
Net cash used in investing activities		(389,904	)		(265,694	)		(177,724	)
Cash Flows from Financing Activities
Net change in deposits		165,861			170,785			307,648
Net change in federal funds purchased and    securities sold under agreements to repurchase		24,938			(971	)		(17,834	)
Proceeds of FHLB advances		140,000			-			-
Repayment of FHLB advances		(37,394	)		(157	)		(7,493	)
Proceeds (Repayment) of other borrowings		(30,000	)		40,000			-
Purchase of treasury stock		(308	)		(338	)		(383	)
Proceeds from issuance of subordinated notes		-			34,421			-
Cash dividends paid on common stock		(10,276	)		(7,670	)		(7,186	)
Net cash provided by financing activities		252,821			236,070			274,752
Net Increase (Decrease) in Cash and Cash Equivalents		(96,414	)		5,117			124,410
Cash and Cash Equivalents - Beginning of Year		180,823			175,706			51,296
Cash and Cash Equivalents - End of Year	$	84,409		$	180,823		$	175,706

51

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (continued)

Years Ended December 31, 2022, 2021 and 2020

(000’s Omitted)

	2022			2021		2020
Supplemental Information
Supplemental cash flow information:
Interest paid	$	13,748		$	7,048	$	10,093
Income taxes paid		7,702			6,150		6,473
Supplemental noncash disclosures:
Transfer of loans to other real estate owned		-			287		71
Cash dividends declared not paid		2,832			2,461		1,889
The Company purchased the assets of Adams County Financial Resources by issuing 40,049 shares of common stock on November 16, 2020.
Fair value of assets acquired	$	-		$	-	$	825
Less: common stock issued		-			-		825
Cash paid for the capital stock		-			-		-
Liabilities assumed	$	-		$	-	$	-
The Company purchased the assets of Ossian Financial Services, Inc. for $20,001 on April 30, 2021. In conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired	$	-		$	137,058	$	-
Less: common stock issued		-			-		-
Cash paid for the capital stock		-			20,001		-
Liabilities assumed	$	-		$	117,057	$	-
The Company purchased all of the capital stock of Perpetual Federal Savings Bank for $100,312 on October 1, 2021. In conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired	$	-		$	420,162	$	-
Less: common stock issued		-			41,078		-
Cash paid for the capital stock		-			59,234		-
Liabilities assumed	$	-		$	319,850	$	-
The Company purchased all of the capital stock of Peoples Federal Savings and Loan for $23,249 on October 1, 2022. In conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired	$	141,818		$	-	$	-
Less: common stock issued		13,446			-		-
Treasury stock repurchased		(3	)		-		-
Cash paid for the capital stock		9,806			-		-
Liabilities assumed	$	118,569		$	-	$	-

See Notes to Consolidated Financial Statements

52

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Note 1 - Summary of Significant Accounting Policies

Nature of Operations

The Farmers & Merchants Bancorp, Inc. (the Company) through its bank subsidiary, The Farmers & Merchants State Bank (the Bank) provides a variety of financial services to individuals and small businesses through its offices in Northwest Ohio and Northeast Indiana.

Consolidation Policy

The consolidated financial statements include the accounts of Farmers & Merchants Bancorp, Inc. and its wholly-owned subsidiaries, The Farmers & Merchants State Bank (the Bank), a commercial banking institution and Farmers & Merchants Risk Management, Inc. (the Captive), a Captive insurance company. All significant inter-company balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of mortgage servicing rights and the valuation of goodwill. Actual results could differ from those estimates.

The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. In connection with the determination of the estimated losses on loans, management obtains independent appraisals for significant collateral.

The Bank’s loans are generally secured by specific items of collateral including real property, consumer assets, and business assets. Although the Bank has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent on local economic conditions in the agricultural industry.

While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the Bank to recognize additional losses based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans may change materially in the near term. However, the amount of the change that is reasonably possible cannot be estimated.

Cash and Cash Equivalents

For purposes of the consolidated statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. This includes cash on hand, amounts due from banks, and federal funds sold. Generally, federal funds sold are outstanding for one day periods.

Restrictions on Cash and Amounts Due from Banks

Effective March 26, 2020, the Bank is no longer required to maintain average balances on hand with the Federal Reserve Bank. The Company and its subsidiaries maintain cash balances with high quality financial institutions. At times such balances may be in excess of the federally insured limits.

Securities

Debt securities are classified as available-for-sale. Securities available-for-sale are carried at fair value with unrealized gains and losses reported in other comprehensive income (loss). Net realized gains and losses on securities available for sale are included in noninterest income and, when applicable, are reported as a reclassification adjustment, net of

53

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

tax, in other comprehensive income (loss). Gains and losses on sales of securities are determined on the specific-identification method.

Declines in the fair value of securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. The related write-downs are included in earnings as realized losses.

Other Securities

Other Securities consist of stock in the Federal Home Loan Banks of Cincinnati and Indianapolis (the “FHLBs”), which is held to enable the Bank to conduct business with the entities. The FHLBs sell and purchase their stock at par. The FHLBs stock is carried at cost and held as collateral security for all indebtedness of the Bank to the Federal Home Loan Bank. The FHLBs stock is evaluated for impairment as conditions warrant. Other Securities also include the Bank’s capital contributions to four Ohio Equity Funds for Housing Limited Partnership.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at the amount of unpaid principal, reduced by unearned discounts, unamortized premiums or discounts on purchased loans, and deferred loan fees and costs, as well as, by the allowance for loan losses. Interest income is accrued on a daily basis based on the principal outstanding.

Generally, a loan is classified as nonaccrual and the accrual of interest income is generally discontinued when a loan becomes ninety days past due as to principal or interest and these loans are placed on a “cash basis” for purposes of income recognition. Management may elect to continue the accrual of interest when the estimated net realizable value of collateral is sufficient to cover the principal and accrued interest, and the loan is in the process of collection. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest receivable is charged against income.

Loan origination and commitment fees and certain direct loan origination costs are deferred and amortized as a net adjustment to the related loan’s yield. The Bank is generally amortizing these costs over the contractual life of such loans.

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses charged to income. Loans deemed to be uncollectable and changes in the allowance relating to loans are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based on management’s periodic review of the collectability of the loans in light of historical experiences, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are subject to revision as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. The unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses.

54

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and agricultural loans by either the present value of expected future cash flows discounted at the loan's effective interest rate or the fair value of the collateral if the loan is collateral dependent.

At 90 days delinquent, secured consumer loans are charged down to the value of the collateral, if repossession of the collateral is assured and/or in the process of repossession. Consumer mortgage loan deficiencies are charged down upon the sale of the collateral or sooner upon the recognition of collateral deficiency.

For the majority of the Bank’s impaired loans, the Bank will apply the fair value of collateral or use a measurement incorporating the present value of expected future cash flows discounted at the loan’s effective rate of interest. To determine fair value of collateral, collateral asset values securing an impaired loan are periodically evaluated. Maximum time of re-evaluation is every 12 months for chattels and titled vehicles and every two years for real estate. In this process, third party evaluations are obtained. Until such time that updated appraisals are received, the Bank may discount the collateral value used.

Large groups of homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer loans for impairment, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

For more information regarding the actual composition and classification of loans involved in the establishment of the allowance for loan loss, please see Note 4 provided here with the notes to consolidated financial statements.

Loans Held for Sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized in a valuation allowance by charges to income.

Servicing Assets

Servicing assets are recognized as separate assets when rights are acquired through purchase or sale of financial assets. Capitalized servicing rights are amortized into noninterest expense in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as interest rates and terms. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the capitalized amount for the stratum. Fees received for servicing loans owned by investors are based on a percentage of the outstanding monthly principal balance of such loans and are included in operating income as loan payments are received. Costs of servicing loans are charged to expense as incurred.

Goodwill and Other Intangible Assets

Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed for impairment at least annually. If possible impairment is likely, the Bank will utilize the assistance of an independent third party for an appraisal and any such impairment is recognized in the period identified. Periodically, the Bank will have an independent third party assess the possibility of impairment of Goodwill. The goodwill impairment analysis consisted

55

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

of a first step goodwill impairment test which was used to identify potential impairment by comparing the fair value of the relevant reporting entity with its carrying value, including goodwill. The analysis was performed under guidance of FASB ASC 350. In the quantitative testing completed as of November 30, 2022, the excess fair value of capital was $427.5 million or 137.2% over the carrying value and was over 4.9 times the value of goodwill being carried. Therefore, the Bank concluded it is unlikely impairment of goodwill has occurred from the goodwill established from the Bank’s acquisition of Knisely on December 31, 2007, the acquisition of Bank of Geneva on January 1, 2019, the acquisition of Ossian State Bank on April 30, 2021, the acquisition of Perpetual Federal Savings Bank on October 1, 2021 and the acquisition of Peoples Federal Savings and Loan on October 1, 2022.

Other intangible assets consist of core deposit and customer list intangible assets arising from business acquisitions. They are initially measured at fair value and then are amortized on a straight line method over their estimated useful lives and evaluated for impairment. These assets are included in other assets on the consolidated balance sheets.

Off Balance Sheet Instruments

In the ordinary course of business, the Bank has entered into commitments to extend credit, including commitments under credit card arrangements, commercial letters of credit and standby letters of credit. Such financial instruments are recorded when they are funded.

Foreclosed Real Estate

Foreclosed real estate held for sale is carried at the lower of fair value minus estimated costs to sell, or cost. Costs of holding foreclosed real estate are charged to expense in the current period, except for significant property improvements, which are capitalized. Valuations are periodically performed by management and an allowance is established by a charge to noninterest expense if the carrying value exceeds the fair value minus the estimated costs to sell. Foreclosed real estate is classified as other real estate owned. The net loss from operations of foreclosed real estate held for sale is reported in noninterest expense. The Bank held no other real estate owned at December 31, 2022. At December 31, 2021 the Bank’s holding of other real estate owned totaled $159 thousand.

Bank Premises and Equipment

Land is carried at cost. Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is based on the estimated useful lives of the various properties and is computed using straight line and accelerated methods. Costs for maintenance and repairs are charged to operations as incurred. Gains and losses on dispositions are included in current operations.

Bank Owned Life Insurance

Bank owned life insurance policies are carried at their cash surrender value. The Bank recognizes tax-free income from the periodic increases in the cash surrender value of these policies and from death benefits.

Revenue Recognition

Accounting Standards Codification 606, “Revenue from Contracts with Customer” (ASC 606) provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue generated from financial instruments, including loans and investment securities, are not included within the scope of ASC 606. The adoption of ASC 606 did not result in a change to the accounting for any of the Company’s revenue streams that

56

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

are within scope of the amendments. Revenue-generating activities that are within the scope of ASC 606 that are presented as noninterest income in the Company’s consolidated statements of income include:

oCustomer service fees – these include miscellaneous service fees and transaction-based fees charged for certain services, such as debit card or credit card. Revenue is recognized when the performance obligation is completed, which is generally after a transaction is completed or monthly for account maintenance services.

oOther service charges and fees – these include service fees charged for deposit account maintenance and activity along with transaction-based fees charged for certain services, such as overdraft activities, returned check charges and wire transfers. Revenue is recognized when the performance obligation is completed, which is generally after a transaction is completed or monthly for account maintenance services.

Income Tax

The Company’s income tax expense consists of the following components for federal and state: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in tax expense. Based on management’s analysis, the Company did not have any uncertain tax positions as of December 31, 2022 and 2021. With a few exceptions, the Company is no longer subject to U.S. Federal, state or local examinations by tax authorities for years before 2019.

Earnings Per Share

Basic earnings per share represent income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. See Note 12 for additional information.

Stock-Based Compensation

The fair value of restricted common stock is their fair market value on the date of grant. The fair value of restricted stock is amortized as compensation expense on a straight-line basis over the vesting period of the grants. Compensation expense recognized is included in salaries and wages in the consolidated statements of income.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Corporation – put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Corporation does not maintain effective control over the transferred assets

57

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

Treasury Stock

Common stock shares repurchased are recorded at market value on date of purchase. Restricted shares when awarded are removed from treasury stock using the weighted average method.

Other Comprehensive Income (Loss)

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of other comprehensive income (loss).

The components of other comprehensive income (loss) and related tax effects are as follows:

	(In Thousands)
	2022			2021			2020
Net unrealized gain (loss) on available-for-sale    securities	$	(44,366	)	$	(10,948	)	$	6,091
Reclassification adjustment for gain on sale of    available-for-sale securities		-			(293	)		(270	)
Net unrealized gain (loss) on available-for-sale    securities		(44,366	)		(11,241	)		5,821
Tax expense (benefit)		(9,317	)		(2,360	)		1,222
Other comprehensive income (loss)	$	(35,049	)	$	(8,881	)	$	4,599

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

The ASU was effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (i.e., January 1, 2020, for calendar year entities). FASB subsequently approved a delay in adoption for Smaller Reporting Companies. The Company has completed an analysis to determine that it qualifies as a Smaller Reporting Company. As such, adoption can be postponed until periods beginning after December 15, 2022 (i.e., January 1, 2023, for calendar year entities). Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.

The Current Expected Credit Losses (“CECL”) methodology applies to loans held for investment, held to maturity debt securities, and off balance-sheet credit exposures. The ASU allows for several different methods of computing the ALLL: closed pool, vintage, average charge-off, migration, probability of default / loss given default, discounted cash flow, and regression. Based on its analysis of observable data, the Company concluded the average charge-off

58

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

method to be the most appropriate and statistically relevant. A 20-year lookback will be utilized as the historical loss period due to its inclusion of several economic cycles and relevance to real estate secured assets.

The Company began working with its third-party service provider to review parallel reports in June 2019. At the end of first quarter 2022, the Company evaluated and refined its methodology and produced a parallel report for the calculation of the ALLL under the ASU guidance. The Company has contracted with a third party to begin an independent validation of its processes and methodology. This validation will be performed on an annual basis.

The ALLL has been computed through 2022 by applying historical loss rates, adjusted for qualitative factors, to pools of loans. Upon implementation of the ASU, the expected loss estimate will be made up of a historical lookback of actual losses applied over the life of the loan portfolio and adjusted for qualitative factors and forecasted losses based on economic and forward-looking data applied over a reasonable and supportable forecast period.

The impact of the adoption of the ASU is estimated to be a one-time cumulative-effect adjustment to our reserves for loans and unfunded commitments in a range between $3 million and $7 million. This estimate may change as the Company continues to improve its processes and methodology.

The qualitative impact of the new accounting standard will still be directed by many of the same factors that impacted the previous methodology for computing the ALLL including, but not limited to, quality and experience of staff, changes in the value of collateral, concentrations of credit in loan types or industries and changes to lending policies. In addition to this, the Company will also use reasonable and supportable forecasts. Examples of this are regression analyses of data from the Federal Open Market Committee quarterly economic projections for change in real GDP and of national unemployment.

The Company does not anticipate any material changes to its business practices as a result of implementing the ASU. The Company adopted ASU 2016-13 on January 1, 2023.

In March 2022, the FASB issued ASU 2022-02 "Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures." This ASU eliminates the accounting guidance on troubled debt restructurings for creditors in ASC 310-40 and requires entities to evaluate all receivable modifications under ASC 310-20 to determine whether a modification made to a borrower results in a new loan or a continuation of the existing loan. The amended guidance adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. The amended guidance also requires disclosure of current period gross charge-offs by year of origination within the vintage disclosures required by ASC 326. The amended guidance is effective for the Company on January 1, 2023, with early adoption permitted. The Company adopted ASU 2022-02 on January 1, 2023.

Note 2 – Business Combination & Asset Purchase

On October 1, 2022, the Company acquired Peoples-Sidney Financial Corporation (PPSF), the bank holding company for Peoples Federal Savings and Loan Bank, a community bank with three full-service offices in Sidney, Anna and Jackson Center, Ohio in addition to a separate drive-thru location in Sidney, Ohio. PPSF shareholders had the opportunity to elect to receive either 0.6597 shares of FMAO stock or $24.00 per share in cash for each PPSF share owned, subject to a requirement under the Merger Agreement that the minimum number of PPSF shares exchanged for Farmers & Merchants Bancorp, Inc. (FMAO) shares in the merger was no less than 758,566. Fractional shares of FMAO common stock were not issued in respect of fractional interests arising from the merger but were paid in cash pursuant to the merger agreement. PPSF had 1,167,025 shares outstanding on October 1, 2022. The share price of FMAO stock on October 1, 2022 was $26.87. Total consideration for the acquisition was approximately $23.2 million consisting of which $9.8 million was in cash and $13.4 million in stock. As a result of the acquisition, the Company will have an opportunity to increase its deposit base in Sidney and the greater Shelby County and reduce transaction costs. The Company also expects to reduce costs through economies of scale.

In 2022, the Company has incurred additional third-party acquisition-related costs of $2.4 million. These expenses are comprised primarily of data processing costs of $1.1 million, consulting fees of $542.9 thousand, employee benefits of $126.5 thousand and other general and administrative expense of $501.0 thousand in the Company’s consolidated statement of income for the year ended December 31, 2022.

59

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Under the acquisition method of accounting, the total purchase was allocated to net tangible and intangible assets based on their current estimated fair values on the date of acquisition. Of the total purchase price of $23.2 million, $6.0 million has been allocated to core deposit intangible included in other assets and is being amortized over seven years on a straight line basis. Goodwill of $5.9 million, resulting from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and Peoples Federal Savings and Loan Bank. Of that total amount, none of the purchase price is deductible for tax purposes. The following table summarizes the consideration paid for Peoples Federal Savings and Loan Bank and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date

Fair Value of Consideration Transferred
	(In Thousands)
Cash	$	9,806
Common Shares (500,426 shares)		13,446
Treasury stock repurchased (125 shares)		(3	)
Total	$	23,249
Recognized amounts of identifiable assets acquired and liabilities assumed
Assets
Cash and cash equivalents	$	18,881
Other securities, at cost		1,271
Loans, net		101,755
Premises and equipment		1,906
Goodwill		5,924
Other assets		12,081
Total Assets Purchased	$	141,818
Liabilities
Deposits
Noninterest bearing	$	7,139
Interest bearing		104,719
Total deposits		111,858
Federal Home Loan Bank (FHLB) advances		896
Accrued expenses and other liabilities		5,815
Total Liabilities Assumed	$	118,569

The fair value of the assets acquired includes loans with a fair value of $101.8 million. The gross principal and contractual interest due under the contracts is $116.1 million of which none is expected to be uncollectible. The loans have a weighted average life of 44.4 months.

The fair value of building and land included in premises and equipment was written up $581 thousand with $597 thousand attributable to the buildings and is being amortized over the remaining life of each building. The combined average remaining life was 12.8 years.

The fair value for certificates of deposit incorporates a valuation amount of $662 thousand which is being amortized over 1.1 years. The fair value of Federal Home Loan Bank (FHLB) advances included a valuation amount of $69 thousand which is being amortized over 5.2 years.

The Company acquired no loans in the acquisition that had evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would be collected.

Changes in accretable yield, or income expected to be collected, are as follows:

60

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

	2022
	(In Thousands)
Beginning Balance
Additions		856
Accretion		(58	)
Reclassification from nonaccretable difference		-
Disposals		-
Ending Balance	$	798

On October 1, 2021, the Company acquired Perpetual Federal Savings Bank, (PFSB), a community bank with one full-service office in Urbana, Ohio. Shareholders of PFSB elected to receive either 1.7766 shares of FMAO stock or $41.20 per share in cash for each PFSB share owned, subject to adjustment based upon 1,833,999 shares of FMAO to be issued in the merger. PFSB had 2,470,032 shares outstanding on October 1, 2021. The share price of Farmers & Merchants Bancorp, Inc. (FMAO) stock on October 1, 2021 was $22.40. Total consideration for the acquisition was approximately $100.3 million consisting of $59.2 million in cash and $41.1 million in stock. As a result of the acquisition, the Company increased its deposit base and reduced transaction costs. The Company also reduced costs through economies of scale.

In 2021, the Company incurred additional third-party acquisition-related costs of $1.7 million. These expenses are comprised of employee benefits of $131.5 thousand, data processing costs of $444.9 thousand, consulting fees of $636.8 thousand and other general and administrative expense of $488.3 thousand in the Company’s consolidated statement of income for the year ended December 31, 2021.

In 2022, the Company has incurred additional third-party acquisition-related costs of $148.5 thousand. These expenses are comprised of employee benefits of $90.8 thousand and other general and administrative expense of $57.7 thousand in the Company’s consolidated statement of income for the year ended December 31, 2022.

Under the acquisition method of accounting, the total purchase was allocated to net tangible and intangible assets based on their current estimated fair values on the date of acquisition. Of the total purchase price of $100.3 million, $668 thousand has been allocated to core deposit intangible included in other assets and is being amortized over seven years on a straight line basis. Goodwill of $25.2 million, resulting from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and Perpetual Federal Savings Bank. Of that total amount, none of the purchase price is deductible for tax purposes. The following table summarizes the consideration paid for Perpetual Federal Savings Bank and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

61

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Fair Value of Consideration Transferred
	(In Thousands)
Cash	$	59,234
Common Shares (1,833,845 shares)		41,078
Total	$	100,312
Recognized amounts of identifiable assets acquired and liabilities assumed
Assets
Cash and cash equivalents	$	44,975
Federal funds sold		1,672
Interest-bearing time deposits		6,250
Other securities, at cost		2,794
Loans, net		334,661
Premises and equipment		615
Goodwill		25,220
Other assets		3,975
Total Assets Purchased	$	420,162
Liabilities
Deposits
Noninterest bearing	$	2,018
Interest bearing		309,090
Total deposits		311,108
Federal Home Loan Bank (FHLB) advances		6,218
Accrued expenses and other liabilities		2,524
Total Liabilities Assumed	$	319,850

The fair value of the assets acquired includes loans with a fair value of $334.7 million. The gross principal and contractual interest due under the contracts is $403.3 million, of which $5.6 million is expected to be uncollectible. The loans have a weighted average life of 52 months.

The fair value of building and land included in premises and equipment was written down by $4 thousand with $297 thousand attributable to the buildings and is being amortized over the useful life of 16.2 years.

The fair value for certificates of deposit incorporates a valuation amount of $3.9 million which is being accreted over 1.6 years. The fair value of Federal Home Loan Bank (FHLB) advances included a valuation amount of $218 thousand which is being accreted over 2.6 years.

The Company acquired loans in the acquisition that had evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.

Loans purchased with evidence of credit deterioration since origination and for which it was probable that all contractually required payments would not be collected were considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date included information such as past-due and nonaccrual status, borrower credit scores and recent loan to value percentages. Purchased credit-impaired loans were accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310-30) and initially measured at fair value, which included estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans was not carried over and recorded at the acquisition date. Management estimated the cash flows expected to be collected at acquisition using our internal risk models, which incorporated the estimate of current key assumptions, such as default rates, severity and prepayment speeds.

62

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

The carrying amount of those loans is included in loans, net on the balance sheet at December 31, 2021. The amounts of loans at October 1, 2021, December 31, 2021 and December 31, 2022 are as follows:

	2021
	(In Thousands)
Balance - October 1, 2021
Consumer Real Estate	$	608
Agricultural Real Estate		118
Commercial Real Estate		234
Consumer		5
Carrying amount, net of fair value adjustment of $237	$	728
Balance - December 31, 2021
Consumer Real Estate	$	581
Agricultural Real Estate		114
Commercial Real Estate		5
Consumer		-
Carrying amount, net of fair value adjustment of $190	$	510
	2022
	(In Thousands)
Balance - December 31, 2022
Consumer Real Estate	$	288
Agricultural Real Estate		107
Commercial Real Estate		-
Consumer		-
Carrying amount, net of fair value adjustment of $128	$	267

Loans acquired during 2021 for which it was probable at acquisition that all contractually required payments would not be collected are as follows:

	(In Thousands)
Contractually required payments receivable at acquisition
Consumer Real Estate	$	962
Agricultural Real Estate		146
Commercial Real Estate		293
Consumer		6
Total required payments receivable	$	1,407
Cash flows expected to be collected at acquisition	$	728
Basis in acquired loans at acquisition	$	965

During 2022, five consumer real estate purchased credit impaired loans were paid off in full. The associated discount originally recognized at acquisition of $62.1 thousand was included in the loan interest income in the Company’s consolidated statement of income for the year ended December 31, 2022.

During the fourth quarter 2021, two commercial real estate and one consumer purchased credit impaired loans were paid off in full. The associated discount originally recognized at acquisition of $47.4 thousand was included in the loan interest income in the Company’s consolidated statement of income for the year ended December 31, 2021. The balance of the fair value adjustment for loans acquired and accounted for under this guidance (ASC 310-30) was $127.7 thousand at December 31, 2022, $189.8 thousand at December 31, 2021 and $237.2 thousand at October 1, 2021.

63

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Changes in accretable yield, or income expected to be collected, are as follows:

	2022			2021
	(In Thousands)			(In Thousands)
Beginning Balance	$	5,262		$	-
Additions		294			5,592
Accretion		(1,318	)		(330	)
Reclassification from nonaccretable difference		-			-
Disposals		(2	)		-
Ending Balance	$	4,236		$	5,262

On April 30, 2021, the Company acquired Ossian Financial Services, Inc., (OSFI), the bank holding company for Ossian State Bank, a community bank based in Ossian, Indiana. Ossian State Bank operated two full-service offices in the northeast Indiana communities of Ossian and Bluffton. Shareholders of OSFI received $67.71 in cash for each share. OSFI had 295,388 shares outstanding on April 30, 2021. Total consideration for the acquisition was approximately $20.0 million in cash. As a result of the acquisition, the Company will have an opportunity to increase its deposit base and reduce transaction costs. The Company also expects to reduce costs through economies of scale.

In 2020, the Company incurred $42.5 thousand of third-party acquisition-related costs. The expenses recognized in 2020 related to other general and administration expenses of $30.0 thousand and consulting fees of $12.5 thousand. These acquisition expenses were included in the Company’s 2020 consolidated statement of income.

In 2021, the Company incurred additional third-party acquisition-related costs of $2.2 million. These expenses are comprised of employee benefits of $694.1 thousand, data processing costs of $938.9 thousand, consulting fees of $255.2 thousand, ATM expense of $13.8 thousand and other general and administrative expense of $255.0 thousand in the Company’s consolidated statement of income for the year ended December 31, 2021.

In 2022, the Company has incurred additional third-party acquisition-related costs of $31.6 thousand. These expenses are included in other general and administrative expense in the Company’s consolidated statement of income for the year ended December 31, 2022.

Under the acquisition method of accounting, the total purchase was allocated to net tangible and intangible assets based on their current estimated fair values on the date of acquisition. Of the total purchase price of $20.0 million, $980.2 thousand has been allocated to core deposit intangible included in other assets and is being amortized over seven years on a straight line basis. Goodwill of $7.9 million which resulted from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and Ossian State Bank and is deductible for tax purposes over 15 years. The following table summarizes the consideration paid for Ossian State Bank and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

64

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Fair Value of Consideration Transferred
	(In Thousands)
Cash	$	20,001
Total	$	20,001
Recognized amounts of identifiable assets acquired and liabilities assumed
Assets
Cash and cash equivalents	$	20,229
Interest-bearing time deposits		20,226
Securities - available-for-sale		30,243
Other securities, at cost		281
Loans, net		52,403
Premises and equipment		494
Goodwill		7,874
Other assets		5,308
Total Assets Purchased	$	137,058
Liabilities
Deposits
Noninterest bearing	$	34,509
Interest bearing		81,535
Total deposits		116,044
Accrued expenses and other liabilities		1,013
Total Liabilities Assumed	$	117,057

The fair value of the assets acquired includes loans with a fair value of $52.4 million. The gross principal and contractual interest due under the contracts is $63.7 million, of which $1.1 million is expected to be uncollectible. The loans have a weighted average life of 52 months.

The fair value of building and land included in premises and equipment was written down by $596 thousand with $244 thousand attributable to the buildings and is being accreted over the useful life of 39 years.

The fair value for certificates of deposit incorporates a valuation amount of $59 thousand which is being accreted over 1.4 years.

The Company acquired loans in the acquisition that had evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.

Loans purchased with evidence of credit deterioration since origination and for which it was probable that all contractually required payments would not be collected were considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date included information such as past-due and nonaccrual status, borrower credit scores and recent loan to value percentages. Purchased credit-impaired loans were accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310-30) and initially measured at fair value, which included estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans was not carried over and recorded at the acquisition date. Management estimated the cash flows expected to be collected at acquisition using our internal risk models, which incorporated the estimate of current key assumptions, such as default rates, severity and prepayment speeds.

65

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

The carrying amount of those loans is included in loans, net on the balance sheet at December 31, 2021. The amounts of loans at April 30, 2021, December 31, 2021 and December 31, 2022 are as follows:

	2021
	(In Thousands)
Balance - April 30, 2021
Consumer Real Estate	$	24
Agricultural Real Estate		981
Commercial Real Estate		315
Commercial and Industrial		314
Carrying amount, net of fair value adjustment of $325	$	1,309
Balance - December 31, 2021
Consumer Real Estate	$	22
Agricultural Real Estate		-
Commercial Real Estate		222
Commercial and Industrial		285
Carrying amount, net of fair value adjustment of $321	$	208
	2022
	(In Thousands)
Balance - December 31, 2022
Consumer Real Estate	$	19
Agricultural Real Estate		-
Commercial Real Estate		-
Commercial and Industrial		-
Carrying amount, net of fair value adjustment of $10	$	9

Loans acquired during 2021 for which it was probable at acquisition that all contractually required payments would not be collected are as follows:

	(In Thousands)
Contractually required payments receivable at acquisition
Consumer Real Estate	$	28
Agricultural Real Estate		1,142
Commercial Real Estate		527
Commercial and Industrial		360
Total required payments receivable	$	2,057
Cash flows expected to be collected at acquisition	$	1,309
Basis in acquired loans at acquisition	$	1,634

During the third quarter 2022, the associated discount of $311 thousand for six purchased credit impaired loans between two relationships was included in the loan interest income in the Company's consolidated statement of income for the year ended December 31, 2022.

During the third quarter 2021, two agricultural real estate purchased credit impaired loans were paid off in full. The associated discount originally recognized at acquisition of $4.2 thousand was included in the loan interest income in the Company’s consolidated statement of income for the year ended December 31, 2021. The balance of the fair value adjustment for loans acquired and accounted for under this guidance (ASC 310-30) was $10.1 thousand at December 31, 2022, $320.6 thousand at December 31, 2021 and $324.8 thousand at April 30, 2021.

66

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Changes in accretable yield, or income expected to be collected, are as follows:

	2022			2021
	(In Thousands)			(In Thousands)
Beginning Balance	$	645		$	-
Additions		1			762
Accretion		(176	)		(117	)
Reclassification from nonaccretable difference		-			-
Disposals		-			-
Ending Balance	$	470		$	645

Changes in accretable yield, or income expected to be collected, for the acquisition of Bank of Geneva completed in 2019, are as follows:

	2022			2021
	(In Thousands)			(In Thousands)
Beginning Balance	$	1,198		$	1,653
Additions		13			17
Accretion		(426	)		(431	)
Reclassification from nonaccretable difference		-			-
Disposals		-			(41	)
Ending Balance	$	785		$	1,198

The results of operations of Ossian State Bank, Perpetual Federal Savings Bank and Peoples Federal Savings and Loan Bank have been included in the Company’s consolidated financial statements since the acquisition dates of April 30, 2021, October 1, 2021 and October 1, 2022, respectively. The following schedule includes pro-forma results for the years ended December 31, 2022, 2021 and 2020 as if all three acquisitions had occurred as of the beginning of the comparable prior reporting periods.

	2022		2021		2020
Summary of Operations
Net Interest Income - Before Provision for Loan Losses	$	90,290	$	84,362	$	81,636
Provision for Loan Losses		4,513		3,445		6,901
Net Interest Income After Provision for Loan Losses		85,777		80,917		74,735
Noninterest Income		14,099		18,931		17,668
Noninterest Expense		57,426		57,622		55,765
Income Before Income Taxes		42,450		42,226		36,638
Income Taxes		8,185		8,458		7,242
Net Income	$	34,265	$	33,768	$	29,396
Basic and Diluted Earnings Per Share	$	2.59	$	2.57	$	2.24

The pro-forma information includes adjustments for interest income on loans, amortization of intangibles arising from the transaction, interest expense on deposits acquired, premises expense for the branches acquired and the related income tax effects.

The pro-forma financial information is presented for informational purposes only and is not indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time, nor is it intended to be a projection of future results.

67

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

As mentioned previously, the acquisition of Bank of Geneva resulted in the recognition of $3.9 million in core deposit intangible assets, the acquisition of Ossian State Bank resulted in the recognition of $980.2 thousand in core deposits assets, the acquisition of Perpetual Federal Savings Bank resulted in the recognition of $668 thousand in core deposits and the acquisition of Peoples Federal Savings and Loan resulted in the recognition of $6.0 million in core deposits which are all being amortized over its remaining economic useful life of 7 years on a straight line basis. Core deposit intangible is included in other assets on the consolidated balance sheets.

The amortization expense for the years ended December 31, 2022, 2021 and 2020 was $1.0 million, $677 thousand, and $720 thousand, respectively. Included in the 2020 amortization expense was $160 thousand related to the purchase of the Custar office on December 13, 2013.

Future amortization expense of core deposit intangible assets is as follows:

	Geneva		Ossian		Perpetual		Peoples		Total
	(In thousands)
2023	$	560	$	140	$	95	$	861	$	1,656
2024		560		140		95		861		1,656
2025		560		140		95		861		1,656
2026		-		140		95		861		1,096
2026		-		140		95		861		1,096
Thereafter		-		47		74		1,506		1,627
Total	$	1,680	$	747	$	549	$	5,811	$	8,787

On November 16, 2020, FM Investment Services, a division of the Bank, purchased the assets and clients of Adams County Financial Resources (ACFR), a full-service registered investment advisory firm located in Geneva, Indiana.

ACFR was founded in 1994 by R. Lee Flueckiger and provides clients and their families with financial confidence through personalized investment planning and services. As of November 30, 2020, ACFR had approximately $83 million of assets under management and over 450 clients.

Total consideration for the purchase was $825 thousand which consisted of 40,049 shares of stock. Under the acquisition method of accounting, the total purchase is allocated to net tangible and intangible assets based on their current estimated fair values on the date of acquisition. Of the total purchase price of $825 thousand, $800 thousand has been allocated to customer list intangible, included in other assets, to be amortized over 6.5 years on a straight line basis.

The following table summarizes the consideration paid for ACFR and the amounts of the assets acquired:

Fair Value of Consideration Transferred
	(In Thousands)
Common Shares (40,049 shares)	$	825
Total	$	825
Recognized amounts of identifiable assets acquired and liabilities assumed
Assets
Premises and equipment	$	25
Customer list intangible		800
Total Assets Purchased	$	825

68

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

The customer list intangible amortization expense for the years ended December 31, 2022, 2021 and 2020 was $123, $123 and $16 thousand, respectively. Future amortization expense of customer list intangible is as follows:

	(In thousands)
2023	$	123
2024		123
2025		123
2026		123
2027		47
Thereafter		-
Total	$	539

69

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Note 3 – Securities

The amortized cost and fair value of securities, with gross unrealized gains and losses, follows:

	(In Thousands)
	2022
			Gross		Gross			Fair
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Available-for-Sale:
U.S. Treasury	$	104,507	$	-	$	(9,829	)	$	94,678
U.S. Government agencies		156,817		-		(17,050	)		139,767
Mortgage-backed securities		101,068		-		(14,141	)		86,927
State and local governments		76,794		69		(7,446	)		69,417
Total available-for-sale securities	$	439,186	$	69	$	(48,466	)	$	390,789

	(In Thousands)
	2021
			Gross		Gross			Fair
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Available-for-Sale:
U.S. Treasury	$	90,775	$	-	$	(1,598	)	$	89,177
U.S. Government agencies		159,673		695		(3,482	)		156,886
Mortgage-backed securities		118,550		839		(1,462	)		117,927
State and local governments		64,964		1,498		(521	)		65,941
Total available-for-sale securities	$	433,962	$	3,032	$	(7,063	)	$	429,931

Investment securities will at times depreciate to an unrealized loss position. The Bank utilizes the following criteria to assess whether impairment is other than temporary. No one item by itself will necessarily signal that a security should be recognized as other than temporarily impaired.

1.The fair value of the security has significantly declined from book value.

2.A downgrade has occurred that lowered the credit rating to below investment grade (below Baa3 by Moody and BBB – by Standard and Poors.)

3.Dividends have been reduced or eliminated or scheduled interest payments have not been made.

4.The underwater security has longer than 10 years to maturity and the loss position had existed for more than 3 years.

5.Management does not possess both the intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.

If the impairment is judged to be other than temporary, the cost basis of the individual security shall be written down to fair value, thereby establishing a new cost basis. The new cost basis shall not be changed for subsequent recoveries in fair value. The amount of the write down shall be included in current earnings as a realized loss. The recovery in fair value, if any, shall be recognized in earnings when the security is sold. The table below is presented by category of security and length of time in a continuous loss position. The Bank currently does not hold any securities with other than temporary impairment.

70

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Information pertaining to securities with gross unrealized losses at December 31, 2022 and 2021, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

	2022
	(In Thousands)					(In Thousands)
	Less Than Twelve Months					Twelve Months & Over
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value
U.S. Treasury	$	(207	)	$	9,121	$	(9,622	)	$	85,557
U.S. Government agencies		(1,081	)		24,560		(15,969	)		114,906
Mortgage-backed securities		(2,454	)		26,905		(11,687	)		60,022
State and local governments		(3,223	)		38,771		(4,223	)		25,610
Total available-for-sales securities	$	(6,965	)	$	99,357	$	(41,501	)	$	286,095

	2021
	(In Thousands)					(In Thousands)
	Less Than Twelve Months					Twelve Months & Over
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value
U.S. Treasury	$	(1,598	)	$	89,177	$	-		$	-
U.S. Government agencies		(1,898	)		86,739		(1,584	)		41,738
Mortgage-backed securities		(1,050	)		63,157		(412	)		16,434
State and local governments		(296	)		17,727		(225	)		5,487
Total available-for-sales securities	$	(4,842	)	$	256,800	$	(2,221	)	$	63,659

Unrealized losses on securities have not been recognized into income because the issuers’ bonds are of high credit quality, values have only been impacted by rate changes, and the Company has the intent and ability to hold the securities for the foreseeable future. The fair value is expected to recover as the bonds approach the maturity date.

Sales of $9.3 and $11.8 million for 2021 and 2020, respectively, generated gross realized gains for the years ended December 31, as presented below:

	(In Thousands)
	2022		2021		2020
Gross realized gains	$	-	$	293	$	270
Gross realized losses		-		-		-
Net realized gains	$	-	$	293	$	270
Tax expense related to net realized gains	$	-	$	62	$	57

The net realized gain on sales and related tax expense is a reclassification out of accumulated other comprehensive income (loss). The net realized gain is included in net gain on sale of securities available-for-sale and the related tax expense is included in income taxes in the consolidated statements of income.

71

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

The amortized cost and fair value of debt securities at December 31, 2022, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	(In Thousands)
	Amortized
	Cost		Fair Value
One year or less	$	20,732	$	20,283
After one year through five years		209,735		190,333
After five years through ten years		105,681		91,379
After ten years		1,970		1,867
Total	$	338,118	$	303,862
Mortgage-backed securities		101,068		86,927
Total	$	439,186	$	390,789

Investments with a carrying value and fair value of $134.8 million at December 31, 2022 and $115.0 million at December 31, 2021 were pledged to secure public deposits and securities sold under repurchase agreements.

Note 4 - Loans

The Company had $827 thousand in loans held for sale at December 31, 2022 as compared to $7.7 million in loans held for sale at December 31, 2021.

Loans at December 31 are summarized below:

	(In Thousands)
Loans:	2022			2021
Consumer Real Estate	$	494,423		$	395,873
Agricultural Real Estate		220,819			198,343
Agricultural		128,733			118,368
Commercial Real Estate		1,152,603			848,477
Commercial and Industrial		242,360			208,270
Consumer		89,147			57,737
Other		29,818			32,089
		2,357,903			1,859,157
Less: Net deferred loan fees and costs		(1,516	)		(1,738	)
		2,356,387			1,857,419
Less: Allowance for loan losses		(20,313	)		(16,242	)
Loans - Net	$	2,336,074		$	1,841,177

Following are the characteristics and underwriting criteria for each major type of loan the Bank offers:

Consumer Real Estate: Purchase, refinance, or equity financing of one to four family owner occupied dwelling. Success in repayment is subject to borrower’s income, debt level, character in fulfilling payment obligations, employment, and others.

Agricultural Real Estate: Purchase of farm real estate or for permanent improvements to the farm real estate. Cash flow from the farm operation is the repayment source and is therefore subject to the financial success of the farm operation.

Agricultural: Loans for the production and housing of crops, fruits, vegetables, and livestock or to fund the purchase or re-finance of capital assets such as machinery and equipment and livestock. The production of crops and livestock is especially vulnerable to commodity prices and weather. The vulnerability to commodity prices is offset by the

72

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

farmer’s ability to hedge their position by the use of the future contracts. The risk related to weather is often mitigated by requiring crop insurance.

Commercial Real Estate: Construction, purchase, and refinance of business purpose real estate. Risks include potential construction delays and overruns, vacancies, collateral value subject to market value fluctuations, interest rate, market demands, borrower’s ability to repay in orderly fashion, and others. The Bank does employ stress testing on higher balance loans to mitigate risk by ensuring the customer’s ability to repay in a changing rate environment before granting loan approval.

Commercial and Industrial: Loans to proprietorships, partnerships, or corporations to provide temporary working capital and seasonal loans as well as long term loans for capital asset acquisition. Risks include adequacy of cash flow, reasonableness of projections, financial leverage, economic trends, management ability and estimated capital expenditures during the fiscal year. The Bank does employ stress testing on higher balance loans to mitigate risk by ensuring the customer's ability to repay in a changing rate environment before granting loan approval. During 2022, the remaining PPP balances were forgiven and consequently paid off. Included in commercial loans for 2021 are $2.9 million of Paycheck Protection Program (PPP) loans, administered by the Small Business Administration (SBA). The PPP provided loans to eligible business through financial institutions like the Bank, with loans being eligible for forgiveness of some or all of the principal amount by the SBA if the borrower meets certain requirements. The SBA guarantees repayment of the loans to the Bank if the borrower’s loan is not forgiven and is then not repaid by the customer. Therefore, there is no allowance for loan losses related to these loans.

Consumer: Funding for individual and family purposes. Success in repayment is subject to borrower’s income, debt level, character in fulfilling payment obligations, employment, and other factors.

Other: Primarily funds public improvements in the Bank’s service area. Repayment ability is based on the continuance of the taxation revenue as the source of repayment.

The following is a maturity schedule by major category of loans excluding fair value adjustments at December 31, 2022:

	(In Thousands)
			After One
	Within		Year Within		After
	One Year		Five Years		Five Years		Total
Consumer Real Estate	$	8,890	$	34,961	$	456,556	$	500,407
Agricultural Real Estate		525		7,116		214,297		221,938
Agricultural		59,119		47,113		22,544		128,776
Commercial Real Estate		26,670		336,890		789,304		1,152,864
Commercial and Industrial		81,552		108,729		52,715		242,996
Consumer		2,089		47,052		40,357		89,498
Other		235		1,219		28,375		29,829
	$	179,080	$	583,080	$	1,604,148	$	2,366,308

73

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

The distribution of fixed rate loans and variable rate loans by major loan category is as follows as of December 31, 2022:

	(In Thousands)
	Fixed		Variable
	Rate		Rate
Consumer Real Estate	$	354,420	$	140,003
Agricultural Real Estate		144,702		76,117
Agricultural		52,867		75,866
Commercial Real Estate		941,927		210,676
Commercial and Industrial		130,513		111,847
Consumer		88,972		175
Other		20,029		9,789

Other loans are included in the commercial and industrial category for the remainder of the tables in this Note 4, unless specifically noted separately.

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74

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

The following table represents the contractual aging of the recorded investment in past due loans by portfolio classification of loans as of December 31, 2022 and 2021, net of deferred loan fees and costs:

December 31, 2022	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Consumer Real Estate	$	1,536	$	635	$	90	$	2,261	$	492,162	$	494,423	$	-
Agricultural Real Estate		118		2		1,550		1,670		218,844		220,514		-
Agricultural		433		-		152		585		128,341		128,926		-
Commercial Real Estate		74		-		180		254		1,150,257		1,150,511		-
Commercial and Industrial		953		-		182		1,135		270,984		272,119		-
Consumer		83		37		-		120		89,774		89,894		-
Total	$	3,197	$	674	$	2,154	$	6,025	$	2,350,362	$	2,356,387	$	-

December 31, 2021	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Consumer Real Estate	$	228	$	-	$	246	$	474	$	395,331	$	395,805	$	-
Agricultural Real Estate		436		-		-		436		197,597		198,033		-
Agricultural		-		-		-		-		118,504		118,504		-
Commercial Real Estate		-		-		180		180		846,930		847,110		-
Commercial and Industrial		21		131		149		301		239,837		240,138		-
Consumer		64		-		-		64		57,765		57,829		-
Total	$	749	$	131	$	575	$	1,455	$	1,855,964	$	1,857,419	$	-

75

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

The following table presents the recorded investment in nonaccrual loans by portfolio class of loans as of December 31, 2022 and December 31, 2021:

	(In Thousands)
	2022		2021
Consumer Real Estate	$	612	$	824
Agricultural Real Estate		1,921		6,477
Agriculture		152		20
Commercial Real Estate		903		600
Commercial and Industrial		1,096		149
Consumer		5		6
Total	$	4,689	$	8,076

The Bank uses a nine tier risk rating system to grade its loans. The grade of a loan may change during the life of the loan.

The risk ratings are described as follows.

1.Zero (0) Unclassified. Any loan which has not been assigned a classification.

2.One (1) Excellent. Credit to premier customers having the highest credit rating based on an extremely strong financial condition, which compares favorably with industry standards (upper quartile of RMA ratios). Financial statements indicate a sound earnings and financial ratio trend for several years with satisfactory profit margins and excellent liquidity exhibited. Prime credits may also be borrowers with loans fully secured by highly liquid collateral such as traded stocks, bonds, certificates of deposit, savings account, etc. No credit or collateral exceptions exist, and the loan adheres to The Bank's loan policy in every respect. Financing alternatives would be readily available and would qualify for unsecured credit. This rate is summarized by high liquidity, minimum risk, strong ratios, and low handling costs.

3.Two (2) Good. Desirable loans of somewhat less stature than rate 1, but with strong financial statements. Loan supported by financial statements containing strong balance sheets and a history of profitability. Probability of serious financial deterioration is unlikely. Possessing a sound repayment source (and a secondary source), which would allow repayment in a reasonable period of time. Individual loans backed by liquid personal assets, established history and unquestionable character.

4.Three (3) Satisfactory. Satisfactory loans of average or slightly above average risk – having some deficiency or vulnerability to changing economic conditions, but still fully collectible. Projects should normally demonstrate acceptable debt service coverage. There may be some weakness but with offsetting features of other support readily available. Loans that are meeting the terms of repayment.

Loans may be rated 3 when there is no recent information on which to base a current risk evaluation and the following conditions apply:

At inception, the loan was properly underwritten and did not possess an unwarranted level of credit risk;

a.At inception, the loan was secured with collateral possessing a loan-to-value adequate to protect The Bank from loss;

b.The loan exhibited two or more years of satisfactory repayment with a reasonable reduction of the principal balance;

c.During the period that the loan has been outstanding, there has been no evidence of any credit weakness. Some examples of weakness include slow payment, lack of cooperation by the borrower, breach of loan covenants, or the business is in an industry which is known to be experiencing problems. If any of these credit weaknesses is observed, a lower risk rating is warranted.

76

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

5.Four (4) Satisfactory / Monitored. A “4” (Satisfactory/Monitored) risk rating may be established for a loan considered satisfactory but which is of average credit risk due to financial weakness or uncertainty. The loans warrant a higher than average level of monitoring to ensure that weaknesses do not advance. The level of risk in Satisfactory/Monitored classification is considered acceptable and within normal underwriting guidelines, so long as the loan is given management supervision.

6.Five (5) Special Mention. Loans that possess some credit deficiency or potential weakness which deserve close attention, but which do not yet warrant substandard classification. Such loans pose unwarranted financial risk that, if not corrected, could weaken the loan and increase risk in the future. The key distinctions of a 5 (Special Mention) classification are that (1) it is indicative of an unwarranted level of risk, and (2) weaknesses are considered “potential” versus “defined” impairments to the primary source of loan repayment and collateral.

7.Six (6) Substandard. One or more of the following characteristics may be exhibited in loans classified substandard:

a.Loans which possess a defined credit weakness and the likelihood that a loan will be paid from the primary source are uncertain. Financial deterioration is underway and very close attention is warranted to ensure that the loan is collected without loss.

b.Loans are inadequately protected by the current net worth and paying capacity of the borrower.

c.The primary source of repayment is weakened, and The Bank is forced to rely on a secondary source of repayment such as collateral liquidation or guarantees.

d.Loans are characterized by the distinct possibility that The Bank will sustain some loss if deficiencies are not corrected.

e.Unusual courses of action are needed to maintain a high probability of repayment.

f.The borrower is not generating enough cash flow to repay loan principal; however, continues to make interest payments.

g.The lender is forced into a subordinate position or unsecured collateral position due to flaws in documentation.

h.Loans have been restructured so that payment schedules, terms and collateral represent concessions to the borrower when compared to the normal loan terms.

i.The lender is seriously contemplating foreclosure or legal action due to the apparent deterioration in the loan

j.There is significant deterioration in the market conditions and the borrower is highly vulnerable to these conditions.

77

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

8.Seven (7) Doubtful. One or more of the following characteristics may be exhibited in loans classified Doubtful:

a.Loans have all of the weaknesses of those classified as Substandard. Additionally, however, these weaknesses make collection or liquidation in full based on existing conditions improbable.

b.The primary source of repayment is gone, and there is considerable doubt as to the quality of the secondary source of repayment.

c.The possibility of loss is high, but, because of certain important pending factors which may strengthen the loan, loss classification is deferred until its exact status is known. A Doubtful classification is established deferring the realization of the loss.

9.Eight (8) Loss. Loans are considered uncollectable and of such little value that continuing to carry them as assets on the institution’s financial statements is not feasible. Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

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78

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

The following table represents the risk category of loans by portfolio class, net of deferred fees, based on the most recent analysis performed as of the time periods shown of December 31, 2022 and December 31, 2021.

	(In Thousands)
	Agricultural Real Estate				Agricultural				Commercial Real Estate				Commercial and Industrial				Other
	2022		2021		2022		2021		2022		2021		2022		2021		2022		2021
1-2	$	9,912	$	8,720	$	5,857	$	4,178	$	8,718	$	10,894	$	780	$	4,604	$	-	$	-
3		47,405		42,180		33,671		38,623		370,035		238,132		67,506		46,547		10,921		11,408
4		146,143		129,301		88,992		75,164		737,745		568,038		167,291		152,736		18,897		20,681
5		10,389		4,599		228		227		9,751		14,509		3,592		986		-		-
6		6,665		13,233		178		312		24,262		15,537		3,132		3,176		-		-
7		-		-		-		-		-		-		-		-		-		-
8		-		-		-		-		-		-		-		-		-		-
Total	$	220,514	$	198,033	$	128,926	$	118,504	$	1,150,511	$	847,110	$	242,301	$	208,049	$	29,818	$	32,089

79

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

For consumer residential real estate, the Company also evaluates credit quality based on the aging status of the loan, which was previously stated, and by payment activity. The following tables present the recorded investment in those classes based on payment activity and assigned risk grading as of December 31, 2022 and December 31, 2021.

	(In Thousands)
	Consumer Real Estate
	2022		2021
Grade
Pass	$	492,575	$	392,940
Special mention (5)		676		1,673
Substandard (6)		1,172		1,192
Doubtful (7)		-		-
Total	$	494,423	$	395,805

	(In Thousands)
	Consumer - Credit Card				Consumer - Other
	2022		2021		2022		2021
Performing	$	-	$	3,906	$	89,853	$	53,820
Nonperforming		-		13		41		90
Total	$	-	$	3,919	$	89,894	$	53,910

Information about impaired loans as of and for the years ended December 31, 2022 and 2021 is as follows:

	(In Thousands)
	2022		2021
Impaired loans without a valuation allowance	$	4,194	$	1,228
Impaired loans with a valuation allowance		4,663		10,711
Total impaired loans	$	8,857	$	11,939
Valuation allowance related to impaired loans	$	1,996	$	2,184
Total nonaccrual loans	$	4,689	$	8,076
Total loans past-due ninety days or more and still accruing	$	-	$	-

80

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

	(In Thousands)
	2022		2021		2020
Average investment in impaired loans	$	10,710	$	12,247	$	10,232
Interest income recognized on impaired loans	$	361	$	292	$	269
Interest income recognized on a cash basis on impaired    loans	$	97	$	188	$	135

There were no additional funds committed to be advanced in connection with impaired loans.

The Bank had approximately $3.6 million and $7.6 million of its impaired loans classified as troubled debt restructured as of December 31, 2022 and December 31, 2021.

Modification programs focused on payment pattern changes and/or modified maturity dates with most receiving a combination of the two concessions. The modifications did not result in the contractual forgiveness of principal. During 2022, three new loans were considered TDR as a result of the continuance of interest only payment modifications. These three loans stem from a single relationship with a borrower. This relationship has a Small Business Administration (SBA) guaranty and consequently the request for the continuance of the interest only period was also approved by the SBA as were previous requests. One of the three loans was charged off in December of 2022. The ALLL includes a $837 thousand specific allocation for one of the loans as of December 31, 2022. The fourth loan was a work-out loan that was included on Peoples TDR list which had some debt written off when the loan was granted. Two loans previously reported as TDR were paid off in April 2022. During 2021, there were three new loans considered TDR. One loan resulted in payment changes from a monthly payment to monthly interest only payments. One loan was considered TDR as a result of being in a deficiency balance upon sale of property. The loan is set for a 3 year term and a 10 year amortization. The ALLL includes a $825 thousand specific allocation on the principal balance of this loan as of December 31, 2021. The last loan was rewritten to improve collateral position. Capitalized interest, late charges and prepayment penalties were charged off immediately. The ALLL includes a $313 thousand specific allocation for this loan as of December 31, 2021. Two loans previously reported as TDR were paid off in June 2021 and three loans previously reported as TDR were fully charged off in March 2021.

81

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

December 31, 2022							December 31, 2021
			(In thousands)							(In thousands)
Troubled Debt Restructurings	Number of Contracts Modified in the Last 12 Months		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Troubled Debt Restructurings	Number of Contracts Modified in the Last 12 Months		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Consumer Real Estate		1	$	95	$	95	Consumer Real Estate		-	$	-	$	-
Agricultural Real Estate		-		-		-	Agricultural Real Estate		1		1,655		1,655
Agricultural		-		-		-	Agricultural		-		-		-
Commercial Real Estate		1		74		74	Commercial Real Estate		1		382		382
Commercial and Industrial		2		1,232		1,232	Commercial and Industrial		1		1,000		1,000

For the years ended December 31, 2022 and 2021, there were no TDR’s that subsequently defaulted after modification.

For the Bank’s impaired TDR loans, the Bank may utilize a measurement incorporating the present value of expected future cash flows discounted at the loan's effective rate of interest or the fair value of collateral if the loan is collateral dependent. To determine the fair value of collateral, collateral asset values securing an impaired loan are periodically evaluated. Maximum time of re-evaluation is every 12 months for chattels and titled vehicles and every two years for real estate. In this process, third party evaluations are obtained and heavily relied upon. Until such time that updated appraisals are received, the Bank may discount the collateral value used.

The Bank uses the following guidelines as stated in policy to determine when to realize a charge-off, whether a partial or full loan balance. A charge down in whole or in part is realized when unsecured consumer loans, credit card credits and overdraft lines of credit reach 90 days delinquency. At 90 days delinquent, secured consumer loans are charged down to the value of the collateral, if repossession of the collateral is assured and/or in the process of repossession. Consumer mortgage loan deficiencies are charged down upon the sale of the collateral or sooner upon the recognition of collateral deficiency. A broker's price opinion or appraisal will be completed on all home loans in litigation and any deficiency will be charged off before reaching 150 days delinquent. Commercial and agricultural credits are charged down/allocated at 120 days delinquency, unless an established and approved work-out plan is in place or litigation of the credit will likely result in recovery of the loan balance. Upon notification of bankruptcy, unsecured debt is charged off. Additional charge-off may be realized as further unsecured positions are recognized.

82

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

The following tables present loans individually evaluated for impairment by portfolio class of loans as of December 31, 2022 and 2021:

	(In Thousands)
2022	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized Cash Basis
With no related allowance recorded:
Consumer Real Estate	$	509	$	509	$	-	$	355	$	5	$	12
Agricultural Real Estate		2,280		2,385		-		2,048		25		6
Agricultural		152		152		-		588		-		2
Commercial Real Estate		1,234		1,272		-		1,252		29		43
Commercial and Industrial		17		417		-		135		2		10
Consumer		2		2		-		15		1		-
With a specific allowance recorded:
Consumer Real Estate		60		60		6		15		-		1
Agricultural Real Estate		-		-		-		1,388		-		-
Agricultural		-		-		-		-		-		-
Commercial Real Estate		2,874		2,874		438		3,176		150		-
Commercial and Industrial		1,564		1,564		1,551		1,736		149		23
Consumer		165		165		1		2		-		-
Totals:
Consumer Real Estate	$	569	$	569	$	6	$	370	$	5	$	13
Agricultural Real Estate	$	2,280	$	2,385	$	-	$	3,436	$	25	$	6
Agricultural	$	152	$	152	$	-	$	588	$	-	$	2
Commercial Real Estate	$	4,108	$	4,146	$	438	$	4,428	$	179	$	43
Commercial and Industrial	$	1,581	$	1,981	$	1,551	$	1,871	$	151	$	33
Consumer	$	167	$	167	$	1	$	17	$	1	$	-

83

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

	(In Thousands)
2021	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized Cash Basis
With no related allowance recorded:
Consumer Real Estate	$	604	$	604	$	-	$	456	$	5	$	15
Agricultural Real Estate		423		423		-		1,000		33		-
Agricultural		-		-		-		143		18		3
Commercial Real Estate		180		180		-		1,445		70		9
Commercial and Industrial		21		21		-		920		24		158
Consumer		-		-		-		17		-		-
With a specific allowance recorded:
Consumer Real Estate		-		-		-		59		-		-
Agricultural Real Estate		6,302		6,406		691		5,414		54		-
Agricultural		20		20		1		94		-		-
Commercial Real Estate		3,381		3,381		664		2,199		70		3
Commercial and Industrial		982		982		825		498		17		-
Consumer		26		26		3		2		1		-
Totals:
Consumer Real Estate	$	604	$	604	$	-	$	515	$	5	$	15
Agricultural Real Estate	$	6,725	$	6,829	$	691	$	6,414	$	87	$	-
Agricultural	$	20	$	20	$	1	$	237	$	18	$	3
Commercial Real Estate	$	3,561	$	3,561	$	664	$	3,644	$	140	$	12
Commercial and Industrial	$	1,003	$	1,003	$	825	$	1,418	$	41	$	158
Consumer	$	26	$	26	$	3	$	19	$	1	$	-

As of December 31, 2022 the Company had no foreclosed residential real estate property obtained by physical possession or consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process according to local jurisdictions. This compares to the Company having $159 thousand of foreclosed residential real estate property obtained by physical possession and $255 thousand of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process according to local jurisdictions as of December 31, 2021.

The ALLL has a direct impact on the provision expense. An increase in the ALLL is funded through recoveries and provision expense. The following tables summarize the activities in the allowance for credit losses.

84

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

The following is an analysis of the allowance for credit losses for the years ended December 31:

	(In Thousands)
	2022			2021			2020
Allowance for Loan Losses
Balance at beginning of year	$	16,242		$	13,672		$	7,228
Provision for loan loss		4,600			3,444			6,981
Loans charged off		(827	)		(1,332	)		(720	)
Recoveries		298			458			183
Balance at ending of year	$	20,313		$	16,242		$	13,672
Allowance for Unfunded Loan Commitments    & Letters of Credit	$	1,262		$	1,041		$	641
Total Allowance for Credit Losses	$	21,575		$	17,283		$	14,313

The Company segregates its Allowance for Loan and Lease Losses (ALLL) into two reserves: The ALLL and the Allowance for Unfunded Loan Commitments and Letters of Credit (AULC). When combined, these reserves constitute the total Allowance for Credit Losses (ACL).

The AULC is reported within other liabilities on the balance sheet while the ALLL is netted within the loans on the consolidated balance sheet. The ACL presented above represents the full amount of reserves available to absorb possible credit losses.

The following table breaks down the activity within ALLL for each loan portfolio segment and shows the contribution provided by both the recoveries and the provision along with the reduction of the allowance caused by charge-offs.

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85

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Additional analysis related to the allowance for credit losses as of December 31, 2022 and 2021 is as follows:

	(In Thousands)
2022	Consumer Real Estate		Agricultural Real Estate			Agricultural		Commercial Real Estate		Commercial and Industrial			Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated			Total
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	857	$	1,040		$	709	$	9,130	$	3,847		$	625		$	1,041	$	34		$	17,283
Charge-Offs		-		-			-		-		(418	)		(409	)		-		-			(827	)
Recoveries		20		-			7		9		93			169			-		-			298
Provision		121		(691	)		35		2,785		1,860			506			-		(16	)		4,600
Other Non-interest    expense related to    unfunded		-		-			-		-		-			-			221		-			221
Ending Balance	$	998	$	349		$	751	$	11,924	$	5,382		$	891		$	1,262	$	18		$	21,575
Ending balance:    individually evaluated    for impairment	$	6	$	-		$	-	$	438	$	1,551		$	1		$	-	$	-		$	1,996
Ending balance:    collectively evaluated    for impairment	$	992	$	349		$	751	$	11,486	$	3,831		$	890		$	1,262	$	18		$	19,579
Ending balance: loans    acquired with    deteriorated credit    quality	$	-	$	-		$	-	$	-	$	-		$	-		$	-	$	-		$	-
FINANCING RECEIVABLES:
Ending balance	$	494,423	$	220,514		$	128,926	$	1,150,511	$	272,119		$	89,894		$	-	$	-		$	2,356,387
Ending balance:    individually evaluated    for impairment	$	569	$	2,280		$	152	$	4,108	$	1,581		$	167		$	-	$	-		$	8,857
Ending balance:    collectively evaluated    for impairment	$	493,449	$	218,039		$	128,774	$	1,146,389	$	270,493		$	89,727		$	-	$	-		$	2,346,871
Ending balance: loans    acquired with    deteriorated credit    quality	$	405	$	195		$	-	$	14	$	45		$	-		$	-	$	-		$	659

86

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

	(In Thousands)
2021	Consumer Real Estate			Agricultural Real Estate			Agricultural			Commercial Real Estate		Commercial and Industrial			Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated		Total
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	633		$	958		$	701		$	7,415	$	3,346		$	606		$	641	$	13	$	14,313
Charge-Offs		(19	)		(105	)		(143	)		-		(814	)		(251	)		-		-		(1,332	)
Recoveries		13			-			14			10		257			164			-		-		458
Provision (Credit)		230			187			137			1,705		1,058			106			-		21		3,444
Other Non-interest    expense related    to unfunded		-			-			-			-		-			-			400		-		400
Ending Balance	$	857		$	1,040		$	709		$	9,130	$	3,847		$	625		$	1,041	$	34	$	17,283
Ending balance:    individually evaluated    for impairment	$	-		$	691		$	1		$	664	$	825		$	3		$	-	$	-	$	2,184
Ending balance:    collectively evaluated    for impairment	$	857		$	349		$	708		$	8,466	$	3,022		$	622		$	1,041	$	34	$	15,099
Ending balance: loans    acquired with    deteriorated credit    quality	$	37		$	-		$	-		$	-	$	-		$	-		$	-	$	-	$	37
FINANCING RECEIVABLES:
Ending balance	$	395,805		$	198,033		$	118,504		$	847,110	$	240,138		$	57,829		$	-	$	-	$	1,857,419
Ending balance:    individually evaluated    for impairment	$	604		$	6,725		$	20		$	3,561	$	1,003		$	26		$	-	$	-	$	11,939
Ending balance:    collectively evaluated    for impairment	$	394,489		$	191,107		$	118,484		$	843,299	$	238,849		$	57,803		$	-	$	-	$	1,844,031
Ending balance: loans    acquired with    deteriorated credit    quality	$	712		$	201		$	-		$	250	$	286		$	-		$	-	$	-	$	1,449

87

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Note 5 – Premises and Equipment

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

	(In Thousands)
	2022			2021
Land	$	6,896		$	6,652
Buildings (useful life 15-39 years)		34,501			30,929
Furnishings (useful life 3-15 years)		26,448			23,160
		67,845			60,741
Less: Accumulated depreciation		(39,464	)		(33,828	)
Premises and Equipment (Net)	$	28,381		$	26,913

Depreciation expense for the years ended December 31, 2022, 2021, and 2020 amounted to $2.7, $2.6, and $2.5 million, respectively.

Construction in progress of $278 thousand as of December 31, 2022 relates to the construction of three new offices which are expected to be operational by end of third quarter 2023.

Note 6 - Servicing

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of loans serviced for others were $375.6 and $380.8 million at December 31, 2022 and 2021, respectively.

The balance of capitalized servicing rights included in other assets at December 31, 2022 and 2021, was $3.5 and $3.6 million, respectively. The capitalized addition of servicing rights is included in net gain on sale of loans on the consolidated statement of income.

The fair market value of the capitalized servicing rights as of December 31, 2022 and 2021 was $5.1 million and $3.2 million, respectively. The valuations were completed by stratifying the loans into like groups based on loan type and term. Impairment was measured by estimating the fair value of each stratum, taking into consideration an estimated level of prepayment based upon current market conditions. An average constant prepayment rate of 7.7% and 21.7% were utilized for 2022 and 2021, respectively. All strata did show positive values in 2022 compared to the carrying value using a discount yield of 5.94%. In 2021, all strata did not show positive values compared to carrying value using a discount yield of 1.97% which resulted in the need to establish a $414 thousand valuation allowance.

The following summarizes mortgage servicing rights capitalized and amortized during each year:

	(In Thousands)
	2022			2021
Beginning of Year	$	3,571		$	3,320
Capitalized Additions		537			1,417
Amortization		(559	)		(1,166	)
Ending Balance, December 31		3,549			3,571
Valuation Allowance		-			(414	)
Mortgage Servicing Rights net, December 31	$	3,549		$	3,157

88

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Note 7 - Deposits

Time deposits as of December 31 consist of the following:

	(In Thousands)
	2022		2021
Time deposits under $250,000	$	495,891	$	397,102
Time deposits of $250,000 or more		62,089		74,377
	$	557,980	$	471,479

At December 31, 2022 the scheduled maturities for time deposits are as follows:

	(In Thousands)
2023	$	383,052
2024		91,267
2025		62,412
2026		13,862
2027		7,068
Thereafter		319
	$	557,980

Note 8 – Federal Funds Purchased and Securities Sold Under Agreement to Repurchase

The Bank’s policy requires qualifying securities to be used as collateral for the underlying repurchase agreements. As of December 31, 2022 and 2021, securities with a market value of $43.6 million and $31.1 million, respectively, were pledged to secure the repurchase agreements. The table below presents the daily securities sold under agreement to repurchase and the term repurchase agreements. It does not include the Bank’s federal funds purchased.

	Daily Securities Sold Under Agreement to Repurchase
	Amount		Weighted			Maximum Amount		Approximate		Approximate
	Outstanding		Average			Borrowings		Average		Weighted Average
	at End		Rate End			Outstanding		Outstanding in		Interest Rate
	of Period (000's)		of Period			Month End (000's)		Period (000's)		For the Period
2022	$	1,115		0.95	%	$	1,450	$	1,169		0.43	%
2021	$	1,062		0.70	%	$	1,991	$	1,514		0.43	%

	Term CD's Sold Under Agreement to Repurchase
	Amount		Weighted			Maximum Amount		Approximate		Approximate
	Outstanding		Average			Borrowings		Average		Weighted Average
	at End		Rate End			Outstanding		Outstanding in		Interest Rate
	of Period (000's)		of Period			Month End (000's)		Period (000's)		For the Period
2022	$	30,518		0.97	%	$	34,504	$	31,573		2.54	%
2021	$	28,206		1.00	%	$	28,362	$	28,315		2.56	%

89

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

The Company had $22.6 million of federal funds purchased as of December 31, 2022 and no federal funds purchased as of December 31, 2021. The $31.6 million in Securities Sold Under Agreements to Repurchase were comprised of U.S. Treasuries and government agency securities. The table below shows the remaining contractual maturity in the repurchase agreements and the collateral pledged as of December 31, 2022.

	December 31, 2022
	Remaining Contractual Maturity of the Agreements
	Overnight & Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Federal funds purchased	$	22,573	$	-	$	-	$	-	$	22,573
Repurchase agreements
US Treasury & agency securities		1,115						30,518		31,633
Total	$	23,688	$	-	$	-	$	30,518	$	54,206

90

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Note 9 – Borrowings and Subordinated Notes

Short Term Debt

Due to the funding requirement for the acquisition of PFSB to be provided from the holding company, the Company secured borrowings from a correspondent bank. Two loans were secured, the first a $30 million 12-month term note and the second a 12-month line of credit for $10 million. Both loans were advanced on October 1, 2021. Interest on both loans is due quarterly and accrues at a rate of 2.50% per annum with reporting and capital covenants included. The structure of the acquisition required all accounting of the transaction to be recorded at the Bank level as Perpetual did not have a holding company. The Company advanced funds from the Bank to the Company to facilitate payoff of the term note and line of credit balance after regulatory approval was granted in the second quarter of 2022. The line of credit remained open for future liquidity needs.

On September 29, 2022, the line of credit was advanced for $10 million for the acquisition of PFSL Interest on the line of credit is due quarterly and accrues at a rate of 5.50% per annum with reporting and capital covenants included. The line of credit matures on September 30, 2023.

Long Term Debt

Federal Home Loan Bank Advances

Long term debt consists of various loans from the Federal Home Loan Banks. Repayment structures vary, ranging from monthly installments, annual payments or upon maturity. Interest payments are due monthly. Total borrowings were $127.4 million excluding an additional $47 thousand for fair value related to the acquisitions for December 31, 2022 compared to $23.9 million excluding $197 thousand for fair value for December 31, 2021. With the acquisition of Peoples Federal Savings and Loan Bank, the Bank undertook $965 thousand in advances with varying maturity dates from 2022 through 2028. With the acquisition of Perpetual Federal Savings Bank, the Bank undertook $6 million in advances due in 2024. The advances were secured by a pledge of $232.9 and $193.2 million of mortgage loans as of December 31, 2022 and 2021, respectively under a blanket collateral agreement.

The advances are subject to pre-payment penalties and the provisions and conditions of the credit policy of the Federal Home Loan Bank.

The Bank had access to $73.0 and $69.0 million unsecured borrowings through correspondent banks as of December 31, 2022 and December 31, 2021, respectively. The Bank also had access to $130.4 million and $94.2 million through a Cash Management Advance with the Federal Home Loan Bank as of December 31, 2022 and December 31, 2021 respectively. The Bank had unpledged securities, which could be sold or used as collateral, of $249.6 million and $313.6 million at the end of the same time periods, respectively. An additional $2.0 million at December 31, 2022, and $91.2 million at December 31, 2021, were available from the Federal Home Loan Bank based on current pledging. The table below shows the maturities of the borrowings exclusive of the fair value.

	(In Thousands)
2023	$	71,507
2024		32,500
2025		11,500
2026		-
2027		9,064
Thereafter		2,867
Total	$	127,438

91

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Subordinated Notes

On July 30, 2021, the Company announced the completion of a private placement of $35 million aggregate principal amount of its 3.25% fixed-to-floating rate subordinated notes due July 30, 2031 (the “Notes”) to various accredited investors (the “Offering”). The price for the Notes was 100% of the principal amount of the Notes. The Notes are intended to qualify as Tier 2 capital for regulatory purposes. The Company intends to use the net proceeds from the Offering for general corporate purposes, including financing acquisitions and organic growth.

Interest on the Notes will accrue at a rate equal to (i) 3.25% per annum from the original issue date to, but excluding, the five-year anniversary, payable semi-annually in arrears, and (ii) a floating rate per annum equal to a benchmark rate, which is expected to be the Three-Month Term SOFR (as defined in the Notes), plus a spread of 263 basis points from and including the five-year anniversary until maturity, payable quarterly in arrears. Beginning on or after the fifth anniversary of the issue date through maturity, the Notes may be redeemed, at the Company’s option, on any scheduled interest payment date. Any redemption will be at a redemption price equal to 100% of the principal amount of Notes being redeemed, plus accrued and unpaid interest.

	December 31, 2022					December 31, 2021
(In Thousands)	Principal		Unamortized Note Issuance Costs			Principal		Unamortized Note Issuance Costs
Subordinated Notes	$	35,000	$	(414	)	$	35,000	$	(529	)

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92

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Note 10 – Income Taxes

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

	(In Thousands)
	2022			2021			2020
Current:
Federal	$	7,430		$	7,536		$	6,289
State		359			271			513
Total current		7,789			7,807			6,802
Deferred:
Federal		227			(1,746	)		(1,596	)
State		(56	)		(59	)		(95	)
Total deferred		171			(1,805	)		(1,691	)
Total Income Tax	$	7,960		$	6,002		$	5,111

The following is a reconciliation of the statutory federal income tax rate to the effective tax rate:

	(In Thousands)
	2022			2021			2020
Federal income tax at statutory rates	$	8,489		$	6,194		$	5,294
(Decrease) increase resulting from:
State income tax, net of federal benefit		239			167			330
Tax exempt interest		(133	)		(116	)		(146	)
Section 831 deduction		(270	)		(294	)		(266	)
Other		(365	)		51			(101	)
Total Income Tax	$	7,960		$	6,002		$	5,111

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

	(In Thousands)
	2022		2021
Deferred Tax Assets:
Allowance for loan losses	$	4,623	$	3,629
Deferred compensation		570		561
Net unrealized loss on available-for-sale securities		10,163		846
Fair value adjustments		2,152		1,913
Other		554		277
Total deferred tax assets		18,062		7,226
Deferred Tax Liabilities:
Accreted discounts on bonds		54		22
Depreciation		1,083		772
FHLB stock dividends		1,011		828
Intangible amortization		2,640		1,282
Mortgage servicing rights		787		778
Prepaids		500		471
Other		424		173
Total deferred tax liabilities		6,499		4,326
Net Deferred Tax Asset (Liability)	$	11,563	$	2,900

As part of the Perpetual acquisition, a net operating loss (NOL) carryforward was acquired that is subject to a Section 382 limitation. At the end of 2021, $377,807 of this NOL remained. This NOL was used in 2022 and no balance remains. The Peoples Federal Savings and Loan acquisition included a NOL of $2,789,124. At the end of 2022, $2,638,002 of this NOL remained.

93

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

The Corporation has additional paid-in capital that is considered restricted resulting from the acquisition of Perpetual in 2021 of approximately $2,779,000 and from the acquisition of Peoples in 2022 of approximately $2,174,000. No deferred tax liability is required to be recorded for the Corporation’s tax bad debt reserves arising before December 31, 1987, unless it is apparent that the reserves will reverse in the near future. Unrecognized deferred taxes on these reserves would total $1,040,000. If the portion of retained earnings representing these reserves is used for any purpose other than to absorb bad debts, it will be added to future taxable income and the related tax will be recognized as expense.

Note 11 - Employee Benefit Plans

The Bank has established a 401(k) profit sharing plan which allows eligible employees to save at a minimum one percent of eligible compensation on a pre-tax or post-tax basis, subject to certain Internal Revenue Service limitations. The Bank will match 50% of employee 401(k) contributions up to six percent of total eligible compensation. In addition, the Bank may make a discretionary contribution from time to time as is deemed advisable. A participant is 100% vested in the participant’s deferral contributions. Employer matching contributions are funded annually and are immediately vested. Beginning in 2022, nonelective employer contributions are immediately vested at 100%. Employees are immediately eligible upon hire to contribute to the plan and receive matching contributions. In order to be eligible for discretionary contributions, employees must work 1,000 hours in the plan year and be employed on the last day of the year. Contributions expensed for the 401(k) profit sharing plan for both the employer matching contribution and the discretionary contribution were $1.7 million, $1.5 million and $1.0 million for 2022, 2021 and 2020, respectively.

Restricted Stock Awards

The Company has a Long-Term Stock Incentive Plan under which 56,496 shares of the Company’s restricted stock were issued to 109 employees during 2022, 48,750 shares of restricted stock were issued to 96 employees during 2021 and 37,382 shares of restricted stock were issued to 92 employees during 2020. Under the plan, the shares generally vest 100% in three years. During the 3 year vesting period, the employees receive dividends or dividend equivalent compensation on the shares. Due to employee termination, there were 8,000, 2,575 and 2,175 shares forfeited during 2022, 2021 and 2020, respectively. During 2022, three employees retired and received 3,775 shares from the shares awarded in 2019, 2020 and 2021. In 2021, seven employees retired and received 4,425 shares from the shares awarded in 2018, 2019 and 2020. During 2020, due to retirement, eight employees received 10,890 shares from awards granted in 2017, 2018, 2019 and 2020. In 2022, 26,900 shares awarded in 2019 were 100% vested and 60 employees received the stock. During 2021, 18,845 shares awarded in 2018 were 100% vested and 50 employees received the stock. During 2020, 21,340 shares awarded in 2017 were 100% vested and 53 employees received the stock. One employee received accelerated vesting of 1,050 shares awarded in 2019, 2018 and 2017. Also during 2020, 1,600 shares awarded in 2019 were 100% vested and three employees received the stock. One employee received immediate vesting of 551 shares of stock. Compensation expense applicable to the restricted stock awards totaled $899 thousand, $822 thousand and $1.0 million for the years ending December 31, 2022, 2021 and 2020, respectively.

The table below summarizes the details of the restricted shares issued, vested, and forfeited for the years ending December 31, 2021, 2021 and 2020.

	Year Ended December 31,
	2022				2021				2020
	Number of Shares		Number of Employees		Number of Shares		Number of Employees		Number of Shares		Number of Employees
Restricted shares issued		56,496		109		48,750		96		37,382		92
Restricted shares vested		26,900		60		18,845		50		23,491		58
Restricted shares awarded due to retirement		3,775		3		4,425		7		10,890		8
Restricted shares awarded for other		-		-		-		-		1,050		1
Restricted shares forfeited		8,000		9		2,575		4		2,175		5

94

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

The following table summarizes the activity of restricted stock awards as of December 31:

	Year Ended December 31,
	2022					2021					2020
	Number of Shares			Weighted average fair value per award		Number of Shares			Weighted average fair value per award		Number of Shares			Weighted average fair value per award
Beginning of period		111,131		$	23.02		88,226		$	28.40		88,450		$	31.52
Granted		56,496			30.46		48,750			22.70		37,382			21.80
Vested		(30,675	)		24.77		(23,270	)		42.03		(35,431	)		29.27
Forfeited		(8,000	)		30.15		(2,575	)		24.28		(2,175	)		21.92
Nonvested, end of period		128,952		$	25.75		111,131		$	23.02		88,226		$	28.40

As of December 31, 2022, there was $2.1 million of unrecognized compensation cost related to the nonvested portion of restricted stock awards under the plan to be recognized over the next three years.

Note 12 – Earnings Per Share

Basic earnings per share is calculated using the two-class method. The two-class method is an earnings allocation formula under which earnings per share is calculated from common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Under this method, all earnings distributed and undistributed, are allocated to participating securities and common shares based on their respective rights to receive dividends. Unvested share-based payment awards that contain non-forfeitable rights to dividends are considered participating securities (i.e. unvested restricted stock), not subject to performance based measures. Basic earnings per share is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding. Application of the two-class method for participating securities results in a more dilutive basic earnings per share as the participating securities are allocated the same amount of income as if they are outstanding for purposes of basic earnings per share. There is no additional potential dilution in calculating diluted earnings per share, therefore basic and diluted earnings per share are the same amounts. Other than the restricted stock plan, the Company has no other stock based compensation plans.

The Compensation Committee of the Company has determined that it is appropriate to award shares of the common stock of the Company to Outside Directors and Employees that are officers of the Company or the Bank who also serve as Directors of the Company and the Bank as a portion of their retainer for services rendered as Directors of the Company and the Bank. The Committee believes that it is appropriate to award the Directors Shares equal to approximately $4,000, rounded to the nearest whole Share on an annual basis commencing on June 5, 2020 and thereafter on the first Friday of June in each year. The value for the Shares is to be based upon the closing price for Shares on June 4, 2020 and thereafter on the first Thursday in June each year. On June 5, 2020, each Director received 176 shares. On November 20, 2020, a new director received 20 prorated shares. On June 4, 2021, ten Directors received approximately $6,000 worth of shares which equated to 272 shares while four Directors received a prorated dollar value of shares. On October 1, 2021, a new Director was added as a result of the Perpetual Federal Savings Bank acquisition and received 68 prorated shares worth approximately $1,523. On June 3, 2022, twelve Directors

95

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

each received $10,013 which equated to 240 shares. The use of stock for Directors' retainer, does not have an effect on diluted earnings per share as it is immediately vested.

The table below presents basic and diluted earnings per share for the years ended December 31, 2021, 2020, and 2019.

	Year Ended
	December 31,			December 31,			December 31,
	2022			2021			2020
Earnings per share
Net income	$	32,515		$	23,495		$	20,095
Less: distributed earnings allocated to    participating securities		(97	)		(70	)		(57	)
Less: undistributed earnings allocated to    participating securities		(187	)		(121	)		(96	)
Net earnings available to common    shareholders	$	32,231		$	23,304		$	19,942
Weighted average common shares outstanding    including participating securities		13,206,713			11,664,852			11,146,270
Less: average unvested restricted shares		(115,291	)		(94,634	)		(84,879	)
Weighted average common shares outstanding		13,091,422			11,570,218			11,061,391
Basic and diluted earnings per share	$	2.46		$	2.01		$	1.80

Note 13 – Related Party Transactions

In the ordinary course of business, the Bank has granted loans to senior officers and directors and their affiliated companies amounting to $20.2 million and $20.1 million at December 31, 2022 and 2021, respectively. Two new loans were approved during 2022 of which no additional borrowings were utilized. During 2022, subsequent advances totaled $12.5 million and payments of $21.9 million were received. The difference in related borrowings amounted to $151 thousand, net increase. Deposits of directors, executive officers and companies in which they have a direct or indirect ownership as of December 31, 2022 and 2021, amounted to $41.5 million and $43.7 million, respectively.

Note 14 - Off Balance Sheet Activities

Credit Related Financial Instruments

The Bank is a party to credit related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing need of its customers. These financial instruments include commitments to extend credit, Standby Letters of Credit, and Commercial Letters of Credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The Bank's exposure to credit loss is represented by the contractual amount of these commitments. The Bank follows the same credit policies in making commitments as it does for on-balance-sheet instruments. The allowance for credit losses as it relates to unfunded loan commitments (AULC) is included under other liabilities. The AULC as of both December 31, 2022 and 2021 was $1.0 million.

96

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

At December 31, 2022 and 2021, the following financial instruments were outstanding whose contract amounts represent credit risk:

	(In Thousands)
	2022		2021
Commitments to extend credit	$	691,501	$	557,094
Credit card arrangements		-		23,179
Standby letters of credit		1,046		983

Commitments to extend credit, credit card arrangements and Standby Letters of Credit all include exposure to some credit loss in the event of nonperformance of the customer. The Bank’s credit policies and procedures for credit commitments and financial guarantees are the same as those for extensions of credit that are recorded in the financial statements. Due to the fact that these instruments have fixed maturity dates, and because many of them expire without being drawn upon, they generally do not present any significant liquidity risk to the Bank. On May 1, 2022, the Bank sold the credit card portfolio thus eliminating credit risk for 2022.

Collateral Requirements

To reduce credit risk related to the use of credit-related financial instruments, the Bank might deem it necessary to obtain collateral. The amount and nature of the collateral obtained is based on the Bank's credit evaluation of the customer. Collateral held varies but may include cash, securities, accounts receivable, inventory, property, plant, and real estate.

Legal Contingencies

Various legal claims also arise from time to time in the normal course of business, which, in the opinion of management, will have no material effect on the Company’s consolidated financial statements.

Note 15 - Minimum Regulatory Capital Requirements

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off balance-sheet items as calculated under regulatory accounting practices.

The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by the Basel III Capital Rules, the comprehensive capital framework for U.S. banking organizations, to ensure capital adequacy require the maintenance of minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1 capital, Tier 1 capital and Total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to adjusted quarterly average assets (as defined).

In connection with the adoption of the Basel III Capital Rules, we elected to opt-out of the requirement to include most components of accumulated other comprehensive income in Common Equity Tier 1.

Common Equity Tier 1 is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities, and subject to transition provisions.

The Common Equity Tier 1, Tier 1 and Total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets. Risk-weighted assets are calculated based on regulatory requirements and include total assets, with certain exclusions, allocated by risk weight category, and certain off-balance-sheet items, among other things. The leverage ratio is calculated by dividing Tier 1 capital by adjusted quarterly average total assets, which exclude goodwill and other intangible assets, among other things.

97

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

The Basel III Capital Rules require the Bank to maintain (i) a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% Common Equity Tier 1 capital ratio, effectively resulting in a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of at least 7.0%), (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio, effectively resulting in a minimum Tier 1 capital ratio of 8.5%), (iii) a minimum ratio of Total capital (that is, Tier 1 plus Tier 2) to risk-weighted assets of at least 8.0%, plus the capital conservation buffer (which is added to the 8.0% total capital ratio, effectively resulting in a minimum total capital ratio of 10.5%) and (iv) a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average quarterly assets.

The capital conservation buffer is designed to absorb losses during periods of economic stress and, as detailed above, effectively increases the minimum required risk-weighted capital ratios. Banking institutions with a ratio of Common Equity Tier 1 capital to risk-weighted assets below the effective minimum (4.5% plus the capital conservation buffer) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall.

Management believes, as of December 31, 2022, that the Bank meets all the capital adequacy requirements to which it is subject.

As of December 31, 2022, the most recent notification from the FDIC indicated the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To remain categorized as well capitalized, the Bank will have to maintain minimum total risk-based, Tier I risk-based, Common Equity Tier 1 and Tier I leverage ratios as disclosed in the table to follow. There are no conditions or events since the most recent notification that management believes have changed the Bank’s prompt corrective action category.

The following tables present actual and required capital ratios as of December 31, 2022 and December 31, 2021 under the Basel III Capital Rules. The minimum required capital amounts presented include the minimum required capital levels as of December 31, 2022 and December 31, 2021. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.

The Bank’s actual and required capital amounts and ratios as of December 31, 2022 and December 31, 2021 are as follows:

	Actual					Minimum Capital Required					Required to be Considered Well-Capitalized
	(000's)					(000's)					(000's)
As of December 31, 2022	Amount		Ratio			Amount		Ratio			Amount		Ratio
Common Equity Tier 1 Capital    (to Risk Weighted Assets)	$	259,510		11.15	%	$	104,763		4.50	%	$	151,324		6.50	%
Total Risk-Based Capital    (to Risk Weighted Assets)		281,085		12.07	%		186,245		8.00	%		232,806		10.00	%
Tier 1 Capital    (to Risk Weighted Assets)		259,510		11.15	%		139,684		6.00	%		186,245		8.00	%
Tier 1 Leverage Capital    (to Adjusted Total Assets)		259,510		9.03	%		114,972		4.00	%		143,714		5.00	%

98

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

	Actual					Minimum Capital Required					Required to be Considered Well-Capitalized
	(000's)					(000's)					(000's)
As of December 31, 2021	Amount		Ratio			Amount		Ratio			Amount		Ratio
Common Equity Tier 1 Capital    (to Risk Weighted Assets)	$	256,943		14.26	%	$	81,074		4.50	%	$	117,112		6.50	%
Total Risk-Based Capital    (to Risk Weighted Assets)		274,226		15.22	%		144,138		8.00	%		180,173		10.00	%
Tier 1 Capital    (to Risk Weighted Assets)		256,943		14.26	%		108,104		6.00	%		144,138		8.00	%
Tier 1 Leverage Capital    (to Adjusted Total Assets)		256,943		10.25	%		100,317		4.00	%		125,396		5.00	%

The above tables exclude the capital conservation buffer requirements.

Note 16 - Restrictions of Dividends & Inter-company Borrowings

The Bank is restricted as to the amount of dividends that can be paid. Dividends declared by the Bank that exceed the net income for the current year plus retained income for the preceding two years must be approved by federal and state regulatory agencies. Under this formula and excluding the $40 million of a special one time dividend approved by the Federal Reserve for the acquisition of Perpetual Federal Saving Bank, dividends of $42.9 million may be paid without prior regulatory approval. Regardless of formal regulatory restrictions, the Bank may not pay dividends that would result in its capital levels being reduced below the minimum requirements shown above. Under current Federal Reserve regulations, the Bank is limited as to the amount and type of loans it may make to the Company. These loans are subject to qualifying collateral requirements on which the amount of the loan may be based.

Note 17 - Fair Value of Financial Instruments

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

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99

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

The estimated fair values, and related carrying or notional amounts, for on and off-balance sheet financial instruments as of December 31, 2022 and 2021, are reflected below. The aggregate fair values in the table below do not represent the total market value of the Bank’s assets and liabilities. The table excludes the following: Bank Premises and Equipment, Goodwill, Mortgage Servicing Rights, Other Real Estate Owned, Other Assets, Other Liabilities and Accrued Expenses.

	(In Thousands)
	December 31, 2022										December 31, 2021
	Carrying		Fair								Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3		Amount		Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	84,409	$	84,409	$	84,409	$	-	$	-	$	180,823	$	180,823	$	180,823	$	-	$	-
Interest-bearing time deposits		4,442		4,440		-		4,440		-		10,913		10,933		-		10,933		-
Securities - available-for-sale		390,789		390,789		94,678		292,766		3,345		429,931		429,931		89,177		335,981		4,773
Other securities		9,799		9,799		-		-		9,799		8,162		8,162		-		-		8,162
Loans held for sale		827		815		-		-		815		7,714		7,844		-		-		7,844
Loans, net		2,336,074		2,171,152		-		-		2,171,152		1,841,177		1,864,386		-		-		1,864,386
Interest receivable		10,440		10,440		-		-		10,440		7,209		7,209		-		-		7,209
Financial Liabilities:
Interest bearing deposits	$	1,378,090	$	1,377,944	$	-	$	-	$	1,377,944	$	1,248,294	$	1,248,044	$	-	$	-	$	1,248,044
Noninterest bearing deposits		532,794		532,794		532,794		-		-		473,689		473,689		-		473,689		-
Time deposits		557,980		543,737		-		-		543,737		471,479		475,810		-		-		475,810
Total Deposits		2,468,864		2,454,475		532,794		-		1,921,681		2,193,462		2,197,543		-		473,689		1,723,854
Fed funds purchased and    securities sold under    agreement to repurchase		54,206		54,206		-		-		54,206		29,268		29,268		-		-		29,268
Federal Home Loan Bank  advances		127,485		125,761		-		-		125,761		24,065		24,305		-		-		24,305
Other borrowings		10,000		10,000		-		10,000		-		40,000		40,000		-		40,000		-
Subordinated notes		34,586		30,993		-		30,993		-		34,471		35,000		-		35,000		-
Interest payable		1,739		1,739		-		-		1,739		1,125		1,125		-		-		1,125

100

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Fair Value Measurements

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2022 and 2021, and the valuation techniques used by the Company to determine those fair values. There were no changes to valuation techniques during 2022.

In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities in active markets that the Company has the ability to access.

Available-for-sale securities - When quoted prices are available in an active market, securities are valued using the quoted price and are classified as Level 1. The quoted prices are not adjusted.

Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

Available-for-sale securities classified as Level 2 are valued using the prices obtained from an independent pricing service. The prices are not adjusted. Securities of obligations of state and political subdivisions are valued using a type of matrix, or grid, pricing in which securities are benchmarked against the treasury rate based on credit rating. Substantially all assumptions used by the independent pricing service are observable in the marketplace, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace.

Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability. The Bank holds ten local municipals that the Bank evaluates based on the credit strength of the underlying project. The fair value is determined by valuing similar credit payment streams at similar rates.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset.

101

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

The following table summarizes financial assets measured at fair value on a recurring basis as of December 31, 2022 and December 31, 2021 segregated by level or the valuation inputs within the fair value hierarchy utilized to measure fair value.

Assets and Liabilities Measured at Fair Value on a Recurring Basis (in Thousands)
	Quoted Prices in		Significant		Significant
	Active Markets		Observable		Observable
	for Identical		Inputs		Inputs
December 31, 2022	Assets (Level 1)		(Level 2)		(Level 3)
Assets-(Securities Available-for-Sale)
U.S. Treasury	$	94,678	$	-	$	-
U.S. Government agencies		-		139,767		-
Mortgage-backed securities		-		86,927		-
State and local governments		-		66,072		3,345
Total Securities Available-for-Sale	$	94,678	$	292,766	$	3,345

	Quoted Prices in		Significant		Significant
	Active Markets		Observable		Observable
	for Identical		Inputs		Inputs
December 31, 2021	Assets (Level 1)		(Level 2)		(Level 3)
Assets-(Securities Available-for-Sale)
U.S. Treasury	$	89,177	$	-	$	-
U.S. Government agencies		-		156,886		-
Mortgage-backed securities		-		117,927		-
State and local governments		-		61,168		4,773
Total Securities Available-for-Sale	$	89,177	$	335,981	$	4,773

	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local			State and Local			State and Local
	Governments			Governments			Governments
	Tax-Exempt			Taxable			Total
Balance at January 1, 2022	$	2,307		$	2,466		$	4,773
Change in Market Value		(76	)		(203	)		(279	)
Purchases		-			-			-
Sales		-			-			-
Payments & Maturities		(160	)		-			(160	)
Reclassification and Adjustments		-			(989	)		(989	)
Balance at December 31, 2022	$	2,071		$	1,274		$	3,345

102

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local			State and Local			State and Local
	Governments			Governments			Governments
	Tax-Exempt			Taxable			Total
Balance at January 1, 2021	$	-		$	1,562		$	1,562
Change in Market Value		44			(96	)		(52	)
Purchases		2,418			1,000			3,418
Sales		-			-			-
Payments & Maturities		-			-			-
Reclassification and Adjustments		(155	)		-			(155	)
Balance at December 31, 2021	$	2,307		$	2,466		$	4,773

Most of the Company’s available for sale securities, including any bonds issued by local municipalities, have CUSIP numbers or have similar characteristics of those in the municipal markets, making them marketable and comparable as Level 2.

There was one security transferred out of Level 3 to Level 2 in 2022 and no transfers into or out of Level 3 during 2021. The 2021 tax exempt purchases were included in the acquisition of Ossian State Bank.

The Company also has assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis. At December 31, 2022 and 2021, such assets consist primarily of collateral dependent impaired loans. Collateral dependent impaired loans categorized as Level 3 assets consist of non-homogeneous loans that are considered impaired. The Company estimates the fair value of the loans based on the present value of expected future cash flows using management’s best estimate of key assumptions. These assumptions include future payment ability, timing of payment streams, and estimated realizable values of available collateral (typically based on outside appraisals).

At December 31, 2022 and 2021, collateral dependent impaired loans categorized as Level 3 were $2,667 and $8,527 thousand, respectively. The specific allocation for collateral dependent impaired loans was $1,996 thousand as of December 31, 2022 and $2,184 thousand as of December 31, 2021, respectively, which are accounted for in the allowance for loan losses (see Note 4).

During 2021, impairment was recognized on mortgage servicing rights based upon the independent third party’s quarterly valuations. A valuation allowance was established by strata to quantify the likely impairment of the value of the mortgage servicing rights to the Company. If the carrying amount of an individual strata exceeds the fair value, impairment was recorded on that strata so the servicing asset was carried at fair value. In 2022, the valuation allowance was reversed as all strata were positive.

Other real estate is reported at the lower of either the fair value of the real estate, minus the estimated costs to sell the asset, or the cost of the asset. The determination of the fair value of the real estate relies primarily on appraisals from third parties. If the fair value of the real estate, minus the estimated costs to sell the asset, is less than the asset’s cost, the deficiency is recognized as a valuation allowance against the asset through a charge to expense. The valuation allowance is therefore increased or decreased, through charges or credits to expense, for changes in the asset’s fair value or estimated selling costs.

103

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

The following table presents collateral dependent impaired loans and other real estate owned as recorded at fair value:

	($ in Thousands)
	Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2022
			Quoted Prices in
			Markets for		Significant		Significant
	Balance at		Identical		Observable Inputs		Unobservable Inputs
	December 31, 2022		Assets (Level 1)		(Level 2)		(Level 3)
Collateral dependent impaired     loans	$	2,667	$	-	$	-	$	2,667
Mortgage servicing rights		-		-		-		-
Other real estate owned -     residential		-		-		-		-

	($ in Thousands)
	Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2021
			Quoted Prices in
			Markets for		Significant		Significant
	Balance at		Identical		Observable Inputs		Unobservable Inputs
	December 31, 2021		Assets (Level 1)		(Level 2)		(Level 3)
Collateral dependent impaired     loans	$	8,527	$	-	$	-	$	8,527
Mortgage servicing rights		3,157		-		-		3,157
Other real estate owned -     residential		99		-		-		99

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements:

	(In Thousands)
	Fair Value at December 31, 2022		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
State and local    government	$	3,345	Discounted Cash Flow	Credit strength of underlying project or entity / Discount rate	2.08-5.01% (4.38%)
Collateral dependent    impaired loans		2,667	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	20.00-29.01% (24.13%)
Mortgage servicing     rights		-	Discounted Cash Flow	Constant prepayment rate and probability of default / Discount rate	— % ( — )
		-	Appraisals	Discount to reflect current market	— % ( — )

104

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Other real estate
   owned - residential

	(In Thousands)
	Fair Value at December 31, 2021		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
State and local    government	$	4,773	Discounted Cash Flow	Credit strength of underlying project or entity / Discount rate	0.21-1.77% (1.33%)
Collateral dependent    impaired loans		8,527	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	20.00-53.95% (34.78%)
Mortgage servicing     rights		3,157	Discounted Cash Flow	Constant prepayment rate and probability of default / Discount rate	1.94-27.70% (18.44%)
Other real estate    owned - residential		99	Appraisals	Discount to reflect current market	32.72% (32.72%)

105

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Note 18 – Condensed Financial Statements of Parent Company

Balance Sheets
	(In Thousands)
	2022		2021
Assets
Cash	$	16,901	$	19,293
Interest-bearing time deposits		498		1,234
Related party receivables:
Dividends and accounts receivable from subsidiary		2,114		4,636
Accrued interest receivable - municipals / interest     bearing time deposits		38		43
Securities - municipals		7,460		9,027
Investment in subsidiaries		319,371		340,733
Total Assets	$	346,382	$	374,966
Liabilities
Other borrowings	$	10,000	$	40,000
Subordinated notes, net of unamortized issuance costs		34,586		34,471
Dividends payable		2,832		2,461
Accrued interest payable		618		743
Accrued expenses		206		124
Total Liabilities		48,242		77,799
Stockholders' Equity		298,140		297,167
Total Liabilities and Stockholders' Equity	$	346,382	$	374,966

Statements of Income and Comprehensive Income
	(In Thousands)
	2022			2021			2020
Income
Dividends from subsidiaries	$	44,285		$	23,200		$	8,800
Interest - municipals / interest-bearing time deposits		308			253			382
Loss on sales of available-for-sale securities		-			293			-
Total income		44,593			23,746			9,182
Expenses
Interest		1,588			743			-
Operating expenses		1,176			1,335			923
Total expenses		2,764			2,078			923
Income Before Income Taxes and Equity in    Undistributed Earnings of Subsidiaries		41,829			21,668			8,259
Income Taxes (Benefit)		(535	)		(347	)		(184	)
		42,364			22,015			8,443
Equity in undistributed earnings of subsidiaries		(9,849	)		1,480			11,652
Net Income		32,515			23,495			20,095
Other Comprehensive Income (Loss):
Unrealized gains (losses) on securities, net of taxes		(35,049	)		(8,881	)		4,599
Comprehensive Income (Loss)	$	(2,534	)	$	14,614		$	24,694

106

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Statements of Cash Flows
	(In Thousands)
	2022			2021			2020
Cash Flows from Operating Activities
Net income	$	32,515		$	23,495		$	20,095
Adjustments to reconcile net income to net cash    provided by operating activities:
Equity in undistributed net income		9,849			(1,480	)		(11,652	)
Amortization of premiums on available-for-sale securities, net		61			81			154
Amortization of subordinated notes issuance fees		116			49			-
Stock-based compensation expense		899			822			1,024
Director stock awards		120			73			48
Gain on sale of available-for-sale securities		-			(293	)		-
Changes in assets and liabilities:
Other assets and liabilities		2,560			(456	)		1,742
Net cash provided by operating activities		46,120			22,291			11,411
Cash Flows from Investing Activities
Activity in available-for-sale securities:
Maturities, prepayments and calls		1,540			795			385
Sales		-			7,773			-
Purchases		(398	)		-			(745	)
Activity in certificates of deposit
Maturities		1,234			493			-
Purchases		(498	)		-			-
Cash used for acquisitions		(9,806	)		(79,235	)		-
Net cash used in investing activities		(7,928	)		(70,174	)		(360	)
Cash Flows from Financing Activities
Proceeds (repayments) of other borrowings		(30,000	)		35,000			-
Purchase of treasury stock		(308	)		(338	)		(383	)
Proceeds from issuance of subordinated notes		-			34,421			-
Payment of dividends		(10,276	)		(7,670	)		(7,186	)
Net cash provided by (used in) financing activities		(40,584	)		61,413			(7,569	)
Net Change in Cash and Cash Equivalents		(2,392	)		13,530			3,482
Cash and Cash Equivalents - Beginning of year		19,293			5,763			2,281
Cash and Cash Equivalents - End of year	$	16,901		$	19,293		$	5,763

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107

Farmers & Merchants Bancorp, Inc. and Subsidiaries
	Notes to Consolidated Financial Statements
	December 31, 2022, 2021, 2020

Note 19 – Quarterly Financial Data

Quarterly Financial Data - UNAUDITED
	Quarter Ended in 2022
	Mar 31			June 30			Sep 30			Dec 31
Summary of Income:
Interest income	$	21,899		$	23,911		$	25,847		$	29,492
Interest expense		2,116			2,047			3,264			6,935
Net Interest Income		19,783			21,864			22,583			22,557
Provision for loan loss		580			1,628			1,637			755
Net interest income after provision of loan loss		19,203			20,236			20,946			21,802
Other income (expense)		(9,150	)		(9,915	)		(9,739	)		(12,908	)
Net income before income taxes		10,053			10,321			11,207			8,894
Income taxes		1,951			2,050			2,253			1,706
Net income	$	8,102		$	8,271		$	8,954		$	7,188
Earnings per Common Share	$	0.62		$	0.63		$	0.68		$	0.53
Average common shares outstanding		12,955,107			12,957,126			12,983,307			13,606,876

	Quarter Ended in 2021
	Mar 31			June 30			Sep 30			Dec 31
Summary of Income:
Interest income	$	16,765		$	17,530		$	20,122		$	22,423
Interest expense		1,728			1,554			1,672			2,388
Net Interest Income		15,037			15,976			18,450			20,035
Provision for loan loss		1,700			641			659			444
Net interest income after provision for loan loss		13,337			15,335			17,791			19,591
Other income (expense)		(7,368	)		(9,033	)		(10,247	)		(9,909	)
Net income before income taxes		5,969			6,302			7,544			9,682
Income taxes		1,060			1,319			1,624			1,999
Net income	$	4,909		$	4,983		$	5,920		$	7,683
Earnings per Common Share	$	0.44		$	0.44		$	0.53		$	0.59
Average common shares outstanding		11,197,012			11,191,043			11,209,732			13,046,299

Note 20 – Subsequent Events

On January 24, 2023, the Company announced the authorization by its Board of Directors for the Company’s repurchase, either on the open market, or in privately negotiated transactions, of up to 650,000 shares of its outstanding common stock commencing January 24, 2023 and ending December 31, 2023.

108

ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTING AND FINANCIAL DISCLOSURE

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

ITEM 9a. CONTROLS AND PROCEDURES

Management Report Regarding

Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2022, pursuant to Exchange Act 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2022, in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings.

MANAGEMENT REPORT REGARDING INTERNAL CONTROL AND

COMPLIANCE WITH DESIGNATED LAWS AND REGULATIONS

Management of Farmers & Merchants Bancorp, Inc. and its subsidiary is responsible for preparing the Bank’s annual financial statements. Management is also responsible for establishing and maintaining internal control over financial reporting presented in conformity with both generally accepted accounting principles and regulatory reporting in conformity with the Federal Financial Institutions Examination Council Instructions for Consolidated Reports of Condition and Income (call report instructions). The Bank’s internal control contains monitoring mechanisms, and actions are taken to correct deficiencies identified.

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

It is also management’s responsibility to ensure satisfactory compliance with all designated laws and regulations and in particular, those laws and regulations concerning loans to insiders. The federal laws concerning loans to insiders are codified at 12 USC 375a and 375b, and the federal regulations are set forth at 12 CFR 23.5, 31, and 215.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control – Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2022.

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9b. OTHER INFORMATION

None.

ITEM 9c. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

109

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

BOARD OF DIRECTORS

The information called for herein is presented below:

Name	Age	Principal Occupation or Employment for Past Five Years	Year First Became Director
Andrew J. Briggs	68	First Sr. Vice President of Business Development/Indiana	2019
		The Farmers & Merchants State Bank
Eugene N. Burkholder	70	President, Falor Farm Center, Inc.	2012
Lars B. Eller	56	President and CEO of the Company and	2018
		The Farmers & Merchants State Bank
Jo Ellen Hornish	69	CEO, Hornish Bros, Inc. / Fountain City Leasing, Inc. / Advantage Powder Coating, Inc.	2013
Jack C. Johnson	70	President, Hawk’s Clothing, Inc.	1991
Lori A. Johnston	61	President, ProMedica Insurance Corporation	2020
Dr. Marcia S. Latta	61	Vice President of University Advancement, The University of Findlay	2009
Steven J. Planson	63	President, Planson Farms, Inc.	2008
Kevin J. Sauder	62	President, Chief Executive Officer, Sauder Woodworking Co.	2004
Frank R. Simon	53	Founder & Managing Member / Attorney	2021
		Simon PLC Attorneys & Counselors
Dr. K. Brad Stamm	70	President and Educational Consultant of	2016
		Stamm Management Group
David P. Vernon	56	Owner, Licensed Funeral Director & Embalmer	2021
		Vernon Family Funeral Homes

Directors are elected annually at the annual meeting of shareholders.

110

EXECUTIVE OFFICERS

Name	Age	Principal Occupation & Offices Held with Corporation & Bank for Past Five Years
Jack C. Johnson	70	Chairman
Lars B. Eller	56	President and Chief Executive Officer (“PEO”) (1) (2)
Barbara J. Britenriker	61	Executive Vice President Chief Financial Officer (“PFO”) (1) and Chief Retail Banking Officer (3)
Rex D. Rice	64	Executive Vice President and Chief Lending Officer (4)
Benet S. Rupp	57	Executive Vice President and Chief Administrative Officer (5)

___________________________________________________________________________________________________________________________________

(1) The designation PEO means principal executive officer and PFO means principal financial officer under the rules of the SEC.

(2) From 2013-2017, Mr. Eller was Executive Vice President and Chief Retail Banking Officer of Royal Bank America in Philadelphia. From January 1, 2018, until June 30, 2018, Mr. Eller was a consultant for Cambridge Savings Bank in Massachusetts.

(3) Ms. Britenriker was appointed to serve as the Chief Retail Banking Officer of the Bank on January 7, 2019 and will also remain as the Chief Financial Officer of the Company.

(4) Mr. Rice was the Executive Vice President and Senior Commercial Banking Manager until January 31, 2020. Mr. Rice assumed the position of Chief Lending Officer of the Bank effective upon the retirement of Todd Graham as of February 1, 2020.

(5) Ms. Rupp joined the Company in June 2019 and was the Sr. Vice President and Chief People Officer until August 23, 2022. Ms. Rupp was appointed to serve as the Executive Vice President and Chief Administrative Office of the Bank on August 23, 2022.

Any remaining information required by Item 401 of Regulation S-K is presented in the proxy statement to be furnished in connection with the solicitation of proxies on behalf of the Board of Directors of the Registrant for use at its Annual Meeting to be held on April 17, 2023, and is incorporated herein by reference to the sections of the proxy statement captioned "Nominations for Members of the Board of Director,” “Our Board Composition” and “PROPOSAL ONE – Election of Directors and Information Concerning Directors and Officers.” The information called for under Item 405 of Regulation S-K and called for under paragraphs (d)(4) and (d)(5) of Item 407 is presented in the proxy statement to be furnished in connection with the solicitation of proxies on behalf of the Board of Directors of the Registrant for use at its Annual Meeting to be held on April 17, 2023, and is incorporated herein by reference to the sections of the proxy statement captioned “Delinquent Section 16(a) Reports,” “Audit Committee Report” and “Committees of the Board of Directors.”

The Board of Directors of the Company adopted a Code of Business Conduct and Ethics (the “Code”) at its meeting on February 13, 2004. While the Sarbanes-Oxley Act of 2002 mandates the adoption of a code of ethics for the most senior executive officers of all public companies, the Code adopted by the Corporation's Board of Directors is broader in the activities covered and applies to all officers, directors and employees of the Corporation and the Bank, including the chief executive officer, chief financial officer, principal accounting officer and other senior officers performing accounting, auditing, financial management or similar functions. The administration of the Code has been delegated to the Audit Committee of the Board of Directors, a Committee comprised entirely of “independent directors.” The Code addresses topics such as compliance with laws and regulations, honest and ethical conduct, conflicts of interest, confidentiality and protection of Corporation assets, fair dealing and accurate and timely periodic reports, and also provides for enforcement mechanisms. The Board and management of the Corporation intends to continue to monitor not only the developing legal requirements in this area, but also the best practices of comparable companies, to assure

111

that the Corporation maintains sound corporate governance practices in the future. Annual testing and review of the Code is conducted and attested to by signatures of all officers and directors of the Company.

A copy of the Corporation's Code is available on the website of the Bank (www.fm.bank). In addition, a copy of the Code is available to any shareholder free of charge upon request. Shareholders desiring a copy of the Code should address written requests to Mr. Lars B. Eller, President, Chief Executive Officer of Farmers & Merchants Bancorp, Inc., 307 North Defiance Street, Archbold, Ohio 43502, and are asked to mark Code of Business Conduct and Ethics on the outside of the envelope containing the request.

[Remainder of this page intentionally left blank.]

112

ITEM 11. EXECUTIVE COMPENSATION

The information called for herein by Item 402 and paragraphs (e)(4) and (e)(5) of Item 407, Regulations S-K is presented in the proxy statement to be furnished in connection with the solicitation of proxies on behalf of the Board of Directors of the Registrant for use at its Annual Meeting to be held on April 17, 2023, and is incorporated herein by reference to the sections of the proxy statement captioned “Compensation Discussion and Analysis,” “Compensation Committee Report on Executive Compensation,” and “Related Party Transactions.”

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information called for by Item 403 of Regulation S-K is presented in the proxy statement to be furnished in connection with the solicitation of proxies on behalf of the Board of Directors of the Registrant for use at its Annual Meeting to be held Monday, April 17, 2023 and is incorporated herein by reference to the section of the proxy statement captioned “Security Ownership of Certain Beneficial Owners and Named Executive Officers.”

On April 16, 2015 the Company’s shareholders approved the Farmers & Merchants Bancorp, Inc. 2015 Long-Term Stock Incentive Plan (which replaced the expired 2005 Long-Term Stock Incentive Plan). The plan authorizes the issuance of up to 1,600,000 (adjusted for a two-for-one stock split) of the Company’s common shares in the form of stock options, restricted stock, performance shares, and unrestricted stock to employees of the Company and its subsidiaries. To date, the Company has only made awards of restricted stock under the Plan, which awards are subject to time vesting. This requires the executive or employee to remain employed with the Company or the Bank, as the case may be, until the awards have vested, or such shares of restricted stock will be forfeited. During 2022, 56,496 shares were awarded to 109 employees and 8,000 were forfeited under its long term incentive plan. At year-end, 2022, the Company held 956,003 shares in Treasury stock and 128,952 in unearned stock awards.

The Compensation Committee of the Company has determined that it is appropriate to award shares of the common stock of the Company to Outside Directors and Employees that are officers of the Company or the Bank who also serve as Directors of the Company and the Bank as a portion of their retainer for services rendered as Directors of the Company and the Bank. The Committee believes that it is appropriate to award the Directors shares equal to a specific dollar amount, rounded to the nearest whole share on an annual basis commencing on June 5, 2020 and thereafter on the first Friday of June in each year. Directors receive a prorated dollar value of shares for a partial year of service. The value for the shares is to be based upon the closing price for shares on June 4, 2020 and thereafter on the first Thursday in June each year. On June 5, 2020, each Director received approximately $4,000 worth of shares which equated to 176 shares. On November 20, 2020, a new director received 20 prorated shares. On June 4, 2021, ten directors received approximately $6,000 worth of shares which equated to 272 shares while four directors received a prorated value of shares. On October 1, 2021, a new director received 68 prorated shares. On June 3, 2022, twelve directors each received $10,013 which equated to 240 shares.

	Equity Compensation Plan Information
	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	( a )		( b )		( c )
Equity compensation plans approved by    security holders		-	$	-		1,302,590
Equity compensation plans not approved by    security holders		-		-		-
Total		-		-		1,302,590

113

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information called for herein by Item 404 and paragraph (a) of Item 407 is presented in the proxy statement to be furnished in connection with the solicitation of proxies on behalf of the Board of Directors of the Registrant for use at its Annual Meeting to be held on April 17, 2023, and is incorporated herein by reference to the sections of the proxy statement captioned “Related Party Transactions.”

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information called for by this Item is presented in the proxy statement to be furnished in connection with the solicitation of proxies on behalf of the Board of Directors of the Registrant for use at its Annual Meeting to be held on April 17, 2023, and is incorporated herein by reference to the section of the proxy statement captioned “Selection of Auditors/Principal Accounting Firm Fees.”

The opinion related to the financial statements in the annual report was provided by FORVIS, LLP (formerly BKD, LLP) from Fort Wayne, Indiana. The Public Company Accounting Oversight Board (PCAOB) ID number for FORVIS, LLP is 686.

[Remainder of this page intentionally left blank.]

114

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES

a.	The Following documents are filed as part of this report.
	(1)	Financial Statements (included in this 10-K under Item 8)
		Report of Independent Accountants
		Consolidated Balance Sheets
		Consolidated Statements of Income
		Consolidated Statements of Changes in Shareholders’ Equity
		Consolidated Statements of Cash Flows
		Note to Consolidated Financial Statements
	(2)	Financial Statement Schedules
		Five Year Summary of Operations
	(2.1)	Agreement and Plan of Merger dated June 14, 2022 (incorporated by reference to Exhibit 2.1 to Registrant's Current Report on Form 8-K filed with the Commission on June 15, 2022).
b.	Exhibits Required by Item 601 of Regulation S-K
	(3.1)	Amended Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q filed with the Commission on October 25, 2017).
	(3.2)	Code of Regulations of the Registrant (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q that was filed with the Commission on July 26, 2017).
	(4.1)	Description of Registrant's Common Stock (incorporated by reference to Exhibit 4.1 to Registrant's Annual Report on Form 10-K filed with the Commission on February 26, 2020).
	(4.2)	Form of 3.25% Fixed to Floating Rate Subordinated Note due July 30, 2031 (included as Exhibit A to the Purchase Agreement filed as Exhibit 10.6 hereto).
	(10.1)	Form of Change in Control Agreement executed by and between the Company and Barbara J. Britenriker on December 26, 2012 (incorporated by reference to Exhibit 10.1 to the Annual Report on Form 10-K filed with the Commission on February 25, 2013).
	(10.2)	Form of Change in Control Agreement executed by and between the Company and Rex D. Rice on December 26, 2012 (incorporated by reference to Exhibit 10.2 to the Annual Report on Form 10-K filed with the Commission on February 25, 2013).
	(10.3)	Employment Agreement executed by and between The Farmers & Merchants State Bank and Lars B. Eller on September 1, 2021 (incorporated by reference to Exhibit 10.1 to Registrant’s Report on Form 8-K filed with the Commission on August 18, 2021).
	(10.4)	Farmers & Merchants Bancorp, Inc. 2015 Long-Term Stock Incentive Plan (incorporated by reference to Appendix A to Registrant’s Definitive 14A Proxy Statement, File No. 000-14492, filed with the Commission on March 16, 2015).
	(10.5)	Form on Restricted Stock Agreement (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed with the Commission on October 27, 2005).
	(10.6)	Form of Subordinated Note Purchase Agreement, dated July 30, 2021, by and among Farmers & Merchants Bancorp, Inc, and the Purchasers (as defined therein) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Commission on August 2, 2021).
	(10.7)	Form of Change in Control Agreement executed by and between the Company and Benet S. Rupp on July 1, 2019 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q that was filed with the Commission on October 25, 2022).
	(21)	Subsidiaries of Farmers & Merchants Bancorp, Inc.
	(23)	Consent of FORVIS, LLP
	(31.1)	Certification of the Chief Executive Officer Required under Rule 13(a)-14(a)/15d-14(a)
	(31.2)	Certification of the Chief Financial Officer Required under Rule 13(a)-14(a)/15d-14(a)
	(32.1)	Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	(32.2)	Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

115

101.INS	Inline XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. (1)
101.SCH	Inline XBRL Taxonomy Extension Schema Document (1)
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document (1)
104	The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, has been formatted in Inline XBRL.

(1) Pursuant to Rule 406T of Regulation S-T, the interactive Data Files in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

ITEM 16. FORM 10-K SUMMARY

None.

116

FARMERS & MERCHANTS BANCORP, INC.

Signatures

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

By	/s/ Lars B. Eller	Date:	February 21, 2023
	Lars B. Eller
	Chief Executive Officer
	President

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

/s/ Lars B. Eller	Date:	February 21, 2023	/s/ Barbara J. Britenriker	Date:	February 21, 2023
Lars B. Eller			Barbara J. Britenriker
Chief Executive Officer (Principal Executive Officer)			Chief Financial Officer
			(Principal Financial Officer/Principal Accounting Officer)
/s/ Andrew J. Briggs	Date:	February 21, 2023
Andrew J. Briggs, Director
/s/ Eugene N. Burkholder	Date:	February 21, 2023	/s/ Jo Ellen Hornish	Date:	February 21, 2023
Eugene N. Burkholder, Director			Jo Ellen Hornish, Director
/s/ Jack C. Johnson	Date:	February 21, 2023	/s/ Lori A. Johnston	Date:	February 21, 2023
Jack C. Johnson, Director			Lori A. Johnston, Director
/s/ Marcia S. Latta	Date:	February 21, 2023	/s/ Steven J. Planson	Date:	February 21, 2023
Marcia S. Latta, Director			Steven J. Planson, Director
/s/ Kevin J. Sauder	Date:	February 21, 2023	/s/ Frank R. Simon	Date:	February 21, 2023
Kevin J. Sauder, Director			Frank R. Simon, Director
/s/ K. Brad Stamm	Date:	February 21, 2023	/s/ David P. Vernon	Date:	February 21, 2023
K. Brad Stamm, Director			David P. Vernon, Director

117

EX-21

Exhibit 21

SUBSIDIARIES OF FARMERS & MERCHANTS BANCORP, INC

FARMERS & MERCHANTS STATE BANK

FARMERS & MERCHANTS RISK MANAGEMENT, INC.

[Remainder of this page intentionally left blank.]

1

EX-23

Exhibit 23

 

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in this Registration Statement on Form S-8 (SEC File No. 333-248781) of our report dated February 24, 2023, on our audits of the consolidated financial statements of Farmers & Merchants Bancorp, Inc. as of December 31, 2022 and 2021, and for the three-year period ended December 31, 2022, which report is included in Farmers & Merchants Bancorp, Inc.’s Annual Report on Form 10-K.

FORVIS, LLP

Fort Wayne, Indiana

February 24, 2023

[Remainder of this page intentionally left blank.]

1

EX-31

Exhibit 31.1

CERTIFICATIONS

I, Lars B. Eller, President and Chief Executive Officer of Farmers & Merchants Bancorp, Inc., certify that:

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

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(s) 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(s) 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: February 24, 2023
	/s/ Lars B. Eller
	Lars B. Eller
	President and CEO

1

EX-31

Exhibit 31.2

CERTIFICATIONS

I, Barbara J. Britenriker, Chief Financial Officer of Farmers & Merchants Bancorp, Inc., certify that:

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

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(s) 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(s) 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: February 24, 2023	/s/ Barbara J. Britenriker
	Barbara J. Britenriker
	Chief Financial Officer

1

EX-32

1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ENACTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

FARMERS & MERCHANTS BANCORP, INC.

In connection with the Annual Report on Form 10-K of Farmers & Merchants Bancorp, Inc. for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (the “Report”), I, Lars B. Eller, Chief Executive Officer, of the Company, certify, pursuant to 18 U.S.C. 1350, as added by 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirement of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and;

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

Date: February 24, 2023	/s/ Lars B. Eller
	Lars B. Eller
	Chief Executive Officer

A signed original of this written statement required by section 906 has been provided to Farmers & Merchants Bancorp, Inc. and will be retained by Farmers & Merchants Bancorp, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

1

EX-32

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ENACTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

FARMERS & MERCHANTS BANCORP, INC.

In connection with the Annual Report on Form 10-K of Farmers & Merchants Bancorp, Inc. for the year ended December 31, 2022, as filed with the Securities and Exchange Commission (the “Report”), I, Barbara J. Britenriker, Chief Financial Officer, of the Company, certify, pursuant to 18 U.S.C. 1350, as added by 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirement of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and;

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

Date: February 24, 2023	/s/ Barbara J. Britenriker
	Barbara J. Britenriker
	Chief Financial Officer

A signed original of this written statement required by section 906 has been provided to Farmers & Merchants Bancorp, Inc. and will be retained by Farmers & Merchants Bancorp, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

1

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Document and Entity Information - USD ($)

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Feb. 17, 2023

Jun. 30, 2022

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Document Period End Date

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Entity Registrant Name

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Entity Central Index Key

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Entity Shell Company

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Entity Tax Identification Number

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Entity Address, City or Town

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Auditor Location

Fort Wayne, Indiana

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Documents Incorporated by Reference

Part III of Form 10-K – Portions of the definitive Proxy Statement for the 2023 Annual Meeting of Shareholders of Farmers & Merchants Bancorp, Inc.

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Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Assets
Cash and due from banks	$ 83,085	$ 135,485
Federal funds sold	1,324	45,338
Total cash and cash equivalents	84,409	180,823
Interest-bearing time deposits	4,442	10,913
Securities - available-for-sale	390,789	429,931
Other securities, at cost	9,799	8,162
Loans held for sale	827	7,714
Loans, net	2,336,074	1,841,177
Premises and equipment	28,381	26,913
Construction in progress	278
Goodwill	86,358	80,434
Mortgage servicing rights	3,549	3,157
Other real estate owned		159
Bank owned life insurance	33,073	27,558
Other assets	37,372	21,359
Total Assets	3,015,351	2,638,300
Deposits
Noninterest-bearing	532,794	473,689
Interest-bearing
NOW accounts	750,887	650,466
Savings	627,203	597,828
Time	557,980	471,479
Total deposits	2,468,864	2,193,462
Federal funds purchased and securities sold under agreement to repurchase	54,206	29,268
Federal Home Loan Bank (FHLB) advances	127,485	24,065
Other borrowings	10,000	40,000
Subordinated notes, net of unamortized issuance costs	34,586	34,471
Dividend payable	2,832	2,461
Accrued expenses and other liabilities	19,238	17,406
Total liabilities	2,717,211	2,341,133
Commitments and Contingencies
Stockholders' Equity
Common stock - No par value 20,000,000 shares authorized; issued and outstanding 14,564,425 shares 12/31/22 and 14,063,999 shares 12/31/21	135,497	122,674
Treasury stock - 956,003 shares 12/31/22, 997,766 shares 12/31/21	(11,573)	(11,724)
Retained earnings	212,449	189,401
Accumulated other comprehensive loss	(38,233)	(3,184)
Total stockholders' equity	298,140	297,167
Total Liabilities and Stockholders' Equity	$ 3,015,351	$ 2,638,300

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Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Common stock, no par value	$ 0	$ 0
Common stock, shares authorized	20,000,000	20,000,000
Common stock, shares issued	14,564,425	14,063,999
Common stock, shares outstanding	14,564,425	14,063,999
Treasury Stock, shares	956,003	997,766

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Consolidated Statements of Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Interest Income
Loans, including fees	$ 94,264	$ 71,645	$ 65,317
Debt securities:
U.S. Treasury and government agencies	4,225	3,496	3,369
Municipalities	1,415	1,170	1,079
Dividends	318	174	142
Federal funds sold	21	31	20
Other	906	324	242
Total interest income	101,149	76,840	70,169
Interest Expense
Deposits	9,883	5,418	8,638
Federal funds purchased and securities sold under agreements to repurchase	1,197	649	775
Borrowed funds	2,160	785	980
Subordinated notes	1,122	490
Total interest expense	14,362	7,342	10,393
Net Interest Income Before Provision for Loan Losses	86,787	69,498	59,776
Provision for Loan Losses	4,600	3,444	6,981
Net Interest Income After Provision for Loan Losses	82,187	66,054	52,795
Noninterest Income
Net gain on sale of loans	1,353	3,897	4,022
Net gain on sale of available-for-sale securities		293	270
Total noninterest income	15,537	17,609	16,787
Noninterest Expense
Salaries and wages	22,700	20,184	18,488
Employee benefits	6,903	7,322	5,601
Net occupancy expense	2,566	2,184	2,271
Furniture and equipment	4,207	3,324	3,143
Data processing	3,956	3,501	1,768
Franchise taxes	1,384	1,473	1,346
ATM expense	2,217	1,846	1,690
Advertising	1,646	1,436	1,332
Net (gain) loss on sale of other assets owned	(259)	434	7
FDIC assessment	905	1,073	633
Mortgage servicing rights amortization	145	1,580	1,031
Consulting fees	1,302	1,634	968
Other general and administrative	9,577	8,175	6,098
Total noninterest expense	57,249	54,166	44,376
Income Before Income Taxes	40,475	29,497	25,206
Income Taxes	7,960	6,002	5,111
Net Income	$ 32,515	$ 23,495	$ 20,095
Basic Earnings Per Share	$ 2.46	$ 2.01	$ 1.80
Diluted Earnings Per Share	2.46	2.01	1.80
Dividends Declared	$ 0.8125	$ 0.71	$ 0.66
Customer Service Fees [Member]
Noninterest Income
Noninterest income	$ 9,958	$ 9,671	$ 8,893
Other Service Charges and Fees [Member]
Noninterest Income
Noninterest income	$ 4,226	$ 3,748	$ 3,602

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Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Statement of Comprehensive Income [Abstract]
Net Income	$ 7,188	$ 8,954	$ 8,271	$ 8,102	$ 7,683	$ 5,920	$ 4,983	$ 4,909	$ 32,515	$ 23,495	$ 20,095
Other Comprehensive Income (Loss) (Net of Tax):
Net unrealized gain (loss) on available-for-sale securities									(44,366)	(10,948)	6,091
Reclassification adjustment for realized gain on sale of available-for-sale securities										(293)	(270)
Net unrealized gain (loss) on available-for-sale securities									(44,366)	(11,241)	5,821
Tax expense (benefit)									(9,317)	(2,360)	1,222
Other comprehensive income (loss)									(35,049)	(8,881)	4,599
Comprehensive Income (Loss)									$ (2,534)	$ 14,614	$ 24,694

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Consolidated Statements of Changes to Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock [Member]	Treasury Stock [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Beginning balance at Dec. 31, 2019	$ 230,258	$ 81,535	$ (12,456)	$ 160,081	$ 1,098
Beginning balance, shares at Dec. 31, 2019		11,136,935
Net income	20,095			20,095
Other comprehensive income (loss)	4,599				4,599
Issuance of common stock in acquisition	825		500	325
Issuance of common stock in acquisition, shares		40,049
Purchase of treasury stock	(383)		(383)
Purchase of treasury stock, shares		(16,779)
Issuance of restricted stock (Net of forfeitures)	1	$ (755)	383	373
Issuance of restricted stock (Net of forfeitures), Shares		35,207
Stock-based compensation expense	1,024	$ 1,024
Director stock awards	48		24	24
Director stock awards, shares		2,132
Cash dividends declared	(7,307)			(7,307)
Ending balance at Dec. 31, 2020	249,160	$ 81,804	(11,932)	173,591	5,697
Ending balance, shares at Dec. 31, 2020		11,197,544
Net income	23,495			23,495
Other comprehensive income (loss)	(8,881)				(8,881)
Issuance of common stock in acquisition	41,078	$ 41,078
Issuance of common stock in acquisition, shares		1,833,845
Purchase of treasury stock	(338)		(338)
Purchase of treasury stock, shares		(14,611)
Issuance of restricted stock (Net of forfeitures)		$ (1,030)	507	523
Issuance of restricted stock (Net of forfeitures), Shares		46,175
Stock-based compensation expense	822	$ 822
Director stock awards	73		39	34
Director stock awards, shares		3,280
Cash dividends declared	(8,242)			(8,242)
Ending balance at Dec. 31, 2021	297,167	$ 122,674	(11,724)	189,401	(3,184)
Ending balance, shares at Dec. 31, 2021		13,066,233
Net income	32,515			32,515
Other comprehensive income (loss)	(35,049)				(35,049)
Issuance of common stock in acquisition	13,443	$ 13,446	(3)
Issuance of common stock in acquisition, shares		500,426
Issuance of common stock in acquisition, net off repurchases		500,301
Purchase of treasury stock	(308)		(308)
Purchase of treasury stock, shares		(9,488)
Issuance of restricted stock (Net of forfeitures)		$ (1,522)	428	1,094
Issuance of restricted stock (Net of forfeitures), Shares		48,496
Stock-based compensation expense	899	$ 899
Director stock awards	120		34	86
Director stock awards, shares		2,880
Cash dividends declared	(10,647)			(10,647)
Ending balance at Dec. 31, 2022	$ 298,140	$ 135,497	$ (11,573)	$ 212,449	$ (38,233)
Ending balance, shares at Dec. 31, 2022		13,608,422

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Consolidated Statements of Changes to Stockholders' Equity (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Issuance of shares of restricted stock, Shares	56,496	48,750	37,382
Cash dividends declared, per share	$ 0.8125	$ 0.71	$ 0.66
Common Stock [Member]
Issuance of shares of restricted stock, Shares	56,496	48,750	37,382
Issuance of shares of restricted stock, forfeitures	8,000	2,575	2,175
Issuance of shares of common stock in acquisition	500,426	1,833,845	40,049
Issuance of shares, purchase of common stock in acquisition	125

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Cash Flows from Operating Activities
Net income	$ 32,515	$ 23,495	$ 20,095
Adjustments to reconcile net income to net cash from operating activities:
Depreciation	2,739	2,610	2,531
Amortization of premiums on available-for-sale securities, net	2,090	2,203	1,289
Servicing rights amortization and impairment	145	1,580	1,031
Amortization of core deposit intangible	1,011	677	720
Amortization of customer list intangible	123	123	16
Net amortization (accretion) of fair value adjustments	(4,531)	(1,231)	455
Amortization of subordinated note issuance costs	115	50
Stock-based compensation expense	899	822	1,024
Director stock awards	120	73	48
Deferred income taxes	171	(1,805)	(1,691)
Provision for loan loss	4,600	3,444	6,981
Gain on sale of loans held for sale	(1,353)	(3,897)	(4,022)
Originations of loans held for sale	(69,410)	(121,172)	(210,029)
Proceeds from sale of loans held for sale	77,650	125,095	210,559
(Gain) loss on sale of other assets owned	(259)	434	7
Gain on sales of available-for-sale securities		(293)	(270)
Increase in cash surrender value of bank owned life insurance	(691)	(636)	(359)
Gain on bank owned life insurance			(430)
Change in other assets and other liabilities, net	(5,265)	3,169	(573)
Net cash provided by operating activities	40,669	34,741	27,382
Activity in available-for-sale securities:
Maturities, prepayments and calls	31,064	56,310	91,003
Sales		9,292	11,843
Purchases	(38,377)	(170,629)	(183,563)
Activity in other securities, at cost:
Purchases	(1,615)	(670)	(129)
Purchase of bank owned life insurance			(10,000)
Proceeds from bank owned life insurance			816
Change in interest-bearing time deposits	6,471	20,216	(344)
Proceeds from redemption of FHLB stock	1,249	1,522
Proceeds from sales of other assets owned	440	457	226
Additions to premises and equipment	(2,600)	(1,965)	(3,222)
Loan originations and principal collections, net	(395,610)	(167,867)	(84,354)
Net cash used in investing activities	(389,904)	(265,694)	(177,724)
Cash Flows from Financing Activities
Net change in deposits	165,861	170,785	307,648
Net change in federal funds purchased and securities sold under agreements to repurchase	24,938	(971)	(17,834)
Proceeds of FHLB advances	140,000
Repayment of FHLB advances	(37,394)	(157)	(7,493)
Proceeds (Repayment) of other borrowings	(30,000)	40,000
Purchase of treasury stock	(308)	(338)	(383)
Proceeds from issuance of subordinated notes		34,421
Cash dividends paid on common stock	(10,276)	(7,670)	(7,186)
Net cash provided by financing activities	252,821	236,070	274,752
Net Increase (Decrease) in Cash and Cash Equivalents	(96,414)	5,117	124,410
Cash and Cash Equivalents - Beginning of Year	180,823	175,706	51,296
Cash and Cash Equivalents - End of Year	84,409	180,823	175,706
Supplemental cash flow information:
Interest paid	13,748	7,048	10,093
Income taxes paid	7,702	6,150	6,473
Supplemental noncash disclosures:
Transfer of loans to other real estate owned		287	71
Cash dividends declared not paid	2,832	2,461	1,889
Treasury stock repurchased	(308)	(338)	(383)
Ossian Financial Services, Inc. [Member]
Activity in other securities, at cost:
Acquisition, net of cash received		228
Supplemental noncash disclosures:
Fair value of assets acquired		137,058
Cash paid for the capital stock		20,001
Liabilities assumed		117,057
Perpetual Federal Savings Bank [Member]
Activity in other securities, at cost:
Acquisition, net of cash received		(12,588)
Supplemental noncash disclosures:
Fair value of assets acquired		420,162
Less: common stock issued		41,078
Cash paid for the capital stock		59,234
Liabilities assumed		$ 319,850
Peoples Federal Savings And Loan [Member]
Activity in other securities, at cost:
Acquisition, net of cash received	9,074
Supplemental noncash disclosures:
Fair value of assets acquired	141,818
Less: common stock issued	13,446
Treasury stock repurchased	(3)
Cash paid for the capital stock	9,806
Liabilities assumed	$ 118,569
Adams County Financial Resources [Member]
Supplemental noncash disclosures:
Fair value of assets acquired			825
Less: common stock issued			$ 825

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Consolidated Statements of Cash Flows (Parenthetical) $ in Thousands	Apr. 30, 2021 USD ($)
Ossian Financial Services, Inc. [Member]
Purchase of assets	$ 20,001

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 1 - Summary of Significant Accounting Policies

Nature of Operations

The Farmers & Merchants Bancorp, Inc. (the Company) through its bank subsidiary, The Farmers & Merchants State Bank (the Bank) provides a variety of financial services to individuals and small businesses through its offices in Northwest Ohio and Northeast Indiana.

Consolidation Policy

The consolidated financial statements include the accounts of Farmers & Merchants Bancorp, Inc. and its wholly-owned subsidiaries, The Farmers & Merchants State Bank (the Bank), a commercial banking institution and Farmers & Merchants Risk Management, Inc. (the Captive), a Captive insurance company. All significant inter-company balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of mortgage servicing rights and the valuation of goodwill. Actual results could differ from those estimates.

The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. In connection with the determination of the estimated losses on loans, management obtains independent appraisals for significant collateral.

The Bank’s loans are generally secured by specific items of collateral including real property, consumer assets, and business assets. Although the Bank has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent on local economic conditions in the agricultural industry.

While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the Bank to recognize additional losses based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans may change materially in the near term. However, the amount of the change that is reasonably possible cannot be estimated.

Cash and Cash Equivalents

For purposes of the consolidated statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. This includes cash on hand, amounts due from banks, and federal funds sold. Generally, federal funds sold are outstanding for one day periods.

Restrictions on Cash and Amounts Due from Banks

Effective March 26, 2020, the Bank is no longer required to maintain average balances on hand with the Federal Reserve Bank. The Company and its subsidiaries maintain cash balances with high quality financial institutions. At times such balances may be in excess of the federally insured limits.

Securities

Debt securities are classified as available-for-sale. Securities available-for-sale are carried at fair value with unrealized gains and losses reported in other comprehensive income (loss). Net realized gains and losses on securities available for sale are included in noninterest income and, when applicable, are reported as a reclassification adjustment, net of

tax, in other comprehensive income (loss). Gains and losses on sales of securities are determined on the specific-identification method.

Declines in the fair value of securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. The related write-downs are included in earnings as realized losses.

Other Securities

Other Securities consist of stock in the Federal Home Loan Banks of Cincinnati and Indianapolis (the “FHLBs”), which is held to enable the Bank to conduct business with the entities. The FHLBs sell and purchase their stock at par. The FHLBs stock is carried at cost and held as collateral security for all indebtedness of the Bank to the Federal Home Loan Bank. The FHLBs stock is evaluated for impairment as conditions warrant. Other Securities also include the Bank’s capital contributions to four Ohio Equity Funds for Housing Limited Partnership.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at the amount of unpaid principal, reduced by unearned discounts, unamortized premiums or discounts on purchased loans, and deferred loan fees and costs, as well as, by the allowance for loan losses. Interest income is accrued on a daily basis based on the principal outstanding.

Generally, a loan is classified as nonaccrual and the accrual of interest income is generally discontinued when a loan becomes ninety days past due as to principal or interest and these loans are placed on a “cash basis” for purposes of income recognition. Management may elect to continue the accrual of interest when the estimated net realizable value of collateral is sufficient to cover the principal and accrued interest, and the loan is in the process of collection. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest receivable is charged against income.

Loan origination and commitment fees and certain direct loan origination costs are deferred and amortized as a net adjustment to the related loan’s yield. The Bank is generally amortizing these costs over the contractual life of such loans.

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses charged to income. Loans deemed to be uncollectable and changes in the allowance relating to loans are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based on management’s periodic review of the collectability of the loans in light of historical experiences, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are subject to revision as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. The unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and agricultural loans by either the present value of expected future cash flows discounted at the loan's effective interest rate or the fair value of the collateral if the loan is collateral dependent.

At 90 days delinquent, secured consumer loans are charged down to the value of the collateral, if repossession of the collateral is assured and/or in the process of repossession. Consumer mortgage loan deficiencies are charged down upon the sale of the collateral or sooner upon the recognition of collateral deficiency.

For the majority of the Bank’s impaired loans, the Bank will apply the fair value of collateral or use a measurement incorporating the present value of expected future cash flows discounted at the loan’s effective rate of interest. To determine fair value of collateral, collateral asset values securing an impaired loan are periodically evaluated. Maximum time of re-evaluation is every 12 months for chattels and titled vehicles and every two years for real estate. In this process, third party evaluations are obtained. Until such time that updated appraisals are received, the Bank may discount the collateral value used.

Large groups of homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer loans for impairment, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

For more information regarding the actual composition and classification of loans involved in the establishment of the allowance for loan loss, please see Note 4 provided here with the notes to consolidated financial statements.

Loans Held for Sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized in a valuation allowance by charges to income.

Servicing Assets

Servicing assets are recognized as separate assets when rights are acquired through purchase or sale of financial assets. Capitalized servicing rights are amortized into noninterest expense in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as interest rates and terms. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the capitalized amount for the stratum. Fees received for servicing loans owned by investors are based on a percentage of the outstanding monthly principal balance of such loans and are included in operating income as loan payments are received. Costs of servicing loans are charged to expense as incurred.

Goodwill and Other Intangible Assets

Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed for impairment at least annually. If possible impairment is likely, the Bank will utilize the assistance of an independent third party for an appraisal and any such impairment is recognized in the period identified. Periodically, the Bank will have an independent third party assess the possibility of impairment of Goodwill. The goodwill impairment analysis consisted

of a first step goodwill impairment test which was used to identify potential impairment by comparing the fair value of the relevant reporting entity with its carrying value, including goodwill. The analysis was performed under guidance of FASB ASC 350. In the quantitative testing completed as of November 30, 2022, the excess fair value of capital was $427.5 million or 137.2% over the carrying value and was over 4.9 times the value of goodwill being carried. Therefore, the Bank concluded it is unlikely impairment of goodwill has occurred from the goodwill established from the Bank’s acquisition of Knisely on December 31, 2007, the acquisition of Bank of Geneva on January 1, 2019, the acquisition of Ossian State Bank on April 30, 2021, the acquisition of Perpetual Federal Savings Bank on October 1, 2021 and the acquisition of Peoples Federal Savings and Loan on October 1, 2022.

Other intangible assets consist of core deposit and customer list intangible assets arising from business acquisitions. They are initially measured at fair value and then are amortized on a straight line method over their estimated useful lives and evaluated for impairment. These assets are included in other assets on the consolidated balance sheets.

Off Balance Sheet Instruments

In the ordinary course of business, the Bank has entered into commitments to extend credit, including commitments under credit card arrangements, commercial letters of credit and standby letters of credit. Such financial instruments are recorded when they are funded.

Foreclosed Real Estate

Foreclosed real estate held for sale is carried at the lower of fair value minus estimated costs to sell, or cost. Costs of holding foreclosed real estate are charged to expense in the current period, except for significant property improvements, which are capitalized. Valuations are periodically performed by management and an allowance is established by a charge to noninterest expense if the carrying value exceeds the fair value minus the estimated costs to sell. Foreclosed real estate is classified as other real estate owned. The net loss from operations of foreclosed real estate held for sale is reported in noninterest expense. The Bank held no other real estate owned at December 31, 2022. At December 31, 2021 the Bank’s holding of other real estate owned totaled $159 thousand.

Bank Premises and Equipment

Land is carried at cost. Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is based on the estimated useful lives of the various properties and is computed using straight line and accelerated methods. Costs for maintenance and repairs are charged to operations as incurred. Gains and losses on dispositions are included in current operations.

Bank Owned Life Insurance

Bank owned life insurance policies are carried at their cash surrender value. The Bank recognizes tax-free income from the periodic increases in the cash surrender value of these policies and from death benefits.

Revenue Recognition

Accounting Standards Codification 606, “Revenue from Contracts with Customer” (ASC 606) provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue generated from financial instruments, including loans and investment securities, are not included within the scope of ASC 606. The adoption of ASC 606 did not result in a change to the accounting for any of the Company’s revenue streams that

are within scope of the amendments. Revenue-generating activities that are within the scope of ASC 606 that are presented as noninterest income in the Company’s consolidated statements of income include:

oCustomer service fees – these include miscellaneous service fees and transaction-based fees charged for certain services, such as debit card or credit card. Revenue is recognized when the performance obligation is completed, which is generally after a transaction is completed or monthly for account maintenance services.

oOther service charges and fees – these include service fees charged for deposit account maintenance and activity along with transaction-based fees charged for certain services, such as overdraft activities, returned check charges and wire transfers. Revenue is recognized when the performance obligation is completed, which is generally after a transaction is completed or monthly for account maintenance services.

Income Tax

The Company’s income tax expense consists of the following components for federal and state: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in tax expense. Based on management’s analysis, the Company did not have any uncertain tax positions as of December 31, 2022 and 2021. With a few exceptions, the Company is no longer subject to U.S. Federal, state or local examinations by tax authorities for years before 2019.

Earnings Per Share

Basic earnings per share represent income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. See Note 12 for additional information.

Stock-Based Compensation

The fair value of restricted common stock is their fair market value on the date of grant. The fair value of restricted stock is amortized as compensation expense on a straight-line basis over the vesting period of the grants. Compensation expense recognized is included in salaries and wages in the consolidated statements of income.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Corporation – put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Corporation does not maintain effective control over the transferred assets

through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

Treasury Stock

Common stock shares repurchased are recorded at market value on date of purchase. Restricted shares when awarded are removed from treasury stock using the weighted average method.

Other Comprehensive Income (Loss)

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of other comprehensive income (loss).

The components of other comprehensive income (loss) and related tax effects are as follows:

	(In Thousands)
	2022			2021			2020
Net unrealized gain (loss) on available-for-sale    securities	$	(44,366	)	$	(10,948	)	$	6,091
Reclassification adjustment for gain on sale of    available-for-sale securities		-			(293	)		(270	)
Net unrealized gain (loss) on available-for-sale    securities		(44,366	)		(11,241	)		5,821
Tax expense (benefit)		(9,317	)		(2,360	)		1,222
Other comprehensive income (loss)	$	(35,049	)	$	(8,881	)	$	4,599

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

The ASU was effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (i.e., January 1, 2020, for calendar year entities). FASB subsequently approved a delay in adoption for Smaller Reporting Companies. The Company has completed an analysis to determine that it qualifies as a Smaller Reporting Company. As such, adoption can be postponed until periods beginning after December 15, 2022 (i.e., January 1, 2023, for calendar year entities). Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.

The Current Expected Credit Losses (“CECL”) methodology applies to loans held for investment, held to maturity debt securities, and off balance-sheet credit exposures. The ASU allows for several different methods of computing the ALLL: closed pool, vintage, average charge-off, migration, probability of default / loss given default, discounted cash flow, and regression. Based on its analysis of observable data, the Company concluded the average charge-off

method to be the most appropriate and statistically relevant. A 20-year lookback will be utilized as the historical loss period due to its inclusion of several economic cycles and relevance to real estate secured assets.

The Company began working with its third-party service provider to review parallel reports in June 2019. At the end of first quarter 2022, the Company evaluated and refined its methodology and produced a parallel report for the calculation of the ALLL under the ASU guidance. The Company has contracted with a third party to begin an independent validation of its processes and methodology. This validation will be performed on an annual basis.

The ALLL has been computed through 2022 by applying historical loss rates, adjusted for qualitative factors, to pools of loans. Upon implementation of the ASU, the expected loss estimate will be made up of a historical lookback of actual losses applied over the life of the loan portfolio and adjusted for qualitative factors and forecasted losses based on economic and forward-looking data applied over a reasonable and supportable forecast period.

The impact of the adoption of the ASU is estimated to be a one-time cumulative-effect adjustment to our reserves for loans and unfunded commitments in a range between $3 million and $7 million. This estimate may change as the Company continues to improve its processes and methodology.

The qualitative impact of the new accounting standard will still be directed by many of the same factors that impacted the previous methodology for computing the ALLL including, but not limited to, quality and experience of staff, changes in the value of collateral, concentrations of credit in loan types or industries and changes to lending policies. In addition to this, the Company will also use reasonable and supportable forecasts. Examples of this are regression analyses of data from the Federal Open Market Committee quarterly economic projections for change in real GDP and of national unemployment.

The Company does not anticipate any material changes to its business practices as a result of implementing the ASU. The Company adopted ASU 2016-13 on January 1, 2023.

In March 2022, the FASB issued ASU 2022-02 "Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures." This ASU eliminates the accounting guidance on troubled debt restructurings for creditors in ASC 310-40 and requires entities to evaluate all receivable modifications under ASC 310-20 to determine whether a modification made to a borrower results in a new loan or a continuation of the existing loan. The amended guidance adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. The amended guidance also requires disclosure of current period gross charge-offs by year of origination within the vintage disclosures required by ASC 326. The amended guidance is effective for the Company on January 1, 2023, with early adoption permitted. The Company adopted ASU 2022-02 on January 1, 2023.

XML

Business Combination & Asset Purchase

12 Months Ended

Dec. 31, 2022

Business Combinations [Abstract]

Business Combination & Asset Purchase

Note 2 – Business Combination & Asset Purchase

On October 1, 2022, the Company acquired Peoples-Sidney Financial Corporation (PPSF), the bank holding company for Peoples Federal Savings and Loan Bank, a community bank with three full-service offices in Sidney, Anna and Jackson Center, Ohio in addition to a separate drive-thru location in Sidney, Ohio. PPSF shareholders had the opportunity to elect to receive either 0.6597 shares of FMAO stock or $24.00 per share in cash for each PPSF share owned, subject to a requirement under the Merger Agreement that the minimum number of PPSF shares exchanged for Farmers & Merchants Bancorp, Inc. (FMAO) shares in the merger was no less than 758,566. Fractional shares of FMAO common stock were not issued in respect of fractional interests arising from the merger but were paid in cash pursuant to the merger agreement. PPSF had 1,167,025 shares outstanding on October 1, 2022. The share price of FMAO stock on October 1, 2022 was $26.87. Total consideration for the acquisition was approximately $23.2 million consisting of which $9.8 million was in cash and $13.4 million in stock. As a result of the acquisition, the Company will have an opportunity to increase its deposit base in Sidney and the greater Shelby County and reduce transaction costs. The Company also expects to reduce costs through economies of scale.

In 2022, the Company has incurred additional third-party acquisition-related costs of $2.4 million. These expenses are comprised primarily of data processing costs of $1.1 million, consulting fees of $542.9 thousand, employee benefits of $126.5 thousand and other general and administrative expense of $501.0 thousand in the Company’s consolidated statement of income for the year ended December 31, 2022.

Under the acquisition method of accounting, the total purchase was allocated to net tangible and intangible assets based on their current estimated fair values on the date of acquisition. Of the total purchase price of $23.2 million, $6.0 million has been allocated to core deposit intangible included in other assets and is being amortized over seven years on a straight line basis. Goodwill of $5.9 million, resulting from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and Peoples Federal Savings and Loan Bank. Of that total amount, none of the purchase price is deductible for tax purposes. The following table summarizes the consideration paid for Peoples Federal Savings and Loan Bank and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date

Fair Value of Consideration Transferred
	(In Thousands)
Cash	$	9,806
Common Shares (500,426 shares)		13,446
Treasury stock repurchased (125 shares)		(3	)
Total	$	23,249
Recognized amounts of identifiable assets acquired and liabilities assumed
Assets
Cash and cash equivalents	$	18,881
Other securities, at cost		1,271
Loans, net		101,755
Premises and equipment		1,906
Goodwill		5,924
Other assets		12,081
Total Assets Purchased	$	141,818
Liabilities
Deposits
Noninterest bearing	$	7,139
Interest bearing		104,719
Total deposits		111,858
Federal Home Loan Bank (FHLB) advances		896
Accrued expenses and other liabilities		5,815
Total Liabilities Assumed	$	118,569

The fair value of the assets acquired includes loans with a fair value of $101.8 million. The gross principal and contractual interest due under the contracts is $116.1 million of which none is expected to be uncollectible. The loans have a weighted average life of 44.4 months.

The fair value of building and land included in premises and equipment was written up $581 thousand with $597 thousand attributable to the buildings and is being amortized over the remaining life of each building. The combined average remaining life was 12.8 years.

The fair value for certificates of deposit incorporates a valuation amount of $662 thousand which is being amortized over 1.1 years. The fair value of Federal Home Loan Bank (FHLB) advances included a valuation amount of $69 thousand which is being amortized over 5.2 years.

The Company acquired no loans in the acquisition that had evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would be collected.

Changes in accretable yield, or income expected to be collected, are as follows:

	2022
	(In Thousands)
Beginning Balance
Additions		856
Accretion		(58	)
Reclassification from nonaccretable difference		-
Disposals		-
Ending Balance	$	798

On October 1, 2021, the Company acquired Perpetual Federal Savings Bank, (PFSB), a community bank with one full-service office in Urbana, Ohio. Shareholders of PFSB elected to receive either 1.7766 shares of FMAO stock or $41.20 per share in cash for each PFSB share owned, subject to adjustment based upon 1,833,999 shares of FMAO to be issued in the merger. PFSB had 2,470,032 shares outstanding on October 1, 2021. The share price of Farmers & Merchants Bancorp, Inc. (FMAO) stock on October 1, 2021 was $22.40. Total consideration for the acquisition was approximately $100.3 million consisting of $59.2 million in cash and $41.1 million in stock. As a result of the acquisition, the Company increased its deposit base and reduced transaction costs. The Company also reduced costs through economies of scale.

In 2021, the Company incurred additional third-party acquisition-related costs of $1.7 million. These expenses are comprised of employee benefits of $131.5 thousand, data processing costs of $444.9 thousand, consulting fees of $636.8 thousand and other general and administrative expense of $488.3 thousand in the Company’s consolidated statement of income for the year ended December 31, 2021.

In 2022, the Company has incurred additional third-party acquisition-related costs of $148.5 thousand. These expenses are comprised of employee benefits of $90.8 thousand and other general and administrative expense of $57.7 thousand in the Company’s consolidated statement of income for the year ended December 31, 2022.

Under the acquisition method of accounting, the total purchase was allocated to net tangible and intangible assets based on their current estimated fair values on the date of acquisition. Of the total purchase price of $100.3 million, $668 thousand has been allocated to core deposit intangible included in other assets and is being amortized over seven years on a straight line basis. Goodwill of $25.2 million, resulting from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and Perpetual Federal Savings Bank. Of that total amount, none of the purchase price is deductible for tax purposes. The following table summarizes the consideration paid for Perpetual Federal Savings Bank and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

Fair Value of Consideration Transferred
	(In Thousands)
Cash	$	59,234
Common Shares (1,833,845 shares)		41,078
Total	$	100,312
Recognized amounts of identifiable assets acquired and liabilities assumed
Assets
Cash and cash equivalents	$	44,975
Federal funds sold		1,672
Interest-bearing time deposits		6,250
Other securities, at cost		2,794
Loans, net		334,661
Premises and equipment		615
Goodwill		25,220
Other assets		3,975
Total Assets Purchased	$	420,162
Liabilities
Deposits
Noninterest bearing	$	2,018
Interest bearing		309,090
Total deposits		311,108
Federal Home Loan Bank (FHLB) advances		6,218
Accrued expenses and other liabilities		2,524
Total Liabilities Assumed	$	319,850

The fair value of the assets acquired includes loans with a fair value of $334.7 million. The gross principal and contractual interest due under the contracts is $403.3 million, of which $5.6 million is expected to be uncollectible. The loans have a weighted average life of 52 months.

The fair value of building and land included in premises and equipment was written down by $4 thousand with $297 thousand attributable to the buildings and is being amortized over the useful life of 16.2 years.

The fair value for certificates of deposit incorporates a valuation amount of $3.9 million which is being accreted over 1.6 years. The fair value of Federal Home Loan Bank (FHLB) advances included a valuation amount of $218 thousand which is being accreted over 2.6 years.

The Company acquired loans in the acquisition that had evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.

Loans purchased with evidence of credit deterioration since origination and for which it was probable that all contractually required payments would not be collected were considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date included information such as past-due and nonaccrual status, borrower credit scores and recent loan to value percentages. Purchased credit-impaired loans were accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310-30) and initially measured at fair value, which included estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans was not carried over and recorded at the acquisition date. Management estimated the cash flows expected to be collected at acquisition using our internal risk models, which incorporated the estimate of current key assumptions, such as default rates, severity and prepayment speeds.

The carrying amount of those loans is included in loans, net on the balance sheet at December 31, 2021. The amounts of loans at October 1, 2021, December 31, 2021 and December 31, 2022 are as follows:

	2021
	(In Thousands)
Balance - October 1, 2021
Consumer Real Estate	$	608
Agricultural Real Estate		118
Commercial Real Estate		234
Consumer		5
Carrying amount, net of fair value adjustment of $237	$	728
Balance - December 31, 2021
Consumer Real Estate	$	581
Agricultural Real Estate		114
Commercial Real Estate		5
Consumer		-
Carrying amount, net of fair value adjustment of $190	$	510
	2022
	(In Thousands)
Balance - December 31, 2022
Consumer Real Estate	$	288
Agricultural Real Estate		107
Commercial Real Estate		-
Consumer		-
Carrying amount, net of fair value adjustment of $128	$	267

Loans acquired during 2021 for which it was probable at acquisition that all contractually required payments would not be collected are as follows:

	(In Thousands)
Contractually required payments receivable at acquisition
Consumer Real Estate	$	962
Agricultural Real Estate		146
Commercial Real Estate		293
Consumer		6
Total required payments receivable	$	1,407
Cash flows expected to be collected at acquisition	$	728
Basis in acquired loans at acquisition	$	965

During 2022, five consumer real estate purchased credit impaired loans were paid off in full. The associated discount originally recognized at acquisition of $62.1 thousand was included in the loan interest income in the Company’s consolidated statement of income for the year ended December 31, 2022.

During the fourth quarter 2021, two commercial real estate and one consumer purchased credit impaired loans were paid off in full. The associated discount originally recognized at acquisition of $47.4 thousand was included in the loan interest income in the Company’s consolidated statement of income for the year ended December 31, 2021. The balance of the fair value adjustment for loans acquired and accounted for under this guidance (ASC 310-30) was $127.7 thousand at December 31, 2022, $189.8 thousand at December 31, 2021 and $237.2 thousand at October 1, 2021.

Changes in accretable yield, or income expected to be collected, are as follows:

	2022			2021
	(In Thousands)			(In Thousands)
Beginning Balance	$	5,262		$	-
Additions		294			5,592
Accretion		(1,318	)		(330	)
Reclassification from nonaccretable difference		-			-
Disposals		(2	)		-
Ending Balance	$	4,236		$	5,262

On April 30, 2021, the Company acquired Ossian Financial Services, Inc., (OSFI), the bank holding company for Ossian State Bank, a community bank based in Ossian, Indiana. Ossian State Bank operated two full-service offices in the northeast Indiana communities of Ossian and Bluffton. Shareholders of OSFI received $67.71 in cash for each share. OSFI had 295,388 shares outstanding on April 30, 2021. Total consideration for the acquisition was approximately $20.0 million in cash. As a result of the acquisition, the Company will have an opportunity to increase its deposit base and reduce transaction costs. The Company also expects to reduce costs through economies of scale.

In 2020, the Company incurred $42.5 thousand of third-party acquisition-related costs. The expenses recognized in 2020 related to other general and administration expenses of $30.0 thousand and consulting fees of $12.5 thousand. These acquisition expenses were included in the Company’s 2020 consolidated statement of income.

In 2021, the Company incurred additional third-party acquisition-related costs of $2.2 million. These expenses are comprised of employee benefits of $694.1 thousand, data processing costs of $938.9 thousand, consulting fees of $255.2 thousand, ATM expense of $13.8 thousand and other general and administrative expense of $255.0 thousand in the Company’s consolidated statement of income for the year ended December 31, 2021.

In 2022, the Company has incurred additional third-party acquisition-related costs of $31.6 thousand. These expenses are included in other general and administrative expense in the Company’s consolidated statement of income for the year ended December 31, 2022.

Under the acquisition method of accounting, the total purchase was allocated to net tangible and intangible assets based on their current estimated fair values on the date of acquisition. Of the total purchase price of $20.0 million, $980.2 thousand has been allocated to core deposit intangible included in other assets and is being amortized over seven years on a straight line basis. Goodwill of $7.9 million which resulted from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and Ossian State Bank and is deductible for tax purposes over 15 years. The following table summarizes the consideration paid for Ossian State Bank and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

Fair Value of Consideration Transferred
	(In Thousands)
Cash	$	20,001
Total	$	20,001
Recognized amounts of identifiable assets acquired and liabilities assumed
Assets
Cash and cash equivalents	$	20,229
Interest-bearing time deposits		20,226
Securities - available-for-sale		30,243
Other securities, at cost		281
Loans, net		52,403
Premises and equipment		494
Goodwill		7,874
Other assets		5,308
Total Assets Purchased	$	137,058
Liabilities
Deposits
Noninterest bearing	$	34,509
Interest bearing		81,535
Total deposits		116,044
Accrued expenses and other liabilities		1,013
Total Liabilities Assumed	$	117,057

The fair value of the assets acquired includes loans with a fair value of $52.4 million. The gross principal and contractual interest due under the contracts is $63.7 million, of which $1.1 million is expected to be uncollectible. The loans have a weighted average life of 52 months.

The fair value of building and land included in premises and equipment was written down by $596 thousand with $244 thousand attributable to the buildings and is being accreted over the useful life of 39 years.

The fair value for certificates of deposit incorporates a valuation amount of $59 thousand which is being accreted over 1.4 years.

The Company acquired loans in the acquisition that had evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.

Loans purchased with evidence of credit deterioration since origination and for which it was probable that all contractually required payments would not be collected were considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date included information such as past-due and nonaccrual status, borrower credit scores and recent loan to value percentages. Purchased credit-impaired loans were accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310-30) and initially measured at fair value, which included estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans was not carried over and recorded at the acquisition date. Management estimated the cash flows expected to be collected at acquisition using our internal risk models, which incorporated the estimate of current key assumptions, such as default rates, severity and prepayment speeds.

The carrying amount of those loans is included in loans, net on the balance sheet at December 31, 2021. The amounts of loans at April 30, 2021, December 31, 2021 and December 31, 2022 are as follows:

	2021
	(In Thousands)
Balance - April 30, 2021
Consumer Real Estate	$	24
Agricultural Real Estate		981
Commercial Real Estate		315
Commercial and Industrial		314
Carrying amount, net of fair value adjustment of $325	$	1,309
Balance - December 31, 2021
Consumer Real Estate	$	22
Agricultural Real Estate		-
Commercial Real Estate		222
Commercial and Industrial		285
Carrying amount, net of fair value adjustment of $321	$	208
	2022
	(In Thousands)
Balance - December 31, 2022
Consumer Real Estate	$	19
Agricultural Real Estate		-
Commercial Real Estate		-
Commercial and Industrial		-
Carrying amount, net of fair value adjustment of $10	$	9

Loans acquired during 2021 for which it was probable at acquisition that all contractually required payments would not be collected are as follows:

	(In Thousands)
Contractually required payments receivable at acquisition
Consumer Real Estate	$	28
Agricultural Real Estate		1,142
Commercial Real Estate		527
Commercial and Industrial		360
Total required payments receivable	$	2,057
Cash flows expected to be collected at acquisition	$	1,309
Basis in acquired loans at acquisition	$	1,634

During the third quarter 2022, the associated discount of $311 thousand for six purchased credit impaired loans between two relationships was included in the loan interest income in the Company's consolidated statement of income for the year ended December 31, 2022.

During the third quarter 2021, two agricultural real estate purchased credit impaired loans were paid off in full. The associated discount originally recognized at acquisition of $4.2 thousand was included in the loan interest income in the Company’s consolidated statement of income for the year ended December 31, 2021. The balance of the fair value adjustment for loans acquired and accounted for under this guidance (ASC 310-30) was $10.1 thousand at December 31, 2022, $320.6 thousand at December 31, 2021 and $324.8 thousand at April 30, 2021.

Changes in accretable yield, or income expected to be collected, are as follows:

	2022			2021
	(In Thousands)			(In Thousands)
Beginning Balance	$	645		$	-
Additions		1			762
Accretion		(176	)		(117	)
Reclassification from nonaccretable difference		-			-
Disposals		-			-
Ending Balance	$	470		$	645

Changes in accretable yield, or income expected to be collected, for the acquisition of Bank of Geneva completed in 2019, are as follows:

	2022			2021
	(In Thousands)			(In Thousands)
Beginning Balance	$	1,198		$	1,653
Additions		13			17
Accretion		(426	)		(431	)
Reclassification from nonaccretable difference		-			-
Disposals		-			(41	)
Ending Balance	$	785		$	1,198

The results of operations of Ossian State Bank, Perpetual Federal Savings Bank and Peoples Federal Savings and Loan Bank have been included in the Company’s consolidated financial statements since the acquisition dates of April 30, 2021, October 1, 2021 and October 1, 2022, respectively. The following schedule includes pro-forma results for the years ended December 31, 2022, 2021 and 2020 as if all three acquisitions had occurred as of the beginning of the comparable prior reporting periods.

	2022		2021		2020
Summary of Operations
Net Interest Income - Before Provision for Loan Losses	$	90,290	$	84,362	$	81,636
Provision for Loan Losses		4,513		3,445		6,901
Net Interest Income After Provision for Loan Losses		85,777		80,917		74,735
Noninterest Income		14,099		18,931		17,668
Noninterest Expense		57,426		57,622		55,765
Income Before Income Taxes		42,450		42,226		36,638
Income Taxes		8,185		8,458		7,242
Net Income	$	34,265	$	33,768	$	29,396
Basic and Diluted Earnings Per Share	$	2.59	$	2.57	$	2.24

The pro-forma information includes adjustments for interest income on loans, amortization of intangibles arising from the transaction, interest expense on deposits acquired, premises expense for the branches acquired and the related income tax effects.

The pro-forma financial information is presented for informational purposes only and is not indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time, nor is it intended to be a projection of future results.

As mentioned previously, the acquisition of Bank of Geneva resulted in the recognition of $3.9 million in core deposit intangible assets, the acquisition of Ossian State Bank resulted in the recognition of $980.2 thousand in core deposits assets, the acquisition of Perpetual Federal Savings Bank resulted in the recognition of $668 thousand in core deposits and the acquisition of Peoples Federal Savings and Loan resulted in the recognition of $6.0 million in core deposits which are all being amortized over its remaining economic useful life of 7 years on a straight line basis. Core deposit intangible is included in other assets on the consolidated balance sheets.

The amortization expense for the years ended December 31, 2022, 2021 and 2020 was $1.0 million, $677 thousand, and $720 thousand, respectively. Included in the 2020 amortization expense was $160 thousand related to the purchase of the Custar office on December 13, 2013.

Future amortization expense of core deposit intangible assets is as follows:

	Geneva		Ossian		Perpetual		Peoples		Total
	(In thousands)
2023	$	560	$	140	$	95	$	861	$	1,656
2024		560		140		95		861		1,656
2025		560		140		95		861		1,656
2026		-		140		95		861		1,096
2026		-		140		95		861		1,096
Thereafter		-		47		74		1,506		1,627
Total	$	1,680	$	747	$	549	$	5,811	$	8,787

On November 16, 2020, FM Investment Services, a division of the Bank, purchased the assets and clients of Adams County Financial Resources (ACFR), a full-service registered investment advisory firm located in Geneva, Indiana.

ACFR was founded in 1994 by R. Lee Flueckiger and provides clients and their families with financial confidence through personalized investment planning and services. As of November 30, 2020, ACFR had approximately $83 million of assets under management and over 450 clients.

Total consideration for the purchase was $825 thousand which consisted of 40,049 shares of stock. Under the acquisition method of accounting, the total purchase is allocated to net tangible and intangible assets based on their current estimated fair values on the date of acquisition. Of the total purchase price of $825 thousand, $800 thousand has been allocated to customer list intangible, included in other assets, to be amortized over 6.5 years on a straight line basis.

The following table summarizes the consideration paid for ACFR and the amounts of the assets acquired:

Fair Value of Consideration Transferred
	(In Thousands)
Common Shares (40,049 shares)	$	825
Total	$	825
Recognized amounts of identifiable assets acquired and liabilities assumed
Assets
Premises and equipment	$	25
Customer list intangible		800
Total Assets Purchased	$	825

The customer list intangible amortization expense for the years ended December 31, 2022, 2021 and 2020 was $123, $123 and $16 thousand, respectively. Future amortization expense of customer list intangible is as follows:

	(In thousands)
2023	$	123
2024		123
2025		123
2026		123
2027		47
Thereafter		-
Total	$	539

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Securities

12 Months Ended

Dec. 31, 2022

Investments, Debt and Equity Securities [Abstract]

Securities

Note 3 – Securities

The amortized cost and fair value of securities, with gross unrealized gains and losses, follows:

	(In Thousands)
	2022
			Gross		Gross			Fair
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Available-for-Sale:
U.S. Treasury	$	104,507	$	-	$	(9,829	)	$	94,678
U.S. Government agencies		156,817		-		(17,050	)		139,767
Mortgage-backed securities		101,068		-		(14,141	)		86,927
State and local governments		76,794		69		(7,446	)		69,417
Total available-for-sale securities	$	439,186	$	69	$	(48,466	)	$	390,789

	(In Thousands)
	2021
			Gross		Gross			Fair
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Available-for-Sale:
U.S. Treasury	$	90,775	$	-	$	(1,598	)	$	89,177
U.S. Government agencies		159,673		695		(3,482	)		156,886
Mortgage-backed securities		118,550		839		(1,462	)		117,927
State and local governments		64,964		1,498		(521	)		65,941
Total available-for-sale securities	$	433,962	$	3,032	$	(7,063	)	$	429,931

Investment securities will at times depreciate to an unrealized loss position. The Bank utilizes the following criteria to assess whether impairment is other than temporary. No one item by itself will necessarily signal that a security should be recognized as other than temporarily impaired.

1.The fair value of the security has significantly declined from book value.

2.A downgrade has occurred that lowered the credit rating to below investment grade (below Baa3 by Moody and BBB – by Standard and Poors.)

3.Dividends have been reduced or eliminated or scheduled interest payments have not been made.

4.The underwater security has longer than 10 years to maturity and the loss position had existed for more than 3 years.

5.Management does not possess both the intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.

If the impairment is judged to be other than temporary, the cost basis of the individual security shall be written down to fair value, thereby establishing a new cost basis. The new cost basis shall not be changed for subsequent recoveries in fair value. The amount of the write down shall be included in current earnings as a realized loss. The recovery in fair value, if any, shall be recognized in earnings when the security is sold. The table below is presented by category of security and length of time in a continuous loss position. The Bank currently does not hold any securities with other than temporary impairment.

Information pertaining to securities with gross unrealized losses at December 31, 2022 and 2021, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

	2022
	(In Thousands)					(In Thousands)
	Less Than Twelve Months					Twelve Months & Over
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value
U.S. Treasury	$	(207	)	$	9,121	$	(9,622	)	$	85,557
U.S. Government agencies		(1,081	)		24,560		(15,969	)		114,906
Mortgage-backed securities		(2,454	)		26,905		(11,687	)		60,022
State and local governments		(3,223	)		38,771		(4,223	)		25,610
Total available-for-sales securities	$	(6,965	)	$	99,357	$	(41,501	)	$	286,095

	2021
	(In Thousands)					(In Thousands)
	Less Than Twelve Months					Twelve Months & Over
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value
U.S. Treasury	$	(1,598	)	$	89,177	$	-		$	-
U.S. Government agencies		(1,898	)		86,739		(1,584	)		41,738
Mortgage-backed securities		(1,050	)		63,157		(412	)		16,434
State and local governments		(296	)		17,727		(225	)		5,487
Total available-for-sales securities	$	(4,842	)	$	256,800	$	(2,221	)	$	63,659

Unrealized losses on securities have not been recognized into income because the issuers’ bonds are of high credit quality, values have only been impacted by rate changes, and the Company has the intent and ability to hold the securities for the foreseeable future. The fair value is expected to recover as the bonds approach the maturity date.

Sales of $9.3 and $11.8 million for 2021 and 2020, respectively, generated gross realized gains for the years ended December 31, as presented below:

	(In Thousands)
	2022		2021		2020
Gross realized gains	$	-	$	293	$	270
Gross realized losses		-		-		-
Net realized gains	$	-	$	293	$	270
Tax expense related to net realized gains	$	-	$	62	$	57

The net realized gain on sales and related tax expense is a reclassification out of accumulated other comprehensive income (loss). The net realized gain is included in net gain on sale of securities available-for-sale and the related tax expense is included in income taxes in the consolidated statements of income.

The amortized cost and fair value of debt securities at December 31, 2022, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	(In Thousands)
	Amortized
	Cost		Fair Value
One year or less	$	20,732	$	20,283
After one year through five years		209,735		190,333
After five years through ten years		105,681		91,379
After ten years		1,970		1,867
Total	$	338,118	$	303,862
Mortgage-backed securities		101,068		86,927
Total	$	439,186	$	390,789

Investments with a carrying value and fair value of $134.8 million at December 31, 2022 and $115.0 million at December 31, 2021 were pledged to secure public deposits and securities sold under repurchase agreements.

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Loans

12 Months Ended

Dec. 31, 2022

Receivables [Abstract]

Loans

Note 4 - Loans

The Company had $827 thousand in loans held for sale at December 31, 2022 as compared to $7.7 million in loans held for sale at December 31, 2021.

Loans at December 31 are summarized below:

	(In Thousands)
Loans:	2022			2021
Consumer Real Estate	$	494,423		$	395,873
Agricultural Real Estate		220,819			198,343
Agricultural		128,733			118,368
Commercial Real Estate		1,152,603			848,477
Commercial and Industrial		242,360			208,270
Consumer		89,147			57,737
Other		29,818			32,089
		2,357,903			1,859,157
Less: Net deferred loan fees and costs		(1,516	)		(1,738	)
		2,356,387			1,857,419
Less: Allowance for loan losses		(20,313	)		(16,242	)
Loans - Net	$	2,336,074		$	1,841,177

Following are the characteristics and underwriting criteria for each major type of loan the Bank offers:

Consumer Real Estate: Purchase, refinance, or equity financing of one to four family owner occupied dwelling. Success in repayment is subject to borrower’s income, debt level, character in fulfilling payment obligations, employment, and others.

Agricultural Real Estate: Purchase of farm real estate or for permanent improvements to the farm real estate. Cash flow from the farm operation is the repayment source and is therefore subject to the financial success of the farm operation.

Agricultural: Loans for the production and housing of crops, fruits, vegetables, and livestock or to fund the purchase or re-finance of capital assets such as machinery and equipment and livestock. The production of crops and livestock is especially vulnerable to commodity prices and weather. The vulnerability to commodity prices is offset by the

farmer’s ability to hedge their position by the use of the future contracts. The risk related to weather is often mitigated by requiring crop insurance.

Commercial Real Estate: Construction, purchase, and refinance of business purpose real estate. Risks include potential construction delays and overruns, vacancies, collateral value subject to market value fluctuations, interest rate, market demands, borrower’s ability to repay in orderly fashion, and others. The Bank does employ stress testing on higher balance loans to mitigate risk by ensuring the customer’s ability to repay in a changing rate environment before granting loan approval.

Commercial and Industrial: Loans to proprietorships, partnerships, or corporations to provide temporary working capital and seasonal loans as well as long term loans for capital asset acquisition. Risks include adequacy of cash flow, reasonableness of projections, financial leverage, economic trends, management ability and estimated capital expenditures during the fiscal year. The Bank does employ stress testing on higher balance loans to mitigate risk by ensuring the customer's ability to repay in a changing rate environment before granting loan approval. During 2022, the remaining PPP balances were forgiven and consequently paid off. Included in commercial loans for 2021 are $2.9 million of Paycheck Protection Program (PPP) loans, administered by the Small Business Administration (SBA). The PPP provided loans to eligible business through financial institutions like the Bank, with loans being eligible for forgiveness of some or all of the principal amount by the SBA if the borrower meets certain requirements. The SBA guarantees repayment of the loans to the Bank if the borrower’s loan is not forgiven and is then not repaid by the customer. Therefore, there is no allowance for loan losses related to these loans.

Consumer: Funding for individual and family purposes. Success in repayment is subject to borrower’s income, debt level, character in fulfilling payment obligations, employment, and other factors.

Other: Primarily funds public improvements in the Bank’s service area. Repayment ability is based on the continuance of the taxation revenue as the source of repayment.

The following is a maturity schedule by major category of loans excluding fair value adjustments at December 31, 2022:

	(In Thousands)
			After One
	Within		Year Within		After
	One Year		Five Years		Five Years		Total
Consumer Real Estate	$	8,890	$	34,961	$	456,556	$	500,407
Agricultural Real Estate		525		7,116		214,297		221,938
Agricultural		59,119		47,113		22,544		128,776
Commercial Real Estate		26,670		336,890		789,304		1,152,864
Commercial and Industrial		81,552		108,729		52,715		242,996
Consumer		2,089		47,052		40,357		89,498
Other		235		1,219		28,375		29,829
	$	179,080	$	583,080	$	1,604,148	$	2,366,308

The distribution of fixed rate loans and variable rate loans by major loan category is as follows as of December 31, 2022:

	(In Thousands)
	Fixed		Variable
	Rate		Rate
Consumer Real Estate	$	354,420	$	140,003
Agricultural Real Estate		144,702		76,117
Agricultural		52,867		75,866
Commercial Real Estate		941,927		210,676
Commercial and Industrial		130,513		111,847
Consumer		88,972		175
Other		20,029		9,789

Other loans are included in the commercial and industrial category for the remainder of the tables in this Note 4, unless specifically noted separately.

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The following table represents the contractual aging of the recorded investment in past due loans by portfolio classification of loans as of December 31, 2022 and 2021, net of deferred loan fees and costs:

December 31, 2022	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Consumer Real Estate	$	1,536	$	635	$	90	$	2,261	$	492,162	$	494,423	$	-
Agricultural Real Estate		118		2		1,550		1,670		218,844		220,514		-
Agricultural		433		-		152		585		128,341		128,926		-
Commercial Real Estate		74		-		180		254		1,150,257		1,150,511		-
Commercial and Industrial		953		-		182		1,135		270,984		272,119		-
Consumer		83		37		-		120		89,774		89,894		-
Total	$	3,197	$	674	$	2,154	$	6,025	$	2,350,362	$	2,356,387	$	-

December 31, 2021	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Consumer Real Estate	$	228	$	-	$	246	$	474	$	395,331	$	395,805	$	-
Agricultural Real Estate		436		-		-		436		197,597		198,033		-
Agricultural		-		-		-		-		118,504		118,504		-
Commercial Real Estate		-		-		180		180		846,930		847,110		-
Commercial and Industrial		21		131		149		301		239,837		240,138		-
Consumer		64		-		-		64		57,765		57,829		-
Total	$	749	$	131	$	575	$	1,455	$	1,855,964	$	1,857,419	$	-

The following table presents the recorded investment in nonaccrual loans by portfolio class of loans as of December 31, 2022 and December 31, 2021:

	(In Thousands)
	2022		2021
Consumer Real Estate	$	612	$	824
Agricultural Real Estate		1,921		6,477
Agriculture		152		20
Commercial Real Estate		903		600
Commercial and Industrial		1,096		149
Consumer		5		6
Total	$	4,689	$	8,076

The Bank uses a nine tier risk rating system to grade its loans. The grade of a loan may change during the life of the loan.

The risk ratings are described as follows.

1.Zero (0) Unclassified. Any loan which has not been assigned a classification.

2.One (1) Excellent. Credit to premier customers having the highest credit rating based on an extremely strong financial condition, which compares favorably with industry standards (upper quartile of RMA ratios). Financial statements indicate a sound earnings and financial ratio trend for several years with satisfactory profit margins and excellent liquidity exhibited. Prime credits may also be borrowers with loans fully secured by highly liquid collateral such as traded stocks, bonds, certificates of deposit, savings account, etc. No credit or collateral exceptions exist, and the loan adheres to The Bank's loan policy in every respect. Financing alternatives would be readily available and would qualify for unsecured credit. This rate is summarized by high liquidity, minimum risk, strong ratios, and low handling costs.

3.Two (2) Good. Desirable loans of somewhat less stature than rate 1, but with strong financial statements. Loan supported by financial statements containing strong balance sheets and a history of profitability. Probability of serious financial deterioration is unlikely. Possessing a sound repayment source (and a secondary source), which would allow repayment in a reasonable period of time. Individual loans backed by liquid personal assets, established history and unquestionable character.

4.Three (3) Satisfactory. Satisfactory loans of average or slightly above average risk – having some deficiency or vulnerability to changing economic conditions, but still fully collectible. Projects should normally demonstrate acceptable debt service coverage. There may be some weakness but with offsetting features of other support readily available. Loans that are meeting the terms of repayment.

Loans may be rated 3 when there is no recent information on which to base a current risk evaluation and the following conditions apply:

At inception, the loan was properly underwritten and did not possess an unwarranted level of credit risk;

a.At inception, the loan was secured with collateral possessing a loan-to-value adequate to protect The Bank from loss;

b.The loan exhibited two or more years of satisfactory repayment with a reasonable reduction of the principal balance;

c.During the period that the loan has been outstanding, there has been no evidence of any credit weakness. Some examples of weakness include slow payment, lack of cooperation by the borrower, breach of loan covenants, or the business is in an industry which is known to be experiencing problems. If any of these credit weaknesses is observed, a lower risk rating is warranted.

5.Four (4) Satisfactory / Monitored. A “4” (Satisfactory/Monitored) risk rating may be established for a loan considered satisfactory but which is of average credit risk due to financial weakness or uncertainty. The loans warrant a higher than average level of monitoring to ensure that weaknesses do not advance. The level of risk in Satisfactory/Monitored classification is considered acceptable and within normal underwriting guidelines, so long as the loan is given management supervision.

6.Five (5) Special Mention. Loans that possess some credit deficiency or potential weakness which deserve close attention, but which do not yet warrant substandard classification. Such loans pose unwarranted financial risk that, if not corrected, could weaken the loan and increase risk in the future. The key distinctions of a 5 (Special Mention) classification are that (1) it is indicative of an unwarranted level of risk, and (2) weaknesses are considered “potential” versus “defined” impairments to the primary source of loan repayment and collateral.

7.Six (6) Substandard. One or more of the following characteristics may be exhibited in loans classified substandard:

a.Loans which possess a defined credit weakness and the likelihood that a loan will be paid from the primary source are uncertain. Financial deterioration is underway and very close attention is warranted to ensure that the loan is collected without loss.

b.Loans are inadequately protected by the current net worth and paying capacity of the borrower.

c.The primary source of repayment is weakened, and The Bank is forced to rely on a secondary source of repayment such as collateral liquidation or guarantees.

d.Loans are characterized by the distinct possibility that The Bank will sustain some loss if deficiencies are not corrected.

e.Unusual courses of action are needed to maintain a high probability of repayment.

f.The borrower is not generating enough cash flow to repay loan principal; however, continues to make interest payments.

g.The lender is forced into a subordinate position or unsecured collateral position due to flaws in documentation.

h.Loans have been restructured so that payment schedules, terms and collateral represent concessions to the borrower when compared to the normal loan terms.

i.The lender is seriously contemplating foreclosure or legal action due to the apparent deterioration in the loan

j.There is significant deterioration in the market conditions and the borrower is highly vulnerable to these conditions.

8.Seven (7) Doubtful. One or more of the following characteristics may be exhibited in loans classified Doubtful:

a.Loans have all of the weaknesses of those classified as Substandard. Additionally, however, these weaknesses make collection or liquidation in full based on existing conditions improbable.

b.The primary source of repayment is gone, and there is considerable doubt as to the quality of the secondary source of repayment.

c.The possibility of loss is high, but, because of certain important pending factors which may strengthen the loan, loss classification is deferred until its exact status is known. A Doubtful classification is established deferring the realization of the loss.

9.Eight (8) Loss. Loans are considered uncollectable and of such little value that continuing to carry them as assets on the institution’s financial statements is not feasible. Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

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The following table represents the risk category of loans by portfolio class, net of deferred fees, based on the most recent analysis performed as of the time periods shown of December 31, 2022 and December 31, 2021.

	(In Thousands)
	Agricultural Real Estate				Agricultural				Commercial Real Estate				Commercial and Industrial				Other
	2022		2021		2022		2021		2022		2021		2022		2021		2022		2021
1-2	$	9,912	$	8,720	$	5,857	$	4,178	$	8,718	$	10,894	$	780	$	4,604	$	-	$	-
3		47,405		42,180		33,671		38,623		370,035		238,132		67,506		46,547		10,921		11,408
4		146,143		129,301		88,992		75,164		737,745		568,038		167,291		152,736		18,897		20,681
5		10,389		4,599		228		227		9,751		14,509		3,592		986		-		-
6		6,665		13,233		178		312		24,262		15,537		3,132		3,176		-		-
7		-		-		-		-		-		-		-		-		-		-
8		-		-		-		-		-		-		-		-		-		-
Total	$	220,514	$	198,033	$	128,926	$	118,504	$	1,150,511	$	847,110	$	242,301	$	208,049	$	29,818	$	32,089

For consumer residential real estate, the Company also evaluates credit quality based on the aging status of the loan, which was previously stated, and by payment activity. The following tables present the recorded investment in those classes based on payment activity and assigned risk grading as of December 31, 2022 and December 31, 2021.

	(In Thousands)
	Consumer Real Estate
	2022		2021
Grade
Pass	$	492,575	$	392,940
Special mention (5)		676		1,673
Substandard (6)		1,172		1,192
Doubtful (7)		-		-
Total	$	494,423	$	395,805

	(In Thousands)
	Consumer - Credit Card				Consumer - Other
	2022		2021		2022		2021
Performing	$	-	$	3,906	$	89,853	$	53,820
Nonperforming		-		13		41		90
Total	$	-	$	3,919	$	89,894	$	53,910

Information about impaired loans as of and for the years ended December 31, 2022 and 2021 is as follows:

	(In Thousands)
	2022		2021
Impaired loans without a valuation allowance	$	4,194	$	1,228
Impaired loans with a valuation allowance		4,663		10,711
Total impaired loans	$	8,857	$	11,939
Valuation allowance related to impaired loans	$	1,996	$	2,184
Total nonaccrual loans	$	4,689	$	8,076
Total loans past-due ninety days or more and still accruing	$	-	$	-

	(In Thousands)
	2022		2021		2020
Average investment in impaired loans	$	10,710	$	12,247	$	10,232
Interest income recognized on impaired loans	$	361	$	292	$	269
Interest income recognized on a cash basis on impaired    loans	$	97	$	188	$	135

There were no additional funds committed to be advanced in connection with impaired loans.

The Bank had approximately $3.6 million and $7.6 million of its impaired loans classified as troubled debt restructured as of December 31, 2022 and December 31, 2021.

Modification programs focused on payment pattern changes and/or modified maturity dates with most receiving a combination of the two concessions. The modifications did not result in the contractual forgiveness of principal. During 2022, three new loans were considered TDR as a result of the continuance of interest only payment modifications. These three loans stem from a single relationship with a borrower. This relationship has a Small Business Administration (SBA) guaranty and consequently the request for the continuance of the interest only period was also approved by the SBA as were previous requests. One of the three loans was charged off in December of 2022. The ALLL includes a $837 thousand specific allocation for one of the loans as of December 31, 2022. The fourth loan was a work-out loan that was included on Peoples TDR list which had some debt written off when the loan was granted. Two loans previously reported as TDR were paid off in April 2022. During 2021, there were three new loans considered TDR. One loan resulted in payment changes from a monthly payment to monthly interest only payments. One loan was considered TDR as a result of being in a deficiency balance upon sale of property. The loan is set for a 3 year term and a 10 year amortization. The ALLL includes a $825 thousand specific allocation on the principal balance of this loan as of December 31, 2021. The last loan was rewritten to improve collateral position. Capitalized interest, late charges and prepayment penalties were charged off immediately. The ALLL includes a $313 thousand specific allocation for this loan as of December 31, 2021. Two loans previously reported as TDR were paid off in June 2021 and three loans previously reported as TDR were fully charged off in March 2021.

December 31, 2022							December 31, 2021
			(In thousands)							(In thousands)
Troubled Debt Restructurings	Number of Contracts Modified in the Last 12 Months		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Troubled Debt Restructurings	Number of Contracts Modified in the Last 12 Months		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Consumer Real Estate		1	$	95	$	95	Consumer Real Estate		-	$	-	$	-
Agricultural Real Estate		-		-		-	Agricultural Real Estate		1		1,655		1,655
Agricultural		-		-		-	Agricultural		-		-		-
Commercial Real Estate		1		74		74	Commercial Real Estate		1		382		382
Commercial and Industrial		2		1,232		1,232	Commercial and Industrial		1		1,000		1,000

For the years ended December 31, 2022 and 2021, there were no TDR’s that subsequently defaulted after modification.

For the Bank’s impaired TDR loans, the Bank may utilize a measurement incorporating the present value of expected future cash flows discounted at the loan's effective rate of interest or the fair value of collateral if the loan is collateral dependent. To determine the fair value of collateral, collateral asset values securing an impaired loan are periodically evaluated. Maximum time of re-evaluation is every 12 months for chattels and titled vehicles and every two years for real estate. In this process, third party evaluations are obtained and heavily relied upon. Until such time that updated appraisals are received, the Bank may discount the collateral value used.

The Bank uses the following guidelines as stated in policy to determine when to realize a charge-off, whether a partial or full loan balance. A charge down in whole or in part is realized when unsecured consumer loans, credit card credits and overdraft lines of credit reach 90 days delinquency. At 90 days delinquent, secured consumer loans are charged down to the value of the collateral, if repossession of the collateral is assured and/or in the process of repossession. Consumer mortgage loan deficiencies are charged down upon the sale of the collateral or sooner upon the recognition of collateral deficiency. A broker's price opinion or appraisal will be completed on all home loans in litigation and any deficiency will be charged off before reaching 150 days delinquent. Commercial and agricultural credits are charged down/allocated at 120 days delinquency, unless an established and approved work-out plan is in place or litigation of the credit will likely result in recovery of the loan balance. Upon notification of bankruptcy, unsecured debt is charged off. Additional charge-off may be realized as further unsecured positions are recognized.

The following tables present loans individually evaluated for impairment by portfolio class of loans as of December 31, 2022 and 2021:

	(In Thousands)
2022	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized Cash Basis
With no related allowance recorded:
Consumer Real Estate	$	509	$	509	$	-	$	355	$	5	$	12
Agricultural Real Estate		2,280		2,385		-		2,048		25		6
Agricultural		152		152		-		588		-		2
Commercial Real Estate		1,234		1,272		-		1,252		29		43
Commercial and Industrial		17		417		-		135		2		10
Consumer		2		2		-		15		1		-
With a specific allowance recorded:
Consumer Real Estate		60		60		6		15		-		1
Agricultural Real Estate		-		-		-		1,388		-		-
Agricultural		-		-		-		-		-		-
Commercial Real Estate		2,874		2,874		438		3,176		150		-
Commercial and Industrial		1,564		1,564		1,551		1,736		149		23
Consumer		165		165		1		2		-		-
Totals:
Consumer Real Estate	$	569	$	569	$	6	$	370	$	5	$	13
Agricultural Real Estate	$	2,280	$	2,385	$	-	$	3,436	$	25	$	6
Agricultural	$	152	$	152	$	-	$	588	$	-	$	2
Commercial Real Estate	$	4,108	$	4,146	$	438	$	4,428	$	179	$	43
Commercial and Industrial	$	1,581	$	1,981	$	1,551	$	1,871	$	151	$	33
Consumer	$	167	$	167	$	1	$	17	$	1	$	-

	(In Thousands)
2021	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized Cash Basis
With no related allowance recorded:
Consumer Real Estate	$	604	$	604	$	-	$	456	$	5	$	15
Agricultural Real Estate		423		423		-		1,000		33		-
Agricultural		-		-		-		143		18		3
Commercial Real Estate		180		180		-		1,445		70		9
Commercial and Industrial		21		21		-		920		24		158
Consumer		-		-		-		17		-		-
With a specific allowance recorded:
Consumer Real Estate		-		-		-		59		-		-
Agricultural Real Estate		6,302		6,406		691		5,414		54		-
Agricultural		20		20		1		94		-		-
Commercial Real Estate		3,381		3,381		664		2,199		70		3
Commercial and Industrial		982		982		825		498		17		-
Consumer		26		26		3		2		1		-
Totals:
Consumer Real Estate	$	604	$	604	$	-	$	515	$	5	$	15
Agricultural Real Estate	$	6,725	$	6,829	$	691	$	6,414	$	87	$	-
Agricultural	$	20	$	20	$	1	$	237	$	18	$	3
Commercial Real Estate	$	3,561	$	3,561	$	664	$	3,644	$	140	$	12
Commercial and Industrial	$	1,003	$	1,003	$	825	$	1,418	$	41	$	158
Consumer	$	26	$	26	$	3	$	19	$	1	$	-

As of December 31, 2022 the Company had no foreclosed residential real estate property obtained by physical possession or consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process according to local jurisdictions. This compares to the Company having $159 thousand of foreclosed residential real estate property obtained by physical possession and $255 thousand of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process according to local jurisdictions as of December 31, 2021.

The ALLL has a direct impact on the provision expense. An increase in the ALLL is funded through recoveries and provision expense. The following tables summarize the activities in the allowance for credit losses.

The following is an analysis of the allowance for credit losses for the years ended December 31:

	(In Thousands)
	2022			2021			2020
Allowance for Loan Losses
Balance at beginning of year	$	16,242		$	13,672		$	7,228
Provision for loan loss		4,600			3,444			6,981
Loans charged off		(827	)		(1,332	)		(720	)
Recoveries		298			458			183
Balance at ending of year	$	20,313		$	16,242		$	13,672
Allowance for Unfunded Loan Commitments    & Letters of Credit	$	1,262		$	1,041		$	641
Total Allowance for Credit Losses	$	21,575		$	17,283		$	14,313

The Company segregates its Allowance for Loan and Lease Losses (ALLL) into two reserves: The ALLL and the Allowance for Unfunded Loan Commitments and Letters of Credit (AULC). When combined, these reserves constitute the total Allowance for Credit Losses (ACL).

The AULC is reported within other liabilities on the balance sheet while the ALLL is netted within the loans on the consolidated balance sheet. The ACL presented above represents the full amount of reserves available to absorb possible credit losses.

The following table breaks down the activity within ALLL for each loan portfolio segment and shows the contribution provided by both the recoveries and the provision along with the reduction of the allowance caused by charge-offs.

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Additional analysis related to the allowance for credit losses as of December 31, 2022 and 2021 is as follows:

	(In Thousands)
2022	Consumer Real Estate		Agricultural Real Estate			Agricultural		Commercial Real Estate		Commercial and Industrial			Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated			Total
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	857	$	1,040		$	709	$	9,130	$	3,847		$	625		$	1,041	$	34		$	17,283
Charge-Offs		-		-			-		-		(418	)		(409	)		-		-			(827	)
Recoveries		20		-			7		9		93			169			-		-			298
Provision		121		(691	)		35		2,785		1,860			506			-		(16	)		4,600
Other Non-interest    expense related to    unfunded		-		-			-		-		-			-			221		-			221
Ending Balance	$	998	$	349		$	751	$	11,924	$	5,382		$	891		$	1,262	$	18		$	21,575
Ending balance:    individually evaluated    for impairment	$	6	$	-		$	-	$	438	$	1,551		$	1		$	-	$	-		$	1,996
Ending balance:    collectively evaluated    for impairment	$	992	$	349		$	751	$	11,486	$	3,831		$	890		$	1,262	$	18		$	19,579
Ending balance: loans    acquired with    deteriorated credit    quality	$	-	$	-		$	-	$	-	$	-		$	-		$	-	$	-		$	-
FINANCING RECEIVABLES:
Ending balance	$	494,423	$	220,514		$	128,926	$	1,150,511	$	272,119		$	89,894		$	-	$	-		$	2,356,387
Ending balance:    individually evaluated    for impairment	$	569	$	2,280		$	152	$	4,108	$	1,581		$	167		$	-	$	-		$	8,857
Ending balance:    collectively evaluated    for impairment	$	493,449	$	218,039		$	128,774	$	1,146,389	$	270,493		$	89,727		$	-	$	-		$	2,346,871
Ending balance: loans    acquired with    deteriorated credit    quality	$	405	$	195		$	-	$	14	$	45		$	-		$	-	$	-		$	659

	(In Thousands)
2021	Consumer Real Estate			Agricultural Real Estate			Agricultural			Commercial Real Estate		Commercial and Industrial			Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated		Total
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	633		$	958		$	701		$	7,415	$	3,346		$	606		$	641	$	13	$	14,313
Charge-Offs		(19	)		(105	)		(143	)		-		(814	)		(251	)		-		-		(1,332	)
Recoveries		13			-			14			10		257			164			-		-		458
Provision (Credit)		230			187			137			1,705		1,058			106			-		21		3,444
Other Non-interest    expense related    to unfunded		-			-			-			-		-			-			400		-		400
Ending Balance	$	857		$	1,040		$	709		$	9,130	$	3,847		$	625		$	1,041	$	34	$	17,283
Ending balance:    individually evaluated    for impairment	$	-		$	691		$	1		$	664	$	825		$	3		$	-	$	-	$	2,184
Ending balance:    collectively evaluated    for impairment	$	857		$	349		$	708		$	8,466	$	3,022		$	622		$	1,041	$	34	$	15,099
Ending balance: loans    acquired with    deteriorated credit    quality	$	37		$	-		$	-		$	-	$	-		$	-		$	-	$	-	$	37
FINANCING RECEIVABLES:
Ending balance	$	395,805		$	198,033		$	118,504		$	847,110	$	240,138		$	57,829		$	-	$	-	$	1,857,419
Ending balance:    individually evaluated    for impairment	$	604		$	6,725		$	20		$	3,561	$	1,003		$	26		$	-	$	-	$	11,939
Ending balance:    collectively evaluated    for impairment	$	394,489		$	191,107		$	118,484		$	843,299	$	238,849		$	57,803		$	-	$	-	$	1,844,031
Ending balance: loans    acquired with    deteriorated credit    quality	$	712		$	201		$	-		$	250	$	286		$	-		$	-	$	-	$	1,449

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Premises and Equipment

12 Months Ended

Dec. 31, 2022

Property, Plant and Equipment [Abstract]

Premises and Equipment

Note 5 – Premises and Equipment

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

	(In Thousands)
	2022			2021
Land	$	6,896		$	6,652
Buildings (useful life 15-39 years)		34,501			30,929
Furnishings (useful life 3-15 years)		26,448			23,160
		67,845			60,741
Less: Accumulated depreciation		(39,464	)		(33,828	)
Premises and Equipment (Net)	$	28,381		$	26,913

Depreciation expense for the years ended December 31, 2022, 2021, and 2020 amounted to $2.7, $2.6, and $2.5 million, respectively.

Construction in progress of $278 thousand as of December 31, 2022 relates to the construction of three new offices which are expected to be operational by end of third quarter 2023.

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Servicing

12 Months Ended

Dec. 31, 2022

Transfers and Servicing [Abstract]

Servicing

Note 6 - Servicing

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of loans serviced for others were $375.6 and $380.8 million at December 31, 2022 and 2021, respectively.

The balance of capitalized servicing rights included in other assets at December 31, 2022 and 2021, was $3.5 and $3.6 million, respectively. The capitalized addition of servicing rights is included in net gain on sale of loans on the consolidated statement of income.

The fair market value of the capitalized servicing rights as of December 31, 2022 and 2021 was $5.1 million and $3.2 million, respectively. The valuations were completed by stratifying the loans into like groups based on loan type and term. Impairment was measured by estimating the fair value of each stratum, taking into consideration an estimated level of prepayment based upon current market conditions. An average constant prepayment rate of 7.7% and 21.7% were utilized for 2022 and 2021, respectively. All strata did show positive values in 2022 compared to the carrying value using a discount yield of 5.94%. In 2021, all strata did not show positive values compared to carrying value using a discount yield of 1.97% which resulted in the need to establish a $414 thousand valuation allowance.

The following summarizes mortgage servicing rights capitalized and amortized during each year:

	(In Thousands)
	2022			2021
Beginning of Year	$	3,571		$	3,320
Capitalized Additions		537			1,417
Amortization		(559	)		(1,166	)
Ending Balance, December 31		3,549			3,571
Valuation Allowance		-			(414	)
Mortgage Servicing Rights net, December 31	$	3,549		$	3,157

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Deposits

12 Months Ended

Dec. 31, 2022

Deposits [Abstract]

Deposits

Note 7 - Deposits

Time deposits as of December 31 consist of the following:

	(In Thousands)
	2022		2021
Time deposits under $250,000	$	495,891	$	397,102
Time deposits of $250,000 or more		62,089		74,377
	$	557,980	$	471,479

At December 31, 2022 the scheduled maturities for time deposits are as follows:

	(In Thousands)
2023	$	383,052
2024		91,267
2025		62,412
2026		13,862
2027		7,068
Thereafter		319
	$	557,980

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Federal Funds Purchased and Securities Sold Under Agreement to Repurchase

12 Months Ended

Dec. 31, 2022

Broker-Dealer [Abstract]

Federal Funds Purchased and Securities Sold Under Agreement to Repurchase

Note 8 – Federal Funds Purchased and Securities Sold Under Agreement to Repurchase

The Bank’s policy requires qualifying securities to be used as collateral for the underlying repurchase agreements. As of December 31, 2022 and 2021, securities with a market value of $43.6 million and $31.1 million, respectively, were pledged to secure the repurchase agreements. The table below presents the daily securities sold under agreement to repurchase and the term repurchase agreements. It does not include the Bank’s federal funds purchased.

	Daily Securities Sold Under Agreement to Repurchase
	Amount		Weighted			Maximum Amount		Approximate		Approximate
	Outstanding		Average			Borrowings		Average		Weighted Average
	at End		Rate End			Outstanding		Outstanding in		Interest Rate
	of Period (000's)		of Period			Month End (000's)		Period (000's)		For the Period
2022	$	1,115		0.95	%	$	1,450	$	1,169		0.43	%
2021	$	1,062		0.70	%	$	1,991	$	1,514		0.43	%

	Term CD's Sold Under Agreement to Repurchase
	Amount		Weighted			Maximum Amount		Approximate		Approximate
	Outstanding		Average			Borrowings		Average		Weighted Average
	at End		Rate End			Outstanding		Outstanding in		Interest Rate
	of Period (000's)		of Period			Month End (000's)		Period (000's)		For the Period
2022	$	30,518		0.97	%	$	34,504	$	31,573		2.54	%
2021	$	28,206		1.00	%	$	28,362	$	28,315		2.56	%

The Company had $22.6 million of federal funds purchased as of December 31, 2022 and no federal funds purchased as of December 31, 2021. The $31.6 million in Securities Sold Under Agreements to Repurchase were comprised of U.S. Treasuries and government agency securities. The table below shows the remaining contractual maturity in the repurchase agreements and the collateral pledged as of December 31, 2022.

	December 31, 2022
	Remaining Contractual Maturity of the Agreements
	Overnight & Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Federal funds purchased	$	22,573	$	-	$	-	$	-	$	22,573
Repurchase agreements
US Treasury & agency securities		1,115						30,518		31,633
Total	$	23,688	$	-	$	-	$	30,518	$	54,206

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Borrowings and Subordinated Notes

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

Borrowings and Subordinated Notes

Note 9 – Borrowings and Subordinated Notes

Short Term Debt

Due to the funding requirement for the acquisition of PFSB to be provided from the holding company, the Company secured borrowings from a correspondent bank. Two loans were secured, the first a $30 million 12-month term note and the second a 12-month line of credit for $10 million. Both loans were advanced on October 1, 2021. Interest on both loans is due quarterly and accrues at a rate of 2.50% per annum with reporting and capital covenants included. The structure of the acquisition required all accounting of the transaction to be recorded at the Bank level as Perpetual did not have a holding company. The Company advanced funds from the Bank to the Company to facilitate payoff of the term note and line of credit balance after regulatory approval was granted in the second quarter of 2022. The line of credit remained open for future liquidity needs.

On September 29, 2022, the line of credit was advanced for $10 million for the acquisition of PFSL Interest on the line of credit is due quarterly and accrues at a rate of 5.50% per annum with reporting and capital covenants included. The line of credit matures on September 30, 2023.

Long Term Debt

Federal Home Loan Bank Advances

Long term debt consists of various loans from the Federal Home Loan Banks. Repayment structures vary, ranging from monthly installments, annual payments or upon maturity. Interest payments are due monthly. Total borrowings were $127.4 million excluding an additional $47 thousand for fair value related to the acquisitions for December 31, 2022 compared to $23.9 million excluding $197 thousand for fair value for December 31, 2021. With the acquisition of Peoples Federal Savings and Loan Bank, the Bank undertook $965 thousand in advances with varying maturity dates from 2022 through 2028. With the acquisition of Perpetual Federal Savings Bank, the Bank undertook $6 million in advances due in 2024. The advances were secured by a pledge of $232.9 and $193.2 million of mortgage loans as of December 31, 2022 and 2021, respectively under a blanket collateral agreement.

The advances are subject to pre-payment penalties and the provisions and conditions of the credit policy of the Federal Home Loan Bank.

The Bank had access to $73.0 and $69.0 million unsecured borrowings through correspondent banks as of December 31, 2022 and December 31, 2021, respectively. The Bank also had access to $130.4 million and $94.2 million through a Cash Management Advance with the Federal Home Loan Bank as of December 31, 2022 and December 31, 2021 respectively. The Bank had unpledged securities, which could be sold or used as collateral, of $249.6 million and $313.6 million at the end of the same time periods, respectively. An additional $2.0 million at December 31, 2022, and $91.2 million at December 31, 2021, were available from the Federal Home Loan Bank based on current pledging. The table below shows the maturities of the borrowings exclusive of the fair value.

	(In Thousands)
2023	$	71,507
2024		32,500
2025		11,500
2026		-
2027		9,064
Thereafter		2,867
Total	$	127,438

Subordinated Notes

On July 30, 2021, the Company announced the completion of a private placement of $35 million aggregate principal amount of its 3.25% fixed-to-floating rate subordinated notes due July 30, 2031 (the “Notes”) to various accredited investors (the “Offering”). The price for the Notes was 100% of the principal amount of the Notes. The Notes are intended to qualify as Tier 2 capital for regulatory purposes. The Company intends to use the net proceeds from the Offering for general corporate purposes, including financing acquisitions and organic growth.

Interest on the Notes will accrue at a rate equal to (i) 3.25% per annum from the original issue date to, but excluding, the five-year anniversary, payable semi-annually in arrears, and (ii) a floating rate per annum equal to a benchmark rate, which is expected to be the Three-Month Term SOFR (as defined in the Notes), plus a spread of 263 basis points from and including the five-year anniversary until maturity, payable quarterly in arrears. Beginning on or after the fifth anniversary of the issue date through maturity, the Notes may be redeemed, at the Company’s option, on any scheduled interest payment date. Any redemption will be at a redemption price equal to 100% of the principal amount of Notes being redeemed, plus accrued and unpaid interest.

	December 31, 2022					December 31, 2021
(In Thousands)	Principal		Unamortized Note Issuance Costs			Principal		Unamortized Note Issuance Costs
Subordinated Notes	$	35,000	$	(414	)	$	35,000	$	(529	)

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Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 10 – Income Taxes

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

	(In Thousands)
	2022			2021			2020
Current:
Federal	$	7,430		$	7,536		$	6,289
State		359			271			513
Total current		7,789			7,807			6,802
Deferred:
Federal		227			(1,746	)		(1,596	)
State		(56	)		(59	)		(95	)
Total deferred		171			(1,805	)		(1,691	)
Total Income Tax	$	7,960		$	6,002		$	5,111

The following is a reconciliation of the statutory federal income tax rate to the effective tax rate:

	(In Thousands)
	2022			2021			2020
Federal income tax at statutory rates	$	8,489		$	6,194		$	5,294
(Decrease) increase resulting from:
State income tax, net of federal benefit		239			167			330
Tax exempt interest		(133	)		(116	)		(146	)
Section 831 deduction		(270	)		(294	)		(266	)
Other		(365	)		51			(101	)
Total Income Tax	$	7,960		$	6,002		$	5,111

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

	(In Thousands)
	2022		2021
Deferred Tax Assets:
Allowance for loan losses	$	4,623	$	3,629
Deferred compensation		570		561
Net unrealized loss on available-for-sale securities		10,163		846
Fair value adjustments		2,152		1,913
Other		554		277
Total deferred tax assets		18,062		7,226
Deferred Tax Liabilities:
Accreted discounts on bonds		54		22
Depreciation		1,083		772
FHLB stock dividends		1,011		828
Intangible amortization		2,640		1,282
Mortgage servicing rights		787		778
Prepaids		500		471
Other		424		173
Total deferred tax liabilities		6,499		4,326
Net Deferred Tax Asset (Liability)	$	11,563	$	2,900

As part of the Perpetual acquisition, a net operating loss (NOL) carryforward was acquired that is subject to a Section 382 limitation. At the end of 2021, $377,807 of this NOL remained. This NOL was used in 2022 and no balance remains. The Peoples Federal Savings and Loan acquisition included a NOL of $2,789,124. At the end of 2022, $2,638,002 of this NOL remained.

The Corporation has additional paid-in capital that is considered restricted resulting from the acquisition of Perpetual in 2021 of approximately $2,779,000 and from the acquisition of Peoples in 2022 of approximately $2,174,000. No deferred tax liability is required to be recorded for the Corporation’s tax bad debt reserves arising before December 31, 1987, unless it is apparent that the reserves will reverse in the near future. Unrecognized deferred taxes on these reserves would total $1,040,000. If the portion of retained earnings representing these reserves is used for any purpose other than to absorb bad debts, it will be added to future taxable income and the related tax will be recognized as expense.

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2022

Retirement Benefits [Abstract]

Employee Benefit Plans

Note 11 - Employee Benefit Plans

The Bank has established a 401(k) profit sharing plan which allows eligible employees to save at a minimum one percent of eligible compensation on a pre-tax or post-tax basis, subject to certain Internal Revenue Service limitations. The Bank will match 50% of employee 401(k) contributions up to six percent of total eligible compensation. In addition, the Bank may make a discretionary contribution from time to time as is deemed advisable. A participant is 100% vested in the participant’s deferral contributions. Employer matching contributions are funded annually and are immediately vested. Beginning in 2022, nonelective employer contributions are immediately vested at 100%. Employees are immediately eligible upon hire to contribute to the plan and receive matching contributions. In order to be eligible for discretionary contributions, employees must work 1,000 hours in the plan year and be employed on the last day of the year. Contributions expensed for the 401(k) profit sharing plan for both the employer matching contribution and the discretionary contribution were $1.7 million, $1.5 million and $1.0 million for 2022, 2021 and 2020, respectively.

Restricted Stock Awards

The Company has a Long-Term Stock Incentive Plan under which 56,496 shares of the Company’s restricted stock were issued to 109 employees during 2022, 48,750 shares of restricted stock were issued to 96 employees during 2021 and 37,382 shares of restricted stock were issued to 92 employees during 2020. Under the plan, the shares generally vest 100% in three years. During the 3 year vesting period, the employees receive dividends or dividend equivalent compensation on the shares. Due to employee termination, there were 8,000, 2,575 and 2,175 shares forfeited during 2022, 2021 and 2020, respectively. During 2022, three employees retired and received 3,775 shares from the shares awarded in 2019, 2020 and 2021. In 2021, seven employees retired and received 4,425 shares from the shares awarded in 2018, 2019 and 2020. During 2020, due to retirement, eight employees received 10,890 shares from awards granted in 2017, 2018, 2019 and 2020. In 2022, 26,900 shares awarded in 2019 were 100% vested and 60 employees received the stock. During 2021, 18,845 shares awarded in 2018 were 100% vested and 50 employees received the stock. During 2020, 21,340 shares awarded in 2017 were 100% vested and 53 employees received the stock. One employee received accelerated vesting of 1,050 shares awarded in 2019, 2018 and 2017. Also during 2020, 1,600 shares awarded in 2019 were 100% vested and three employees received the stock. One employee received immediate vesting of 551 shares of stock. Compensation expense applicable to the restricted stock awards totaled $899 thousand, $822 thousand and $1.0 million for the years ending December 31, 2022, 2021 and 2020, respectively.

The table below summarizes the details of the restricted shares issued, vested, and forfeited for the years ending December 31, 2021, 2021 and 2020.

	Year Ended December 31,
	2022				2021				2020
	Number of Shares		Number of Employees		Number of Shares		Number of Employees		Number of Shares		Number of Employees
Restricted shares issued		56,496		109		48,750		96		37,382		92
Restricted shares vested		26,900		60		18,845		50		23,491		58
Restricted shares awarded due to retirement		3,775		3		4,425		7		10,890		8
Restricted shares awarded for other		-		-		-		-		1,050		1
Restricted shares forfeited		8,000		9		2,575		4		2,175		5

The following table summarizes the activity of restricted stock awards as of December 31:

	Year Ended December 31,
	2022					2021					2020
	Number of Shares			Weighted average fair value per award		Number of Shares			Weighted average fair value per award		Number of Shares			Weighted average fair value per award
Beginning of period		111,131		$	23.02		88,226		$	28.40		88,450		$	31.52
Granted		56,496			30.46		48,750			22.70		37,382			21.80
Vested		(30,675	)		24.77		(23,270	)		42.03		(35,431	)		29.27
Forfeited		(8,000	)		30.15		(2,575	)		24.28		(2,175	)		21.92
Nonvested, end of period		128,952		$	25.75		111,131		$	23.02		88,226		$	28.40

As of December 31, 2022, there was $2.1 million of unrecognized compensation cost related to the nonvested portion of restricted stock awards under the plan to be recognized over the next three years.

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Earnings Per Share

12 Months Ended

Dec. 31, 2022

Earnings Per Share [Abstract]

Earnings Per Share

Note 12 – Earnings Per Share

Basic earnings per share is calculated using the two-class method. The two-class method is an earnings allocation formula under which earnings per share is calculated from common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Under this method, all earnings distributed and undistributed, are allocated to participating securities and common shares based on their respective rights to receive dividends. Unvested share-based payment awards that contain non-forfeitable rights to dividends are considered participating securities (i.e. unvested restricted stock), not subject to performance based measures. Basic earnings per share is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding. Application of the two-class method for participating securities results in a more dilutive basic earnings per share as the participating securities are allocated the same amount of income as if they are outstanding for purposes of basic earnings per share. There is no additional potential dilution in calculating diluted earnings per share, therefore basic and diluted earnings per share are the same amounts. Other than the restricted stock plan, the Company has no other stock based compensation plans.

The Compensation Committee of the Company has determined that it is appropriate to award shares of the common stock of the Company to Outside Directors and Employees that are officers of the Company or the Bank who also serve as Directors of the Company and the Bank as a portion of their retainer for services rendered as Directors of the Company and the Bank. The Committee believes that it is appropriate to award the Directors Shares equal to approximately $4,000, rounded to the nearest whole Share on an annual basis commencing on June 5, 2020 and thereafter on the first Friday of June in each year. The value for the Shares is to be based upon the closing price for Shares on June 4, 2020 and thereafter on the first Thursday in June each year. On June 5, 2020, each Director received 176 shares. On November 20, 2020, a new director received 20 prorated shares. On June 4, 2021, ten Directors received approximately $6,000 worth of shares which equated to 272 shares while four Directors received a prorated dollar value of shares. On October 1, 2021, a new Director was added as a result of the Perpetual Federal Savings Bank acquisition and received 68 prorated shares worth approximately $1,523. On June 3, 2022, twelve Directors

each received $10,013 which equated to 240 shares. The use of stock for Directors' retainer, does not have an effect on diluted earnings per share as it is immediately vested.

The table below presents basic and diluted earnings per share for the years ended December 31, 2021, 2020, and 2019.

	Year Ended
	December 31,			December 31,			December 31,
	2022			2021			2020
Earnings per share
Net income	$	32,515		$	23,495		$	20,095
Less: distributed earnings allocated to    participating securities		(97	)		(70	)		(57	)
Less: undistributed earnings allocated to    participating securities		(187	)		(121	)		(96	)
Net earnings available to common    shareholders	$	32,231		$	23,304		$	19,942
Weighted average common shares outstanding    including participating securities		13,206,713			11,664,852			11,146,270
Less: average unvested restricted shares		(115,291	)		(94,634	)		(84,879	)
Weighted average common shares outstanding		13,091,422			11,570,218			11,061,391
Basic and diluted earnings per share	$	2.46		$	2.01		$	1.80

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Related Party Transactions

12 Months Ended

Dec. 31, 2022

Related Party Transactions [Abstract]

Related Party Transactions

Note 13 – Related Party Transactions

In the ordinary course of business, the Bank has granted loans to senior officers and directors and their affiliated companies amounting to $20.2 million and $20.1 million at December 31, 2022 and 2021, respectively. Two new loans were approved during 2022 of which no additional borrowings were utilized. During 2022, subsequent advances totaled $12.5 million and payments of $21.9 million were received. The difference in related borrowings amounted to $151 thousand, net increase. Deposits of directors, executive officers and companies in which they have a direct or indirect ownership as of December 31, 2022 and 2021, amounted to $41.5 million and $43.7 million, respectively.

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Off Balance Sheet Activities

12 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Off Balance Sheet Activities

Note 14 - Off Balance Sheet Activities

Credit Related Financial Instruments

The Bank is a party to credit related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing need of its customers. These financial instruments include commitments to extend credit, Standby Letters of Credit, and Commercial Letters of Credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The Bank's exposure to credit loss is represented by the contractual amount of these commitments. The Bank follows the same credit policies in making commitments as it does for on-balance-sheet instruments. The allowance for credit losses as it relates to unfunded loan commitments (AULC) is included under other liabilities. The AULC as of both December 31, 2022 and 2021 was $1.0 million.

At December 31, 2022 and 2021, the following financial instruments were outstanding whose contract amounts represent credit risk:

	(In Thousands)
	2022		2021
Commitments to extend credit	$	691,501	$	557,094
Credit card arrangements		-		23,179
Standby letters of credit		1,046		983

Commitments to extend credit, credit card arrangements and Standby Letters of Credit all include exposure to some credit loss in the event of nonperformance of the customer. The Bank’s credit policies and procedures for credit commitments and financial guarantees are the same as those for extensions of credit that are recorded in the financial statements. Due to the fact that these instruments have fixed maturity dates, and because many of them expire without being drawn upon, they generally do not present any significant liquidity risk to the Bank. On May 1, 2022, the Bank sold the credit card portfolio thus eliminating credit risk for 2022.

Collateral Requirements

To reduce credit risk related to the use of credit-related financial instruments, the Bank might deem it necessary to obtain collateral. The amount and nature of the collateral obtained is based on the Bank's credit evaluation of the customer. Collateral held varies but may include cash, securities, accounts receivable, inventory, property, plant, and real estate.

Legal Contingencies

Various legal claims also arise from time to time in the normal course of business, which, in the opinion of management, will have no material effect on the Company’s consolidated financial statements.

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Minimum Regulatory Capital Requirements

12 Months Ended

Dec. 31, 2022

Federal Home Loan Banks [Abstract]

Minimum Regulatory Capital Requirements

Note 15 - Minimum Regulatory Capital Requirements

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off balance-sheet items as calculated under regulatory accounting practices.

The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by the Basel III Capital Rules, the comprehensive capital framework for U.S. banking organizations, to ensure capital adequacy require the maintenance of minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1 capital, Tier 1 capital and Total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to adjusted quarterly average assets (as defined).

In connection with the adoption of the Basel III Capital Rules, we elected to opt-out of the requirement to include most components of accumulated other comprehensive income in Common Equity Tier 1.

Common Equity Tier 1 is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities, and subject to transition provisions.

The Common Equity Tier 1, Tier 1 and Total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets. Risk-weighted assets are calculated based on regulatory requirements and include total assets, with certain exclusions, allocated by risk weight category, and certain off-balance-sheet items, among other things. The leverage ratio is calculated by dividing Tier 1 capital by adjusted quarterly average total assets, which exclude goodwill and other intangible assets, among other things.

The Basel III Capital Rules require the Bank to maintain (i) a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% Common Equity Tier 1 capital ratio, effectively resulting in a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of at least 7.0%), (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio, effectively resulting in a minimum Tier 1 capital ratio of 8.5%), (iii) a minimum ratio of Total capital (that is, Tier 1 plus Tier 2) to risk-weighted assets of at least 8.0%, plus the capital conservation buffer (which is added to the 8.0% total capital ratio, effectively resulting in a minimum total capital ratio of 10.5%) and (iv) a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average quarterly assets.

The capital conservation buffer is designed to absorb losses during periods of economic stress and, as detailed above, effectively increases the minimum required risk-weighted capital ratios. Banking institutions with a ratio of Common Equity Tier 1 capital to risk-weighted assets below the effective minimum (4.5% plus the capital conservation buffer) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall.

Management believes, as of December 31, 2022, that the Bank meets all the capital adequacy requirements to which it is subject.

As of December 31, 2022, the most recent notification from the FDIC indicated the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To remain categorized as well capitalized, the Bank will have to maintain minimum total risk-based, Tier I risk-based, Common Equity Tier 1 and Tier I leverage ratios as disclosed in the table to follow. There are no conditions or events since the most recent notification that management believes have changed the Bank’s prompt corrective action category.

The following tables present actual and required capital ratios as of December 31, 2022 and December 31, 2021 under the Basel III Capital Rules. The minimum required capital amounts presented include the minimum required capital levels as of December 31, 2022 and December 31, 2021. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.

The Bank’s actual and required capital amounts and ratios as of December 31, 2022 and December 31, 2021 are as follows:

	Actual					Minimum Capital Required					Required to be Considered Well-Capitalized
	(000's)					(000's)					(000's)
As of December 31, 2022	Amount		Ratio			Amount		Ratio			Amount		Ratio
Common Equity Tier 1 Capital    (to Risk Weighted Assets)	$	259,510		11.15	%	$	104,763		4.50	%	$	151,324		6.50	%
Total Risk-Based Capital    (to Risk Weighted Assets)		281,085		12.07	%		186,245		8.00	%		232,806		10.00	%
Tier 1 Capital    (to Risk Weighted Assets)		259,510		11.15	%		139,684		6.00	%		186,245		8.00	%
Tier 1 Leverage Capital    (to Adjusted Total Assets)		259,510		9.03	%		114,972		4.00	%		143,714		5.00	%

	Actual					Minimum Capital Required					Required to be Considered Well-Capitalized
	(000's)					(000's)					(000's)
As of December 31, 2021	Amount		Ratio			Amount		Ratio			Amount		Ratio
Common Equity Tier 1 Capital    (to Risk Weighted Assets)	$	256,943		14.26	%	$	81,074		4.50	%	$	117,112		6.50	%
Total Risk-Based Capital    (to Risk Weighted Assets)		274,226		15.22	%		144,138		8.00	%		180,173		10.00	%
Tier 1 Capital    (to Risk Weighted Assets)		256,943		14.26	%		108,104		6.00	%		144,138		8.00	%
Tier 1 Leverage Capital    (to Adjusted Total Assets)		256,943		10.25	%		100,317		4.00	%		125,396		5.00	%

The above tables exclude the capital conservation buffer requirements.

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Restrictions of Dividends & Inter-company Borrowings

12 Months Ended

Dec. 31, 2022

Equity [Abstract]

Restrictions of Dividends & Inter-company Borrowings

Note 16 - Restrictions of Dividends & Inter-company Borrowings

The Bank is restricted as to the amount of dividends that can be paid. Dividends declared by the Bank that exceed the net income for the current year plus retained income for the preceding two years must be approved by federal and state regulatory agencies. Under this formula and excluding the $40 million of a special one time dividend approved by the Federal Reserve for the acquisition of Perpetual Federal Saving Bank, dividends of $42.9 million may be paid without prior regulatory approval. Regardless of formal regulatory restrictions, the Bank may not pay dividends that would result in its capital levels being reduced below the minimum requirements shown above. Under current Federal Reserve regulations, the Bank is limited as to the amount and type of loans it may make to the Company. These loans are subject to qualifying collateral requirements on which the amount of the loan may be based.

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Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2022

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Note 17 - Fair Value of Financial Instruments

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

The estimated fair values, and related carrying or notional amounts, for on and off-balance sheet financial instruments as of December 31, 2022 and 2021, are reflected below. The aggregate fair values in the table below do not represent the total market value of the Bank’s assets and liabilities. The table excludes the following: Bank Premises and Equipment, Goodwill, Mortgage Servicing Rights, Other Real Estate Owned, Other Assets, Other Liabilities and Accrued Expenses.

	(In Thousands)
	December 31, 2022										December 31, 2021
	Carrying		Fair								Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3		Amount		Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	84,409	$	84,409	$	84,409	$	-	$	-	$	180,823	$	180,823	$	180,823	$	-	$	-
Interest-bearing time deposits		4,442		4,440		-		4,440		-		10,913		10,933		-		10,933		-
Securities - available-for-sale		390,789		390,789		94,678		292,766		3,345		429,931		429,931		89,177		335,981		4,773
Other securities		9,799		9,799		-		-		9,799		8,162		8,162		-		-		8,162
Loans held for sale		827		815		-		-		815		7,714		7,844		-		-		7,844
Loans, net		2,336,074		2,171,152		-		-		2,171,152		1,841,177		1,864,386		-		-		1,864,386
Interest receivable		10,440		10,440		-		-		10,440		7,209		7,209		-		-		7,209
Financial Liabilities:
Interest bearing deposits	$	1,378,090	$	1,377,944	$	-	$	-	$	1,377,944	$	1,248,294	$	1,248,044	$	-	$	-	$	1,248,044
Noninterest bearing deposits		532,794		532,794		532,794		-		-		473,689		473,689		-		473,689		-
Time deposits		557,980		543,737		-		-		543,737		471,479		475,810		-		-		475,810
Total Deposits		2,468,864		2,454,475		532,794		-		1,921,681		2,193,462		2,197,543		-		473,689		1,723,854
Fed funds purchased and    securities sold under    agreement to repurchase		54,206		54,206		-		-		54,206		29,268		29,268		-		-		29,268
Federal Home Loan Bank  advances		127,485		125,761		-		-		125,761		24,065		24,305		-		-		24,305
Other borrowings		10,000		10,000		-		10,000		-		40,000		40,000		-		40,000		-
Subordinated notes		34,586		30,993		-		30,993		-		34,471		35,000		-		35,000		-
Interest payable		1,739		1,739		-		-		1,739		1,125		1,125		-		-		1,125

Fair Value Measurements

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2022 and 2021, and the valuation techniques used by the Company to determine those fair values. There were no changes to valuation techniques during 2022.

In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities in active markets that the Company has the ability to access.

Available-for-sale securities - When quoted prices are available in an active market, securities are valued using the quoted price and are classified as Level 1. The quoted prices are not adjusted.

Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

Available-for-sale securities classified as Level 2 are valued using the prices obtained from an independent pricing service. The prices are not adjusted. Securities of obligations of state and political subdivisions are valued using a type of matrix, or grid, pricing in which securities are benchmarked against the treasury rate based on credit rating. Substantially all assumptions used by the independent pricing service are observable in the marketplace, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace.

Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability. The Bank holds ten local municipals that the Bank evaluates based on the credit strength of the underlying project. The fair value is determined by valuing similar credit payment streams at similar rates.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset.

The following table summarizes financial assets measured at fair value on a recurring basis as of December 31, 2022 and December 31, 2021 segregated by level or the valuation inputs within the fair value hierarchy utilized to measure fair value.

Assets and Liabilities Measured at Fair Value on a Recurring Basis (in Thousands)
	Quoted Prices in		Significant		Significant
	Active Markets		Observable		Observable
	for Identical		Inputs		Inputs
December 31, 2022	Assets (Level 1)		(Level 2)		(Level 3)
Assets-(Securities Available-for-Sale)
U.S. Treasury	$	94,678	$	-	$	-
U.S. Government agencies		-		139,767		-
Mortgage-backed securities		-		86,927		-
State and local governments		-		66,072		3,345
Total Securities Available-for-Sale	$	94,678	$	292,766	$	3,345

	Quoted Prices in		Significant		Significant
	Active Markets		Observable		Observable
	for Identical		Inputs		Inputs
December 31, 2021	Assets (Level 1)		(Level 2)		(Level 3)
Assets-(Securities Available-for-Sale)
U.S. Treasury	$	89,177	$	-	$	-
U.S. Government agencies		-		156,886		-
Mortgage-backed securities		-		117,927		-
State and local governments		-		61,168		4,773
Total Securities Available-for-Sale	$	89,177	$	335,981	$	4,773

	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local			State and Local			State and Local
	Governments			Governments			Governments
	Tax-Exempt			Taxable			Total
Balance at January 1, 2022	$	2,307		$	2,466		$	4,773
Change in Market Value		(76	)		(203	)		(279	)
Purchases		-			-			-
Sales		-			-			-
Payments & Maturities		(160	)		-			(160	)
Reclassification and Adjustments		-			(989	)		(989	)
Balance at December 31, 2022	$	2,071		$	1,274		$	3,345

	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local			State and Local			State and Local
	Governments			Governments			Governments
	Tax-Exempt			Taxable			Total
Balance at January 1, 2021	$	-		$	1,562		$	1,562
Change in Market Value		44			(96	)		(52	)
Purchases		2,418			1,000			3,418
Sales		-			-			-
Payments & Maturities		-			-			-
Reclassification and Adjustments		(155	)		-			(155	)
Balance at December 31, 2021	$	2,307		$	2,466		$	4,773

Most of the Company’s available for sale securities, including any bonds issued by local municipalities, have CUSIP numbers or have similar characteristics of those in the municipal markets, making them marketable and comparable as Level 2.

There was one security transferred out of Level 3 to Level 2 in 2022 and no transfers into or out of Level 3 during 2021. The 2021 tax exempt purchases were included in the acquisition of Ossian State Bank.

The Company also has assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis. At December 31, 2022 and 2021, such assets consist primarily of collateral dependent impaired loans. Collateral dependent impaired loans categorized as Level 3 assets consist of non-homogeneous loans that are considered impaired. The Company estimates the fair value of the loans based on the present value of expected future cash flows using management’s best estimate of key assumptions. These assumptions include future payment ability, timing of payment streams, and estimated realizable values of available collateral (typically based on outside appraisals).

At December 31, 2022 and 2021, collateral dependent impaired loans categorized as Level 3 were $2,667 and $8,527 thousand, respectively. The specific allocation for collateral dependent impaired loans was $1,996 thousand as of December 31, 2022 and $2,184 thousand as of December 31, 2021, respectively, which are accounted for in the allowance for loan losses (see Note 4).

During 2021, impairment was recognized on mortgage servicing rights based upon the independent third party’s quarterly valuations. A valuation allowance was established by strata to quantify the likely impairment of the value of the mortgage servicing rights to the Company. If the carrying amount of an individual strata exceeds the fair value, impairment was recorded on that strata so the servicing asset was carried at fair value. In 2022, the valuation allowance was reversed as all strata were positive.

Other real estate is reported at the lower of either the fair value of the real estate, minus the estimated costs to sell the asset, or the cost of the asset. The determination of the fair value of the real estate relies primarily on appraisals from third parties. If the fair value of the real estate, minus the estimated costs to sell the asset, is less than the asset’s cost, the deficiency is recognized as a valuation allowance against the asset through a charge to expense. The valuation allowance is therefore increased or decreased, through charges or credits to expense, for changes in the asset’s fair value or estimated selling costs.

The following table presents collateral dependent impaired loans and other real estate owned as recorded at fair value:

	($ in Thousands)
	Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2022
			Quoted Prices in
			Markets for		Significant		Significant
	Balance at		Identical		Observable Inputs		Unobservable Inputs
	December 31, 2022		Assets (Level 1)		(Level 2)		(Level 3)
Collateral dependent impaired     loans	$	2,667	$	-	$	-	$	2,667
Mortgage servicing rights		-		-		-		-
Other real estate owned -     residential		-		-		-		-

	($ in Thousands)
	Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2021
			Quoted Prices in
			Markets for		Significant		Significant
	Balance at		Identical		Observable Inputs		Unobservable Inputs
	December 31, 2021		Assets (Level 1)		(Level 2)		(Level 3)
Collateral dependent impaired     loans	$	8,527	$	-	$	-	$	8,527
Mortgage servicing rights		3,157		-		-		3,157
Other real estate owned -     residential		99		-		-		99

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements:

	(In Thousands)
	Fair Value at December 31, 2022		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
State and local    government	$	3,345	Discounted Cash Flow	Credit strength of underlying project or entity / Discount rate	2.08-5.01% (4.38%)
Collateral dependent    impaired loans		2,667	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	20.00-29.01% (24.13%)
Mortgage servicing     rights		-	Discounted Cash Flow	Constant prepayment rate and probability of default / Discount rate	— % ( — )
		-	Appraisals	Discount to reflect current market	— % ( — )

Other real estate
   owned - residential

	(In Thousands)
	Fair Value at December 31, 2021		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
State and local    government	$	4,773	Discounted Cash Flow	Credit strength of underlying project or entity / Discount rate	0.21-1.77% (1.33%)
Collateral dependent    impaired loans		8,527	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	20.00-53.95% (34.78%)
Mortgage servicing     rights		3,157	Discounted Cash Flow	Constant prepayment rate and probability of default / Discount rate	1.94-27.70% (18.44%)
Other real estate    owned - residential		99	Appraisals	Discount to reflect current market	32.72% (32.72%)

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Condensed Financial Statements of Parent Company

12 Months Ended

Dec. 31, 2022

Condensed Financial Information Disclosure [Abstract]

Condensed Financial Statements of Parent Company

Note 18 – Condensed Financial Statements of Parent Company

Balance Sheets
	(In Thousands)
	2022		2021
Assets
Cash	$	16,901	$	19,293
Interest-bearing time deposits		498		1,234
Related party receivables:
Dividends and accounts receivable from subsidiary		2,114		4,636
Accrued interest receivable - municipals / interest     bearing time deposits		38		43
Securities - municipals		7,460		9,027
Investment in subsidiaries		319,371		340,733
Total Assets	$	346,382	$	374,966
Liabilities
Other borrowings	$	10,000	$	40,000
Subordinated notes, net of unamortized issuance costs		34,586		34,471
Dividends payable		2,832		2,461
Accrued interest payable		618		743
Accrued expenses		206		124
Total Liabilities		48,242		77,799
Stockholders' Equity		298,140		297,167
Total Liabilities and Stockholders' Equity	$	346,382	$	374,966

Statements of Income and Comprehensive Income
	(In Thousands)
	2022			2021			2020
Income
Dividends from subsidiaries	$	44,285		$	23,200		$	8,800
Interest - municipals / interest-bearing time deposits		308			253			382
Loss on sales of available-for-sale securities		-			293			-
Total income		44,593			23,746			9,182
Expenses
Interest		1,588			743			-
Operating expenses		1,176			1,335			923
Total expenses		2,764			2,078			923
Income Before Income Taxes and Equity in    Undistributed Earnings of Subsidiaries		41,829			21,668			8,259
Income Taxes (Benefit)		(535	)		(347	)		(184	)
		42,364			22,015			8,443
Equity in undistributed earnings of subsidiaries		(9,849	)		1,480			11,652
Net Income		32,515			23,495			20,095
Other Comprehensive Income (Loss):
Unrealized gains (losses) on securities, net of taxes		(35,049	)		(8,881	)		4,599
Comprehensive Income (Loss)	$	(2,534	)	$	14,614		$	24,694

Statements of Cash Flows
	(In Thousands)
	2022			2021			2020
Cash Flows from Operating Activities
Net income	$	32,515		$	23,495		$	20,095
Adjustments to reconcile net income to net cash    provided by operating activities:
Equity in undistributed net income		9,849			(1,480	)		(11,652	)
Amortization of premiums on available-for-sale securities, net		61			81			154
Amortization of subordinated notes issuance fees		116			49			-
Stock-based compensation expense		899			822			1,024
Director stock awards		120			73			48
Gain on sale of available-for-sale securities		-			(293	)		-
Changes in assets and liabilities:
Other assets and liabilities		2,560			(456	)		1,742
Net cash provided by operating activities		46,120			22,291			11,411
Cash Flows from Investing Activities
Activity in available-for-sale securities:
Maturities, prepayments and calls		1,540			795			385
Sales		-			7,773			-
Purchases		(398	)		-			(745	)
Activity in certificates of deposit
Maturities		1,234			493			-
Purchases		(498	)		-			-
Cash used for acquisitions		(9,806	)		(79,235	)		-
Net cash used in investing activities		(7,928	)		(70,174	)		(360	)
Cash Flows from Financing Activities
Proceeds (repayments) of other borrowings		(30,000	)		35,000			-
Purchase of treasury stock		(308	)		(338	)		(383	)
Proceeds from issuance of subordinated notes		-			34,421			-
Payment of dividends		(10,276	)		(7,670	)		(7,186	)
Net cash provided by (used in) financing activities		(40,584	)		61,413			(7,569	)
Net Change in Cash and Cash Equivalents		(2,392	)		13,530			3,482
Cash and Cash Equivalents - Beginning of year		19,293			5,763			2,281
Cash and Cash Equivalents - End of year	$	16,901		$	19,293		$	5,763

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Quarterly Financial Data

12 Months Ended

Dec. 31, 2022

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Data

Note 19 – Quarterly Financial Data

Quarterly Financial Data - UNAUDITED
	Quarter Ended in 2022
	Mar 31			June 30			Sep 30			Dec 31
Summary of Income:
Interest income	$	21,899		$	23,911		$	25,847		$	29,492
Interest expense		2,116			2,047			3,264			6,935
Net Interest Income		19,783			21,864			22,583			22,557
Provision for loan loss		580			1,628			1,637			755
Net interest income after provision of loan loss		19,203			20,236			20,946			21,802
Other income (expense)		(9,150	)		(9,915	)		(9,739	)		(12,908	)
Net income before income taxes		10,053			10,321			11,207			8,894
Income taxes		1,951			2,050			2,253			1,706
Net income	$	8,102		$	8,271		$	8,954		$	7,188
Earnings per Common Share	$	0.62		$	0.63		$	0.68		$	0.53
Average common shares outstanding		12,955,107			12,957,126			12,983,307			13,606,876

	Quarter Ended in 2021
	Mar 31			June 30			Sep 30			Dec 31
Summary of Income:
Interest income	$	16,765		$	17,530		$	20,122		$	22,423
Interest expense		1,728			1,554			1,672			2,388
Net Interest Income		15,037			15,976			18,450			20,035
Provision for loan loss		1,700			641			659			444
Net interest income after provision for loan loss		13,337			15,335			17,791			19,591
Other income (expense)		(7,368	)		(9,033	)		(10,247	)		(9,909	)
Net income before income taxes		5,969			6,302			7,544			9,682
Income taxes		1,060			1,319			1,624			1,999
Net income	$	4,909		$	4,983		$	5,920		$	7,683
Earnings per Common Share	$	0.44		$	0.44		$	0.53		$	0.59
Average common shares outstanding		11,197,012			11,191,043			11,209,732			13,046,299

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Subsequent Events

12 Months Ended

Dec. 31, 2022

Subsequent Events [Abstract]

Subsequent Events

Note 20 – Subsequent Events

On January 24, 2023, the Company announced the authorization by its Board of Directors for the Company’s repurchase, either on the open market, or in privately negotiated transactions, of up to 650,000 shares of its outstanding common stock commencing January 24, 2023 and ending December 31, 2023.

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

Nature of Operations

Nature of Operations

The Farmers & Merchants Bancorp, Inc. (the Company) through its bank subsidiary, The Farmers & Merchants State Bank (the Bank) provides a variety of financial services to individuals and small businesses through its offices in Northwest Ohio and Northeast Indiana.

Consolidation Policy

Consolidation Policy

The consolidated financial statements include the accounts of Farmers & Merchants Bancorp, Inc. and its wholly-owned subsidiaries, The Farmers & Merchants State Bank (the Bank), a commercial banking institution and Farmers & Merchants Risk Management, Inc. (the Captive), a Captive insurance company. All significant inter-company balances and transactions have been eliminated.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of mortgage servicing rights and the valuation of goodwill. Actual results could differ from those estimates.

The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. In connection with the determination of the estimated losses on loans, management obtains independent appraisals for significant collateral.

The Bank’s loans are generally secured by specific items of collateral including real property, consumer assets, and business assets. Although the Bank has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent on local economic conditions in the agricultural industry.

While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the Bank to recognize additional losses based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans may change materially in the near term. However, the amount of the change that is reasonably possible cannot be estimated.

Cash and Cash Equivalents

Cash and Cash Equivalents

For purposes of the consolidated statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. This includes cash on hand, amounts due from banks, and federal funds sold. Generally, federal funds sold are outstanding for one day periods.

Restrictions on Cash and Amounts Due from Banks

Restrictions on Cash and Amounts Due from Banks

Effective March 26, 2020, the Bank is no longer required to maintain average balances on hand with the Federal Reserve Bank. The Company and its subsidiaries maintain cash balances with high quality financial institutions. At times such balances may be in excess of the federally insured limits.

Securities

Securities

Debt securities are classified as available-for-sale. Securities available-for-sale are carried at fair value with unrealized gains and losses reported in other comprehensive income (loss). Net realized gains and losses on securities available for sale are included in noninterest income and, when applicable, are reported as a reclassification adjustment, net of

tax, in other comprehensive income (loss). Gains and losses on sales of securities are determined on the specific-identification method.

Declines in the fair value of securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. The related write-downs are included in earnings as realized losses.

Other Securities

Other Securities

Other Securities consist of stock in the Federal Home Loan Banks of Cincinnati and Indianapolis (the “FHLBs”), which is held to enable the Bank to conduct business with the entities. The FHLBs sell and purchase their stock at par. The FHLBs stock is carried at cost and held as collateral security for all indebtedness of the Bank to the Federal Home Loan Bank. The FHLBs stock is evaluated for impairment as conditions warrant. Other Securities also include the Bank’s capital contributions to four Ohio Equity Funds for Housing Limited Partnership.

Loans

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at the amount of unpaid principal, reduced by unearned discounts, unamortized premiums or discounts on purchased loans, and deferred loan fees and costs, as well as, by the allowance for loan losses. Interest income is accrued on a daily basis based on the principal outstanding.

Generally, a loan is classified as nonaccrual and the accrual of interest income is generally discontinued when a loan becomes ninety days past due as to principal or interest and these loans are placed on a “cash basis” for purposes of income recognition. Management may elect to continue the accrual of interest when the estimated net realizable value of collateral is sufficient to cover the principal and accrued interest, and the loan is in the process of collection. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest receivable is charged against income.

Loan origination and commitment fees and certain direct loan origination costs are deferred and amortized as a net adjustment to the related loan’s yield. The Bank is generally amortizing these costs over the contractual life of such loans.

Allowance for Loan Losses

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses charged to income. Loans deemed to be uncollectable and changes in the allowance relating to loans are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based on management’s periodic review of the collectability of the loans in light of historical experiences, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are subject to revision as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. The unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and agricultural loans by either the present value of expected future cash flows discounted at the loan's effective interest rate or the fair value of the collateral if the loan is collateral dependent.

At 90 days delinquent, secured consumer loans are charged down to the value of the collateral, if repossession of the collateral is assured and/or in the process of repossession. Consumer mortgage loan deficiencies are charged down upon the sale of the collateral or sooner upon the recognition of collateral deficiency.

For the majority of the Bank’s impaired loans, the Bank will apply the fair value of collateral or use a measurement incorporating the present value of expected future cash flows discounted at the loan’s effective rate of interest. To determine fair value of collateral, collateral asset values securing an impaired loan are periodically evaluated. Maximum time of re-evaluation is every 12 months for chattels and titled vehicles and every two years for real estate. In this process, third party evaluations are obtained. Until such time that updated appraisals are received, the Bank may discount the collateral value used.

Large groups of homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer loans for impairment, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

For more information regarding the actual composition and classification of loans involved in the establishment of the allowance for loan loss, please see Note 4 provided here with the notes to consolidated financial statements.

Loans Held for Sale

Loans Held for Sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized in a valuation allowance by charges to income.

Servicing Assets

Servicing Assets

Servicing assets are recognized as separate assets when rights are acquired through purchase or sale of financial assets. Capitalized servicing rights are amortized into noninterest expense in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as interest rates and terms. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the capitalized amount for the stratum. Fees received for servicing loans owned by investors are based on a percentage of the outstanding monthly principal balance of such loans and are included in operating income as loan payments are received. Costs of servicing loans are charged to expense as incurred.

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed for impairment at least annually. If possible impairment is likely, the Bank will utilize the assistance of an independent third party for an appraisal and any such impairment is recognized in the period identified. Periodically, the Bank will have an independent third party assess the possibility of impairment of Goodwill. The goodwill impairment analysis consisted

of a first step goodwill impairment test which was used to identify potential impairment by comparing the fair value of the relevant reporting entity with its carrying value, including goodwill. The analysis was performed under guidance of FASB ASC 350. In the quantitative testing completed as of November 30, 2022, the excess fair value of capital was $427.5 million or 137.2% over the carrying value and was over 4.9 times the value of goodwill being carried. Therefore, the Bank concluded it is unlikely impairment of goodwill has occurred from the goodwill established from the Bank’s acquisition of Knisely on December 31, 2007, the acquisition of Bank of Geneva on January 1, 2019, the acquisition of Ossian State Bank on April 30, 2021, the acquisition of Perpetual Federal Savings Bank on October 1, 2021 and the acquisition of Peoples Federal Savings and Loan on October 1, 2022.

Other intangible assets consist of core deposit and customer list intangible assets arising from business acquisitions. They are initially measured at fair value and then are amortized on a straight line method over their estimated useful lives and evaluated for impairment. These assets are included in other assets on the consolidated balance sheets.

Off Balance Sheet Instruments

Off Balance Sheet Instruments

In the ordinary course of business, the Bank has entered into commitments to extend credit, including commitments under credit card arrangements, commercial letters of credit and standby letters of credit. Such financial instruments are recorded when they are funded.

Foreclosed Real Estate

Foreclosed Real Estate

Foreclosed real estate held for sale is carried at the lower of fair value minus estimated costs to sell, or cost. Costs of holding foreclosed real estate are charged to expense in the current period, except for significant property improvements, which are capitalized. Valuations are periodically performed by management and an allowance is established by a charge to noninterest expense if the carrying value exceeds the fair value minus the estimated costs to sell. Foreclosed real estate is classified as other real estate owned. The net loss from operations of foreclosed real estate held for sale is reported in noninterest expense. The Bank held no other real estate owned at December 31, 2022. At December 31, 2021 the Bank’s holding of other real estate owned totaled $159 thousand.

Bank Premises and Equipment

Bank Premises and Equipment

Land is carried at cost. Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is based on the estimated useful lives of the various properties and is computed using straight line and accelerated methods. Costs for maintenance and repairs are charged to operations as incurred. Gains and losses on dispositions are included in current operations.

Bank Owned Life Insurance

Bank Owned Life Insurance

Bank owned life insurance policies are carried at their cash surrender value. The Bank recognizes tax-free income from the periodic increases in the cash surrender value of these policies and from death benefits.

Revenue Recognition

Revenue Recognition

Accounting Standards Codification 606, “Revenue from Contracts with Customer” (ASC 606) provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue generated from financial instruments, including loans and investment securities, are not included within the scope of ASC 606. The adoption of ASC 606 did not result in a change to the accounting for any of the Company’s revenue streams that

are within scope of the amendments. Revenue-generating activities that are within the scope of ASC 606 that are presented as noninterest income in the Company’s consolidated statements of income include:

oCustomer service fees – these include miscellaneous service fees and transaction-based fees charged for certain services, such as debit card or credit card. Revenue is recognized when the performance obligation is completed, which is generally after a transaction is completed or monthly for account maintenance services.

oOther service charges and fees – these include service fees charged for deposit account maintenance and activity along with transaction-based fees charged for certain services, such as overdraft activities, returned check charges and wire transfers. Revenue is recognized when the performance obligation is completed, which is generally after a transaction is completed or monthly for account maintenance services.

Income Tax

Income Tax

The Company’s income tax expense consists of the following components for federal and state: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in tax expense. Based on management’s analysis, the Company did not have any uncertain tax positions as of December 31, 2022 and 2021. With a few exceptions, the Company is no longer subject to U.S. Federal, state or local examinations by tax authorities for years before 2019.

Earnings Per Share

Earnings Per Share

Basic earnings per share represent income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. See Note 12 for additional information.

Stock-Based Compensation

Stock-Based Compensation

The fair value of restricted common stock is their fair market value on the date of grant. The fair value of restricted stock is amortized as compensation expense on a straight-line basis over the vesting period of the grants. Compensation expense recognized is included in salaries and wages in the consolidated statements of income.

Transfers of Financial Assets

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Corporation – put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Corporation does not maintain effective control over the transferred assets

through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

Treasury Stock

Treasury Stock

Common stock shares repurchased are recorded at market value on date of purchase. Restricted shares when awarded are removed from treasury stock using the weighted average method.

Other Comprehensive Income (Loss)

Other Comprehensive Income (Loss)

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of other comprehensive income (loss).

The components of other comprehensive income (loss) and related tax effects are as follows:

	(In Thousands)
	2022			2021			2020
Net unrealized gain (loss) on available-for-sale    securities	$	(44,366	)	$	(10,948	)	$	6,091
Reclassification adjustment for gain on sale of    available-for-sale securities		-			(293	)		(270	)
Net unrealized gain (loss) on available-for-sale    securities		(44,366	)		(11,241	)		5,821
Tax expense (benefit)		(9,317	)		(2,360	)		1,222
Other comprehensive income (loss)	$	(35,049	)	$	(8,881	)	$	4,599

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

The ASU was effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (i.e., January 1, 2020, for calendar year entities). FASB subsequently approved a delay in adoption for Smaller Reporting Companies. The Company has completed an analysis to determine that it qualifies as a Smaller Reporting Company. As such, adoption can be postponed until periods beginning after December 15, 2022 (i.e., January 1, 2023, for calendar year entities). Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.

The Current Expected Credit Losses (“CECL”) methodology applies to loans held for investment, held to maturity debt securities, and off balance-sheet credit exposures. The ASU allows for several different methods of computing the ALLL: closed pool, vintage, average charge-off, migration, probability of default / loss given default, discounted cash flow, and regression. Based on its analysis of observable data, the Company concluded the average charge-off

method to be the most appropriate and statistically relevant. A 20-year lookback will be utilized as the historical loss period due to its inclusion of several economic cycles and relevance to real estate secured assets.

The Company began working with its third-party service provider to review parallel reports in June 2019. At the end of first quarter 2022, the Company evaluated and refined its methodology and produced a parallel report for the calculation of the ALLL under the ASU guidance. The Company has contracted with a third party to begin an independent validation of its processes and methodology. This validation will be performed on an annual basis.

The ALLL has been computed through 2022 by applying historical loss rates, adjusted for qualitative factors, to pools of loans. Upon implementation of the ASU, the expected loss estimate will be made up of a historical lookback of actual losses applied over the life of the loan portfolio and adjusted for qualitative factors and forecasted losses based on economic and forward-looking data applied over a reasonable and supportable forecast period.

The impact of the adoption of the ASU is estimated to be a one-time cumulative-effect adjustment to our reserves for loans and unfunded commitments in a range between $3 million and $7 million. This estimate may change as the Company continues to improve its processes and methodology.

The qualitative impact of the new accounting standard will still be directed by many of the same factors that impacted the previous methodology for computing the ALLL including, but not limited to, quality and experience of staff, changes in the value of collateral, concentrations of credit in loan types or industries and changes to lending policies. In addition to this, the Company will also use reasonable and supportable forecasts. Examples of this are regression analyses of data from the Federal Open Market Committee quarterly economic projections for change in real GDP and of national unemployment.

The Company does not anticipate any material changes to its business practices as a result of implementing the ASU. The Company adopted ASU 2016-13 on January 1, 2023.

In March 2022, the FASB issued ASU 2022-02 "Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures." This ASU eliminates the accounting guidance on troubled debt restructurings for creditors in ASC 310-40 and requires entities to evaluate all receivable modifications under ASC 310-20 to determine whether a modification made to a borrower results in a new loan or a continuation of the existing loan. The amended guidance adds enhanced disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty. The amended guidance also requires disclosure of current period gross charge-offs by year of origination within the vintage disclosures required by ASC 326. The amended guidance is effective for the Company on January 1, 2023, with early adoption permitted. The Company adopted ASU 2022-02 on January 1, 2023.

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2022

Accounting Policies [Abstract]

Components of Other Comprehensive Income (Loss) and Related Tax Effects

The components of other comprehensive income (loss) and related tax effects are as follows:

	(In Thousands)
	2022			2021			2020
Net unrealized gain (loss) on available-for-sale    securities	$	(44,366	)	$	(10,948	)	$	6,091
Reclassification adjustment for gain on sale of    available-for-sale securities		-			(293	)		(270	)
Net unrealized gain (loss) on available-for-sale    securities		(44,366	)		(11,241	)		5,821
Tax expense (benefit)		(9,317	)		(2,360	)		1,222
Other comprehensive income (loss)	$	(35,049	)	$	(8,881	)	$	4,599

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Business Combination & Asset Purchase (Tables)

12 Months Ended

Dec. 31, 2022

Business Acquisition [Line Items]

Schedule of Pro-forma Results

The following schedule includes pro-forma results for the years ended December 31, 2022, 2021 and 2020 as if all three acquisitions had occurred as of the beginning of the comparable prior reporting periods.

	2022		2021		2020
Summary of Operations
Net Interest Income - Before Provision for Loan Losses	$	90,290	$	84,362	$	81,636
Provision for Loan Losses		4,513		3,445		6,901
Net Interest Income After Provision for Loan Losses		85,777		80,917		74,735
Noninterest Income		14,099		18,931		17,668
Noninterest Expense		57,426		57,622		55,765
Income Before Income Taxes		42,450		42,226		36,638
Income Taxes		8,185		8,458		7,242
Net Income	$	34,265	$	33,768	$	29,396
Basic and Diluted Earnings Per Share	$	2.59	$	2.57	$	2.24

Schedule of Future Amortization of Core Deposit Intangible Assets

Future amortization expense of core deposit intangible assets is as follows:

	Geneva		Ossian		Perpetual		Peoples		Total
	(In thousands)
2023	$	560	$	140	$	95	$	861	$	1,656
2024		560		140		95		861		1,656
2025		560		140		95		861		1,656
2026		-		140		95		861		1,096
2026		-		140		95		861		1,096
Thereafter		-		47		74		1,506		1,627
Total	$	1,680	$	747	$	549	$	5,811	$	8,787

Customer Lists [Member]

Business Acquisition [Line Items]

Schedule of Future Amortization of Core Deposit Intangible Assets

Future amortization expense of customer list intangible is as follows:

	(In thousands)
2023	$	123
2024		123
2025		123
2026		123
2027		47
Thereafter		-
Total	$	539

Peoples Federal Savings and Loan [Member]

Business Acquisition [Line Items]

Summary of Consideration Paid and Amounts of Assets Acquired and Liabilities Assumed Recognized

The following table summarizes the consideration paid for Peoples Federal Savings and Loan Bank and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date

Fair Value of Consideration Transferred
	(In Thousands)
Cash	$	9,806
Common Shares (500,426 shares)		13,446
Treasury stock repurchased (125 shares)		(3	)
Total	$	23,249
Recognized amounts of identifiable assets acquired and liabilities assumed
Assets
Cash and cash equivalents	$	18,881
Other securities, at cost		1,271
Loans, net		101,755
Premises and equipment		1,906
Goodwill		5,924
Other assets		12,081
Total Assets Purchased	$	141,818
Liabilities
Deposits
Noninterest bearing	$	7,139
Interest bearing		104,719
Total deposits		111,858
Federal Home Loan Bank (FHLB) advances		896
Accrued expenses and other liabilities		5,815
Total Liabilities Assumed	$	118,569

Summary of Changes in Accretable Yield or Income Expected to be Collected

Changes in accretable yield, or income expected to be collected, are as follows:

	2022
	(In Thousands)
Beginning Balance
Additions		856
Accretion		(58	)
Reclassification from nonaccretable difference		-
Disposals		-
Ending Balance	$	798

Perpetual Federal Savings Bank [Member]

Business Acquisition [Line Items]

Summary of Consideration Paid and Amounts of Assets Acquired and Liabilities Assumed Recognized

The following table summarizes the consideration paid for Perpetual Federal Savings Bank and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

Fair Value of Consideration Transferred
	(In Thousands)
Cash	$	59,234
Common Shares (1,833,845 shares)		41,078
Total	$	100,312
Recognized amounts of identifiable assets acquired and liabilities assumed
Assets
Cash and cash equivalents	$	44,975
Federal funds sold		1,672
Interest-bearing time deposits		6,250
Other securities, at cost		2,794
Loans, net		334,661
Premises and equipment		615
Goodwill		25,220
Other assets		3,975
Total Assets Purchased	$	420,162
Liabilities
Deposits
Noninterest bearing	$	2,018
Interest bearing		309,090
Total deposits		311,108
Federal Home Loan Bank (FHLB) advances		6,218
Accrued expenses and other liabilities		2,524
Total Liabilities Assumed	$	319,850

Summary of Carrying Amount of Loans

The carrying amount of those loans is included in loans, net on the balance sheet at December 31, 2021. The amounts of loans at October 1, 2021, December 31, 2021 and December 31, 2022 are as follows:

	2021
	(In Thousands)
Balance - October 1, 2021
Consumer Real Estate	$	608
Agricultural Real Estate		118
Commercial Real Estate		234
Consumer		5
Carrying amount, net of fair value adjustment of $237	$	728
Balance - December 31, 2021
Consumer Real Estate	$	581
Agricultural Real Estate		114
Commercial Real Estate		5
Consumer		-
Carrying amount, net of fair value adjustment of $190	$	510
	2022
	(In Thousands)
Balance - December 31, 2022
Consumer Real Estate	$	288
Agricultural Real Estate		107
Commercial Real Estate		-
Consumer		-
Carrying amount, net of fair value adjustment of $128	$	267

Summary of Loans Acquired and Contractually Required Payments Receivable

Loans acquired during 2021 for which it was probable at acquisition that all contractually required payments would not be collected are as follows:

	(In Thousands)
Contractually required payments receivable at acquisition
Consumer Real Estate	$	962
Agricultural Real Estate		146
Commercial Real Estate		293
Consumer		6
Total required payments receivable	$	1,407
Cash flows expected to be collected at acquisition	$	728
Basis in acquired loans at acquisition	$	965

Summary of Changes in Accretable Yield or Income Expected to be Collected

Changes in accretable yield, or income expected to be collected, are as follows:

	2022			2021
	(In Thousands)			(In Thousands)
Beginning Balance	$	5,262		$	-
Additions		294			5,592
Accretion		(1,318	)		(330	)
Reclassification from nonaccretable difference		-			-
Disposals		(2	)		-
Ending Balance	$	4,236		$	5,262

Ossian Financial Services, Inc. [Member]

Business Acquisition [Line Items]

Summary of Consideration Paid and Amounts of Assets Acquired and Liabilities Assumed Recognized

The following table summarizes the consideration paid for Ossian State Bank and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

Fair Value of Consideration Transferred
	(In Thousands)
Cash	$	20,001
Total	$	20,001
Recognized amounts of identifiable assets acquired and liabilities assumed
Assets
Cash and cash equivalents	$	20,229
Interest-bearing time deposits		20,226
Securities - available-for-sale		30,243
Other securities, at cost		281
Loans, net		52,403
Premises and equipment		494
Goodwill		7,874
Other assets		5,308
Total Assets Purchased	$	137,058
Liabilities
Deposits
Noninterest bearing	$	34,509
Interest bearing		81,535
Total deposits		116,044
Accrued expenses and other liabilities		1,013
Total Liabilities Assumed	$	117,057

Summary of Carrying Amount of Loans

The carrying amount of those loans is included in loans, net on the balance sheet at December 31, 2021. The amounts of loans at April 30, 2021, December 31, 2021 and December 31, 2022 are as follows:

	2021
	(In Thousands)
Balance - April 30, 2021
Consumer Real Estate	$	24
Agricultural Real Estate		981
Commercial Real Estate		315
Commercial and Industrial		314
Carrying amount, net of fair value adjustment of $325	$	1,309
Balance - December 31, 2021
Consumer Real Estate	$	22
Agricultural Real Estate		-
Commercial Real Estate		222
Commercial and Industrial		285
Carrying amount, net of fair value adjustment of $321	$	208
	2022
	(In Thousands)
Balance - December 31, 2022
Consumer Real Estate	$	19
Agricultural Real Estate		-
Commercial Real Estate		-
Commercial and Industrial		-
Carrying amount, net of fair value adjustment of $10	$	9

Summary of Loans Acquired and Contractually Required Payments Receivable

Loans acquired during 2021 for which it was probable at acquisition that all contractually required payments would not be collected are as follows:

	(In Thousands)
Contractually required payments receivable at acquisition
Consumer Real Estate	$	28
Agricultural Real Estate		1,142
Commercial Real Estate		527
Commercial and Industrial		360
Total required payments receivable	$	2,057
Cash flows expected to be collected at acquisition	$	1,309
Basis in acquired loans at acquisition	$	1,634

Summary of Changes in Accretable Yield or Income Expected to be Collected

Changes in accretable yield, or income expected to be collected, are as follows:

	2022			2021
	(In Thousands)			(In Thousands)
Beginning Balance	$	645		$	-
Additions		1			762
Accretion		(176	)		(117	)
Reclassification from nonaccretable difference		-			-
Disposals		-			-
Ending Balance	$	470		$	645

Limberlost Bancshares, Inc. [Member]

Business Acquisition [Line Items]

Summary of Changes in Accretable Yield or Income Expected to be Collected

Changes in accretable yield, or income expected to be collected, for the acquisition of Bank of Geneva completed in 2019, are as follows:

	2022			2021
	(In Thousands)			(In Thousands)
Beginning Balance	$	1,198		$	1,653
Additions		13			17
Accretion		(426	)		(431	)
Reclassification from nonaccretable difference		-			-
Disposals		-			(41	)
Ending Balance	$	785		$	1,198

Adams County Financial Resources [Member]

Business Acquisition [Line Items]

Summary of Consideration Paid and Amounts of Assets Acquired and Liabilities Assumed Recognized

The following table summarizes the consideration paid for ACFR and the amounts of the assets acquired:

Fair Value of Consideration Transferred
	(In Thousands)
Common Shares (40,049 shares)	$	825
Total	$	825
Recognized amounts of identifiable assets acquired and liabilities assumed
Assets
Premises and equipment	$	25
Customer list intangible		800
Total Assets Purchased	$	825

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Securities (Tables)

12 Months Ended

Dec. 31, 2022

Investments, Debt and Equity Securities [Abstract]

Amortized Cost and Fair Value of Securities with Gross Unrealized Gains and Losses

The amortized cost and fair value of securities, with gross unrealized gains and losses, follows:

	(In Thousands)
	2022
			Gross		Gross			Fair
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Available-for-Sale:
U.S. Treasury	$	104,507	$	-	$	(9,829	)	$	94,678
U.S. Government agencies		156,817		-		(17,050	)		139,767
Mortgage-backed securities		101,068		-		(14,141	)		86,927
State and local governments		76,794		69		(7,446	)		69,417
Total available-for-sale securities	$	439,186	$	69	$	(48,466	)	$	390,789

	(In Thousands)
	2021
			Gross		Gross			Fair
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Available-for-Sale:
U.S. Treasury	$	90,775	$	-	$	(1,598	)	$	89,177
U.S. Government agencies		159,673		695		(3,482	)		156,886
Mortgage-backed securities		118,550		839		(1,462	)		117,927
State and local governments		64,964		1,498		(521	)		65,941
Total available-for-sale securities	$	433,962	$	3,032	$	(7,063	)	$	429,931

Gross Unrealized Losses, Aggregated by Investment Category and Length of Time

Information pertaining to securities with gross unrealized losses at December 31, 2022 and 2021, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

	2022
	(In Thousands)					(In Thousands)
	Less Than Twelve Months					Twelve Months & Over
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value
U.S. Treasury	$	(207	)	$	9,121	$	(9,622	)	$	85,557
U.S. Government agencies		(1,081	)		24,560		(15,969	)		114,906
Mortgage-backed securities		(2,454	)		26,905		(11,687	)		60,022
State and local governments		(3,223	)		38,771		(4,223	)		25,610
Total available-for-sales securities	$	(6,965	)	$	99,357	$	(41,501	)	$	286,095

	2021
	(In Thousands)					(In Thousands)
	Less Than Twelve Months					Twelve Months & Over
	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value
U.S. Treasury	$	(1,598	)	$	89,177	$	-		$	-
U.S. Government agencies		(1,898	)		86,739		(1,584	)		41,738
Mortgage-backed securities		(1,050	)		63,157		(412	)		16,434
State and local governments		(296	)		17,727		(225	)		5,487
Total available-for-sales securities	$	(4,842	)	$	256,800	$	(2,221	)	$	63,659

Gross Realized Gains

gross realized gains for the years ended December 31, as presented below:

	(In Thousands)
	2022		2021		2020
Gross realized gains	$	-	$	293	$	270
Gross realized losses		-		-		-
Net realized gains	$	-	$	293	$	270
Tax expense related to net realized gains	$	-	$	62	$	57

Amortized Cost and Fair Value of Debt Securities, by Contractual Maturity

The amortized cost and fair value of debt securities at December 31, 2022, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	(In Thousands)
	Amortized
	Cost		Fair Value
One year or less	$	20,732	$	20,283
After one year through five years		209,735		190,333
After five years through ten years		105,681		91,379
After ten years		1,970		1,867
Total	$	338,118	$	303,862
Mortgage-backed securities		101,068		86,927
Total	$	439,186	$	390,789

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Loans (Tables)

12 Months Ended

Dec. 31, 2022

Receivables [Abstract]

Loans

Loans at December 31 are summarized below:

	(In Thousands)
Loans:	2022			2021
Consumer Real Estate	$	494,423		$	395,873
Agricultural Real Estate		220,819			198,343
Agricultural		128,733			118,368
Commercial Real Estate		1,152,603			848,477
Commercial and Industrial		242,360			208,270
Consumer		89,147			57,737
Other		29,818			32,089
		2,357,903			1,859,157
Less: Net deferred loan fees and costs		(1,516	)		(1,738	)
		2,356,387			1,857,419
Less: Allowance for loan losses		(20,313	)		(16,242	)
Loans - Net	$	2,336,074		$	1,841,177

Contractual Maturity Schedule by Major Category of Loans Excluding Fair Value Adjustments

The following is a maturity schedule by major category of loans excluding fair value adjustments at December 31, 2022:

	(In Thousands)
			After One
	Within		Year Within		After
	One Year		Five Years		Five Years		Total
Consumer Real Estate	$	8,890	$	34,961	$	456,556	$	500,407
Agricultural Real Estate		525		7,116		214,297		221,938
Agricultural		59,119		47,113		22,544		128,776
Commercial Real Estate		26,670		336,890		789,304		1,152,864
Commercial and Industrial		81,552		108,729		52,715		242,996
Consumer		2,089		47,052		40,357		89,498
Other		235		1,219		28,375		29,829
	$	179,080	$	583,080	$	1,604,148	$	2,366,308

Distribution of Fixed Rate Loans and Variable Rate Loans by Major Loan Category

The distribution of fixed rate loans and variable rate loans by major loan category is as follows as of December 31, 2022:

	(In Thousands)
	Fixed		Variable
	Rate		Rate
Consumer Real Estate	$	354,420	$	140,003
Agricultural Real Estate		144,702		76,117
Agricultural		52,867		75,866
Commercial Real Estate		941,927		210,676
Commercial and Industrial		130,513		111,847
Consumer		88,972		175
Other		20,029		9,789

Contractual Aging of Recorded Investment in Past Due Loans by Portfolio Classification of Loans

The following table represents the contractual aging of the recorded investment in past due loans by portfolio classification of loans as of December 31, 2022 and 2021, net of deferred loan fees and costs:

December 31, 2022	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Consumer Real Estate	$	1,536	$	635	$	90	$	2,261	$	492,162	$	494,423	$	-
Agricultural Real Estate		118		2		1,550		1,670		218,844		220,514		-
Agricultural		433		-		152		585		128,341		128,926		-
Commercial Real Estate		74		-		180		254		1,150,257		1,150,511		-
Commercial and Industrial		953		-		182		1,135		270,984		272,119		-
Consumer		83		37		-		120		89,774		89,894		-
Total	$	3,197	$	674	$	2,154	$	6,025	$	2,350,362	$	2,356,387	$	-

December 31, 2021	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Consumer Real Estate	$	228	$	-	$	246	$	474	$	395,331	$	395,805	$	-
Agricultural Real Estate		436		-		-		436		197,597		198,033		-
Agricultural		-		-		-		-		118,504		118,504		-
Commercial Real Estate		-		-		180		180		846,930		847,110		-
Commercial and Industrial		21		131		149		301		239,837		240,138		-
Consumer		64		-		-		64		57,765		57,829		-
Total	$	749	$	131	$	575	$	1,455	$	1,855,964	$	1,857,419	$	-

Recorded Investment in Nonaccrual Loans by Portfolio Class of Loans

The following table presents the recorded investment in nonaccrual loans by portfolio class of loans as of December 31, 2022 and December 31, 2021:

	(In Thousands)
	2022		2021
Consumer Real Estate	$	612	$	824
Agricultural Real Estate		1,921		6,477
Agriculture		152		20
Commercial Real Estate		903		600
Commercial and Industrial		1,096		149
Consumer		5		6
Total	$	4,689	$	8,076

Risk Category of Loans by Portfolio Class

The following table represents the risk category of loans by portfolio class, net of deferred fees, based on the most recent analysis performed as of the time periods shown of December 31, 2022 and December 31, 2021.

	(In Thousands)
	Agricultural Real Estate				Agricultural				Commercial Real Estate				Commercial and Industrial				Other
	2022		2021		2022		2021		2022		2021		2022		2021		2022		2021
1-2	$	9,912	$	8,720	$	5,857	$	4,178	$	8,718	$	10,894	$	780	$	4,604	$	-	$	-
3		47,405		42,180		33,671		38,623		370,035		238,132		67,506		46,547		10,921		11,408
4		146,143		129,301		88,992		75,164		737,745		568,038		167,291		152,736		18,897		20,681
5		10,389		4,599		228		227		9,751		14,509		3,592		986		-		-
6		6,665		13,233		178		312		24,262		15,537		3,132		3,176		-		-
7		-		-		-		-		-		-		-		-		-		-
8		-		-		-		-		-		-		-		-		-		-
Total	$	220,514	$	198,033	$	128,926	$	118,504	$	1,150,511	$	847,110	$	242,301	$	208,049	$	29,818	$	32,089

Recorded Investment for Consumer Loans, Credit Quality based on Status of Loan and Payment Activity

The following tables present the recorded investment in those classes based on payment activity and assigned risk grading as of December 31, 2022 and December 31, 2021.

	(In Thousands)
	Consumer Real Estate
	2022		2021
Grade
Pass	$	492,575	$	392,940
Special mention (5)		676		1,673
Substandard (6)		1,172		1,192
Doubtful (7)		-		-
Total	$	494,423	$	395,805

	(In Thousands)
	Consumer - Credit Card				Consumer - Other
	2022		2021		2022		2021
Performing	$	-	$	3,906	$	89,853	$	53,820
Nonperforming		-		13		41		90
Total	$	-	$	3,919	$	89,894	$	53,910

Schedule of Impaired Loans

Information about impaired loans as of and for the years ended December 31, 2022 and 2021 is as follows:

	(In Thousands)
	2022		2021
Impaired loans without a valuation allowance	$	4,194	$	1,228
Impaired loans with a valuation allowance		4,663		10,711
Total impaired loans	$	8,857	$	11,939
Valuation allowance related to impaired loans	$	1,996	$	2,184
Total nonaccrual loans	$	4,689	$	8,076
Total loans past-due ninety days or more and still accruing	$	-	$	-

	(In Thousands)
	2022		2021		2020
Average investment in impaired loans	$	10,710	$	12,247	$	10,232
Interest income recognized on impaired loans	$	361	$	292	$	269
Interest income recognized on a cash basis on impaired    loans	$	97	$	188	$	135

Impaired Loans Classified as Troubled Debt Restructured

December 31, 2022							December 31, 2021
			(In thousands)							(In thousands)
Troubled Debt Restructurings	Number of Contracts Modified in the Last 12 Months		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Troubled Debt Restructurings	Number of Contracts Modified in the Last 12 Months		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Consumer Real Estate		1	$	95	$	95	Consumer Real Estate		-	$	-	$	-
Agricultural Real Estate		-		-		-	Agricultural Real Estate		1		1,655		1,655
Agricultural		-		-		-	Agricultural		-		-		-
Commercial Real Estate		1		74		74	Commercial Real Estate		1		382		382
Commercial and Industrial		2		1,232		1,232	Commercial and Industrial		1		1,000		1,000

Loans Individually Evaluated for Impairment by Portfolio Class of Loans

The following tables present loans individually evaluated for impairment by portfolio class of loans as of December 31, 2022 and 2021:

	(In Thousands)
2022	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized Cash Basis
With no related allowance recorded:
Consumer Real Estate	$	509	$	509	$	-	$	355	$	5	$	12
Agricultural Real Estate		2,280		2,385		-		2,048		25		6
Agricultural		152		152		-		588		-		2
Commercial Real Estate		1,234		1,272		-		1,252		29		43
Commercial and Industrial		17		417		-		135		2		10
Consumer		2		2		-		15		1		-
With a specific allowance recorded:
Consumer Real Estate		60		60		6		15		-		1
Agricultural Real Estate		-		-		-		1,388		-		-
Agricultural		-		-		-		-		-		-
Commercial Real Estate		2,874		2,874		438		3,176		150		-
Commercial and Industrial		1,564		1,564		1,551		1,736		149		23
Consumer		165		165		1		2		-		-
Totals:
Consumer Real Estate	$	569	$	569	$	6	$	370	$	5	$	13
Agricultural Real Estate	$	2,280	$	2,385	$	-	$	3,436	$	25	$	6
Agricultural	$	152	$	152	$	-	$	588	$	-	$	2
Commercial Real Estate	$	4,108	$	4,146	$	438	$	4,428	$	179	$	43
Commercial and Industrial	$	1,581	$	1,981	$	1,551	$	1,871	$	151	$	33
Consumer	$	167	$	167	$	1	$	17	$	1	$	-

	(In Thousands)
2021	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Interest Income Recognized Cash Basis
With no related allowance recorded:
Consumer Real Estate	$	604	$	604	$	-	$	456	$	5	$	15
Agricultural Real Estate		423		423		-		1,000		33		-
Agricultural		-		-		-		143		18		3
Commercial Real Estate		180		180		-		1,445		70		9
Commercial and Industrial		21		21		-		920		24		158
Consumer		-		-		-		17		-		-
With a specific allowance recorded:
Consumer Real Estate		-		-		-		59		-		-
Agricultural Real Estate		6,302		6,406		691		5,414		54		-
Agricultural		20		20		1		94		-		-
Commercial Real Estate		3,381		3,381		664		2,199		70		3
Commercial and Industrial		982		982		825		498		17		-
Consumer		26		26		3		2		1		-
Totals:
Consumer Real Estate	$	604	$	604	$	-	$	515	$	5	$	15
Agricultural Real Estate	$	6,725	$	6,829	$	691	$	6,414	$	87	$	-
Agricultural	$	20	$	20	$	1	$	237	$	18	$	3
Commercial Real Estate	$	3,561	$	3,561	$	664	$	3,644	$	140	$	12
Commercial and Industrial	$	1,003	$	1,003	$	825	$	1,418	$	41	$	158
Consumer	$	26	$	26	$	3	$	19	$	1	$	-

Summary of Activities in Allowance for Credit Losses

The following is an analysis of the allowance for credit losses for the years ended December 31:

	(In Thousands)
	2022			2021			2020
Allowance for Loan Losses
Balance at beginning of year	$	16,242		$	13,672		$	7,228
Provision for loan loss		4,600			3,444			6,981
Loans charged off		(827	)		(1,332	)		(720	)
Recoveries		298			458			183
Balance at ending of year	$	20,313		$	16,242		$	13,672
Allowance for Unfunded Loan Commitments    & Letters of Credit	$	1,262		$	1,041		$	641
Total Allowance for Credit Losses	$	21,575		$	17,283		$	14,313

Analysis of Allowance for Credit Losses

Additional analysis related to the allowance for credit losses as of December 31, 2022 and 2021 is as follows:

	(In Thousands)
2022	Consumer Real Estate		Agricultural Real Estate			Agricultural		Commercial Real Estate		Commercial and Industrial			Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated			Total
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	857	$	1,040		$	709	$	9,130	$	3,847		$	625		$	1,041	$	34		$	17,283
Charge-Offs		-		-			-		-		(418	)		(409	)		-		-			(827	)
Recoveries		20		-			7		9		93			169			-		-			298
Provision		121		(691	)		35		2,785		1,860			506			-		(16	)		4,600
Other Non-interest    expense related to    unfunded		-		-			-		-		-			-			221		-			221
Ending Balance	$	998	$	349		$	751	$	11,924	$	5,382		$	891		$	1,262	$	18		$	21,575
Ending balance:    individually evaluated    for impairment	$	6	$	-		$	-	$	438	$	1,551		$	1		$	-	$	-		$	1,996
Ending balance:    collectively evaluated    for impairment	$	992	$	349		$	751	$	11,486	$	3,831		$	890		$	1,262	$	18		$	19,579
Ending balance: loans    acquired with    deteriorated credit    quality	$	-	$	-		$	-	$	-	$	-		$	-		$	-	$	-		$	-
FINANCING RECEIVABLES:
Ending balance	$	494,423	$	220,514		$	128,926	$	1,150,511	$	272,119		$	89,894		$	-	$	-		$	2,356,387
Ending balance:    individually evaluated    for impairment	$	569	$	2,280		$	152	$	4,108	$	1,581		$	167		$	-	$	-		$	8,857
Ending balance:    collectively evaluated    for impairment	$	493,449	$	218,039		$	128,774	$	1,146,389	$	270,493		$	89,727		$	-	$	-		$	2,346,871
Ending balance: loans    acquired with    deteriorated credit    quality	$	405	$	195		$	-	$	14	$	45		$	-		$	-	$	-		$	659

	(In Thousands)
2021	Consumer Real Estate			Agricultural Real Estate			Agricultural			Commercial Real Estate		Commercial and Industrial			Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated		Total
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	633		$	958		$	701		$	7,415	$	3,346		$	606		$	641	$	13	$	14,313
Charge-Offs		(19	)		(105	)		(143	)		-		(814	)		(251	)		-		-		(1,332	)
Recoveries		13			-			14			10		257			164			-		-		458
Provision (Credit)		230			187			137			1,705		1,058			106			-		21		3,444
Other Non-interest    expense related    to unfunded		-			-			-			-		-			-			400		-		400
Ending Balance	$	857		$	1,040		$	709		$	9,130	$	3,847		$	625		$	1,041	$	34	$	17,283
Ending balance:    individually evaluated    for impairment	$	-		$	691		$	1		$	664	$	825		$	3		$	-	$	-	$	2,184
Ending balance:    collectively evaluated    for impairment	$	857		$	349		$	708		$	8,466	$	3,022		$	622		$	1,041	$	34	$	15,099
Ending balance: loans    acquired with    deteriorated credit    quality	$	37		$	-		$	-		$	-	$	-		$	-		$	-	$	-	$	37
FINANCING RECEIVABLES:
Ending balance	$	395,805		$	198,033		$	118,504		$	847,110	$	240,138		$	57,829		$	-	$	-	$	1,857,419
Ending balance:    individually evaluated    for impairment	$	604		$	6,725		$	20		$	3,561	$	1,003		$	26		$	-	$	-	$	11,939
Ending balance:    collectively evaluated    for impairment	$	394,489		$	191,107		$	118,484		$	843,299	$	238,849		$	57,803		$	-	$	-	$	1,844,031
Ending balance: loans    acquired with    deteriorated credit    quality	$	712		$	201		$	-		$	250	$	286		$	-		$	-	$	-	$	1,449

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Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2022

Property, Plant and Equipment [Abstract]

Major Categories of Banking Premises and Equipment and Accumulated Depreciation

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

	(In Thousands)
	2022			2021
Land	$	6,896		$	6,652
Buildings (useful life 15-39 years)		34,501			30,929
Furnishings (useful life 3-15 years)		26,448			23,160
		67,845			60,741
Less: Accumulated depreciation		(39,464	)		(33,828	)
Premises and Equipment (Net)	$	28,381		$	26,913

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Servicing (Tables)

12 Months Ended

Dec. 31, 2022

Transfers and Servicing [Abstract]

Summary of Mortgage Servicing Rights Capitalized and Amortized

The following summarizes mortgage servicing rights capitalized and amortized during each year:

	(In Thousands)
	2022			2021
Beginning of Year	$	3,571		$	3,320
Capitalized Additions		537			1,417
Amortization		(559	)		(1,166	)
Ending Balance, December 31		3,549			3,571
Valuation Allowance		-			(414	)
Mortgage Servicing Rights net, December 31	$	3,549		$	3,157

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Deposits (Tables)

12 Months Ended

Dec. 31, 2022

Deposits [Abstract]

Time Deposits

Time deposits as of December 31 consist of the following:

	(In Thousands)
	2022		2021
Time deposits under $250,000	$	495,891	$	397,102
Time deposits of $250,000 or more		62,089		74,377
	$	557,980	$	471,479

Scheduled Maturities for Time Deposits

At December 31, 2022 the scheduled maturities for time deposits are as follows:

	(In Thousands)
2023	$	383,052
2024		91,267
2025		62,412
2026		13,862
2027		7,068
Thereafter		319
	$	557,980

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Federal Funds Purchased and Securities Sold Under Agreement to Repurchase (Tables)

12 Months Ended

Dec. 31, 2022

Broker-Dealer [Abstract]

Daily Securities under Agreement to Repurchase

The table below presents the daily securities sold under agreement to repurchase and the term repurchase agreements. It does not include the Bank’s federal funds purchased.

	Daily Securities Sold Under Agreement to Repurchase
	Amount		Weighted			Maximum Amount		Approximate		Approximate
	Outstanding		Average			Borrowings		Average		Weighted Average
	at End		Rate End			Outstanding		Outstanding in		Interest Rate
	of Period (000's)		of Period			Month End (000's)		Period (000's)		For the Period
2022	$	1,115		0.95	%	$	1,450	$	1,169		0.43	%
2021	$	1,062		0.70	%	$	1,991	$	1,514		0.43	%

	Term CD's Sold Under Agreement to Repurchase
	Amount		Weighted			Maximum Amount		Approximate		Approximate
	Outstanding		Average			Borrowings		Average		Weighted Average
	at End		Rate End			Outstanding		Outstanding in		Interest Rate
	of Period (000's)		of Period			Month End (000's)		Period (000's)		For the Period
2022	$	30,518		0.97	%	$	34,504	$	31,573		2.54	%
2021	$	28,206		1.00	%	$	28,362	$	28,315		2.56	%

Schedule of Remaining Contractual Maturity in Repurchase Agreements and Collateral Pledged

The table below shows the remaining contractual maturity in the repurchase agreements and the collateral pledged as of December 31, 2022.

	December 31, 2022
	Remaining Contractual Maturity of the Agreements
	Overnight & Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Federal funds purchased	$	22,573	$	-	$	-	$	-	$	22,573
Repurchase agreements
US Treasury & agency securities		1,115						30,518		31,633
Total	$	23,688	$	-	$	-	$	30,518	$	54,206

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Borrowings and Subordinated Notes (Tables)

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

Schedule of Maturities of Borrowings Exclusive of Fair Value

The table below shows the maturities of the borrowings exclusive of the fair value.

	(In Thousands)
2023	$	71,507
2024		32,500
2025		11,500
2026		-
2027		9,064
Thereafter		2,867
Total	$	127,438

Schedule of Subordinated Notes

	December 31, 2022					December 31, 2021
(In Thousands)	Principal		Unamortized Note Issuance Costs			Principal		Unamortized Note Issuance Costs
Subordinated Notes	$	35,000	$	(414	)	$	35,000	$	(529	)

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Components of Income Tax Expense (Benefit)

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

	(In Thousands)
	2022			2021			2020
Current:
Federal	$	7,430		$	7,536		$	6,289
State		359			271			513
Total current		7,789			7,807			6,802
Deferred:
Federal		227			(1,746	)		(1,596	)
State		(56	)		(59	)		(95	)
Total deferred		171			(1,805	)		(1,691	)
Total Income Tax	$	7,960		$	6,002		$	5,111

Reconciliation of the Statutory Federal Income Tax Rate to the Effective Tax Rate

The following is a reconciliation of the statutory federal income tax rate to the effective tax rate:

	(In Thousands)
	2022			2021			2020
Federal income tax at statutory rates	$	8,489		$	6,194		$	5,294
(Decrease) increase resulting from:
State income tax, net of federal benefit		239			167			330
Tax exempt interest		(133	)		(116	)		(146	)
Section 831 deduction		(270	)		(294	)		(266	)
Other		(365	)		51			(101	)
Total Income Tax	$	7,960		$	6,002		$	5,111

Components of Deferred Tax Assets and Liabilities

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

	(In Thousands)
	2022		2021
Deferred Tax Assets:
Allowance for loan losses	$	4,623	$	3,629
Deferred compensation		570		561
Net unrealized loss on available-for-sale securities		10,163		846
Fair value adjustments		2,152		1,913
Other		554		277
Total deferred tax assets		18,062		7,226
Deferred Tax Liabilities:
Accreted discounts on bonds		54		22
Depreciation		1,083		772
FHLB stock dividends		1,011		828
Intangible amortization		2,640		1,282
Mortgage servicing rights		787		778
Prepaids		500		471
Other		424		173
Total deferred tax liabilities		6,499		4,326
Net Deferred Tax Asset (Liability)	$	11,563	$	2,900

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Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2022

Retirement Benefits [Abstract]

Summary of Restricted Shares Issued, Vested and Forfeited

The table below summarizes the details of the restricted shares issued, vested, and forfeited for the years ending December 31, 2021, 2021 and 2020.

	Year Ended December 31,
	2022				2021				2020
	Number of Shares		Number of Employees		Number of Shares		Number of Employees		Number of Shares		Number of Employees
Restricted shares issued		56,496		109		48,750		96		37,382		92
Restricted shares vested		26,900		60		18,845		50		23,491		58
Restricted shares awarded due to retirement		3,775		3		4,425		7		10,890		8
Restricted shares awarded for other		-		-		-		-		1,050		1
Restricted shares forfeited		8,000		9		2,575		4		2,175		5

Activity of Restricted Stock Awards

The following table summarizes the activity of restricted stock awards as of December 31:

	Year Ended December 31,
	2022					2021					2020
	Number of Shares			Weighted average fair value per award		Number of Shares			Weighted average fair value per award		Number of Shares			Weighted average fair value per award
Beginning of period		111,131		$	23.02		88,226		$	28.40		88,450		$	31.52
Granted		56,496			30.46		48,750			22.70		37,382			21.80
Vested		(30,675	)		24.77		(23,270	)		42.03		(35,431	)		29.27
Forfeited		(8,000	)		30.15		(2,575	)		24.28		(2,175	)		21.92
Nonvested, end of period		128,952		$	25.75		111,131		$	23.02		88,226		$	28.40

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2022

Earnings Per Share [Abstract]

Calculation of Basic Earnings Per Share

The table below presents basic and diluted earnings per share for the years ended December 31, 2021, 2020, and 2019.

	Year Ended
	December 31,			December 31,			December 31,
	2022			2021			2020
Earnings per share
Net income	$	32,515		$	23,495		$	20,095
Less: distributed earnings allocated to    participating securities		(97	)		(70	)		(57	)
Less: undistributed earnings allocated to    participating securities		(187	)		(121	)		(96	)
Net earnings available to common    shareholders	$	32,231		$	23,304		$	19,942
Weighted average common shares outstanding    including participating securities		13,206,713			11,664,852			11,146,270
Less: average unvested restricted shares		(115,291	)		(94,634	)		(84,879	)
Weighted average common shares outstanding		13,091,422			11,570,218			11,061,391
Basic and diluted earnings per share	$	2.46		$	2.01		$	1.80

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Off Balance Sheet Activities (Tables)

12 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Outstanding Financial Instruments Whose Contract Amounts Represent Credit Risk

At December 31, 2022 and 2021, the following financial instruments were outstanding whose contract amounts represent credit risk:

	(In Thousands)
	2022		2021
Commitments to extend credit	$	691,501	$	557,094
Credit card arrangements		-		23,179
Standby letters of credit		1,046		983

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Minimum Regulatory Capital Requirements (Tables)

12 Months Ended

Dec. 31, 2022

Federal Home Loan Banks [Abstract]

Summary of Bank's Actual and Required Capital Amounts and Ratios

The Bank’s actual and required capital amounts and ratios as of December 31, 2022 and December 31, 2021 are as follows:

	Actual					Minimum Capital Required					Required to be Considered Well-Capitalized
	(000's)					(000's)					(000's)
As of December 31, 2022	Amount		Ratio			Amount		Ratio			Amount		Ratio
Common Equity Tier 1 Capital    (to Risk Weighted Assets)	$	259,510		11.15	%	$	104,763		4.50	%	$	151,324		6.50	%
Total Risk-Based Capital    (to Risk Weighted Assets)		281,085		12.07	%		186,245		8.00	%		232,806		10.00	%
Tier 1 Capital    (to Risk Weighted Assets)		259,510		11.15	%		139,684		6.00	%		186,245		8.00	%
Tier 1 Leverage Capital    (to Adjusted Total Assets)		259,510		9.03	%		114,972		4.00	%		143,714		5.00	%

	Actual					Minimum Capital Required					Required to be Considered Well-Capitalized
	(000's)					(000's)					(000's)
As of December 31, 2021	Amount		Ratio			Amount		Ratio			Amount		Ratio
Common Equity Tier 1 Capital    (to Risk Weighted Assets)	$	256,943		14.26	%	$	81,074		4.50	%	$	117,112		6.50	%
Total Risk-Based Capital    (to Risk Weighted Assets)		274,226		15.22	%		144,138		8.00	%		180,173		10.00	%
Tier 1 Capital    (to Risk Weighted Assets)		256,943		14.26	%		108,104		6.00	%		144,138		8.00	%
Tier 1 Leverage Capital    (to Adjusted Total Assets)		256,943		10.25	%		100,317		4.00	%		125,396		5.00	%

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Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2022

Fair Value Disclosures [Abstract]

Estimated Fair Values and Related Carrying or Notional Amounts

The estimated fair values, and related carrying or notional amounts, for on and off-balance sheet financial instruments as of December 31, 2022 and 2021, are reflected below. The aggregate fair values in the table below do not represent the total market value of the Bank’s assets and liabilities. The table excludes the following: Bank Premises and Equipment, Goodwill, Mortgage Servicing Rights, Other Real Estate Owned, Other Assets, Other Liabilities and Accrued Expenses.

	(In Thousands)
	December 31, 2022										December 31, 2021
	Carrying		Fair								Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3		Amount		Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	84,409	$	84,409	$	84,409	$	-	$	-	$	180,823	$	180,823	$	180,823	$	-	$	-
Interest-bearing time deposits		4,442		4,440		-		4,440		-		10,913		10,933		-		10,933		-
Securities - available-for-sale		390,789		390,789		94,678		292,766		3,345		429,931		429,931		89,177		335,981		4,773
Other securities		9,799		9,799		-		-		9,799		8,162		8,162		-		-		8,162
Loans held for sale		827		815		-		-		815		7,714		7,844		-		-		7,844
Loans, net		2,336,074		2,171,152		-		-		2,171,152		1,841,177		1,864,386		-		-		1,864,386
Interest receivable		10,440		10,440		-		-		10,440		7,209		7,209		-		-		7,209
Financial Liabilities:
Interest bearing deposits	$	1,378,090	$	1,377,944	$	-	$	-	$	1,377,944	$	1,248,294	$	1,248,044	$	-	$	-	$	1,248,044
Noninterest bearing deposits		532,794		532,794		532,794		-		-		473,689		473,689		-		473,689		-
Time deposits		557,980		543,737		-		-		543,737		471,479		475,810		-		-		475,810
Total Deposits		2,468,864		2,454,475		532,794		-		1,921,681		2,193,462		2,197,543		-		473,689		1,723,854
Fed funds purchased and    securities sold under    agreement to repurchase		54,206		54,206		-		-		54,206		29,268		29,268		-		-		29,268
Federal Home Loan Bank  advances		127,485		125,761		-		-		125,761		24,065		24,305		-		-		24,305
Other borrowings		10,000		10,000		-		10,000		-		40,000		40,000		-		40,000		-
Subordinated notes		34,586		30,993		-		30,993		-		34,471		35,000		-		35,000		-
Interest payable		1,739		1,739		-		-		1,739		1,125		1,125		-		-		1,125

Financial Assets Measured at Fair Value on Recurring Basis

The following table summarizes financial assets measured at fair value on a recurring basis as of December 31, 2022 and December 31, 2021 segregated by level or the valuation inputs within the fair value hierarchy utilized to measure fair value.

Assets and Liabilities Measured at Fair Value on a Recurring Basis (in Thousands)
	Quoted Prices in		Significant		Significant
	Active Markets		Observable		Observable
	for Identical		Inputs		Inputs
December 31, 2022	Assets (Level 1)		(Level 2)		(Level 3)
Assets-(Securities Available-for-Sale)
U.S. Treasury	$	94,678	$	-	$	-
U.S. Government agencies		-		139,767		-
Mortgage-backed securities		-		86,927		-
State and local governments		-		66,072		3,345
Total Securities Available-for-Sale	$	94,678	$	292,766	$	3,345

	Quoted Prices in		Significant		Significant
	Active Markets		Observable		Observable
	for Identical		Inputs		Inputs
December 31, 2021	Assets (Level 1)		(Level 2)		(Level 3)
Assets-(Securities Available-for-Sale)
U.S. Treasury	$	89,177	$	-	$	-
U.S. Government agencies		-		156,886		-
Mortgage-backed securities		-		117,927		-
State and local governments		-		61,168		4,773
Total Securities Available-for-Sale	$	89,177	$	335,981	$	4,773

Changes in the Level 3 Fair-Value Category of Unobservable Inputs

	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local			State and Local			State and Local
	Governments			Governments			Governments
	Tax-Exempt			Taxable			Total
Balance at January 1, 2022	$	2,307		$	2,466		$	4,773
Change in Market Value		(76	)		(203	)		(279	)
Purchases		-			-			-
Sales		-			-			-
Payments & Maturities		(160	)		-			(160	)
Reclassification and Adjustments		-			(989	)		(989	)
Balance at December 31, 2022	$	2,071		$	1,274		$	3,345

	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local			State and Local			State and Local
	Governments			Governments			Governments
	Tax-Exempt			Taxable			Total
Balance at January 1, 2021	$	-		$	1,562		$	1,562
Change in Market Value		44			(96	)		(52	)
Purchases		2,418			1,000			3,418
Sales		-			-			-
Payments & Maturities		-			-			-
Reclassification and Adjustments		(155	)		-			(155	)
Balance at December 31, 2021	$	2,307		$	2,466		$	4,773

Collateral Dependent Impaired Loans and Other Real Estate

The following table presents collateral dependent impaired loans and other real estate owned as recorded at fair value:

	($ in Thousands)
	Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2022
			Quoted Prices in
			Markets for		Significant		Significant
	Balance at		Identical		Observable Inputs		Unobservable Inputs
	December 31, 2022		Assets (Level 1)		(Level 2)		(Level 3)
Collateral dependent impaired     loans	$	2,667	$	-	$	-	$	2,667
Mortgage servicing rights		-		-		-		-
Other real estate owned -     residential		-		-		-		-

	($ in Thousands)
	Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2021
			Quoted Prices in
			Markets for		Significant		Significant
	Balance at		Identical		Observable Inputs		Unobservable Inputs
	December 31, 2021		Assets (Level 1)		(Level 2)		(Level 3)
Collateral dependent impaired     loans	$	8,527	$	-	$	-	$	8,527
Mortgage servicing rights		3,157		-		-		3,157
Other real estate owned -     residential		99		-		-		99

Quantitative Information about Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements:

	(In Thousands)
	Fair Value at December 31, 2022		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
State and local    government	$	3,345	Discounted Cash Flow	Credit strength of underlying project or entity / Discount rate	2.08-5.01% (4.38%)
Collateral dependent    impaired loans		2,667	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	20.00-29.01% (24.13%)
Mortgage servicing     rights		-	Discounted Cash Flow	Constant prepayment rate and probability of default / Discount rate	— % ( — )
		-	Appraisals	Discount to reflect current market	— % ( — )

Other real estate
   owned - residential

	(In Thousands)
	Fair Value at December 31, 2021		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
State and local    government	$	4,773	Discounted Cash Flow	Credit strength of underlying project or entity / Discount rate	0.21-1.77% (1.33%)
Collateral dependent    impaired loans		8,527	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	20.00-53.95% (34.78%)
Mortgage servicing     rights		3,157	Discounted Cash Flow	Constant prepayment rate and probability of default / Discount rate	1.94-27.70% (18.44%)
Other real estate    owned - residential		99	Appraisals	Discount to reflect current market	32.72% (32.72%)

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Condensed Financial Statements of Parent Company (Tables)

12 Months Ended

Dec. 31, 2022

Condensed Financial Information Disclosure [Abstract]

Schedule of Condensed Balance Sheets

Balance Sheets
	(In Thousands)
	2022		2021
Assets
Cash	$	16,901	$	19,293
Interest-bearing time deposits		498		1,234
Related party receivables:
Dividends and accounts receivable from subsidiary		2,114		4,636
Accrued interest receivable - municipals / interest     bearing time deposits		38		43
Securities - municipals		7,460		9,027
Investment in subsidiaries		319,371		340,733
Total Assets	$	346,382	$	374,966
Liabilities
Other borrowings	$	10,000	$	40,000
Subordinated notes, net of unamortized issuance costs		34,586		34,471
Dividends payable		2,832		2,461
Accrued interest payable		618		743
Accrued expenses		206		124
Total Liabilities		48,242		77,799
Stockholders' Equity		298,140		297,167
Total Liabilities and Stockholders' Equity	$	346,382	$	374,966

Schedule of Condensed Income and Comprehensive Income Statements

Statements of Income and Comprehensive Income
	(In Thousands)
	2022			2021			2020
Income
Dividends from subsidiaries	$	44,285		$	23,200		$	8,800
Interest - municipals / interest-bearing time deposits		308			253			382
Loss on sales of available-for-sale securities		-			293			-
Total income		44,593			23,746			9,182
Expenses
Interest		1,588			743			-
Operating expenses		1,176			1,335			923
Total expenses		2,764			2,078			923
Income Before Income Taxes and Equity in    Undistributed Earnings of Subsidiaries		41,829			21,668			8,259
Income Taxes (Benefit)		(535	)		(347	)		(184	)
		42,364			22,015			8,443
Equity in undistributed earnings of subsidiaries		(9,849	)		1,480			11,652
Net Income		32,515			23,495			20,095
Other Comprehensive Income (Loss):
Unrealized gains (losses) on securities, net of taxes		(35,049	)		(8,881	)		4,599
Comprehensive Income (Loss)	$	(2,534	)	$	14,614		$	24,694

Schedule of Condensed Cash Flow Statement

Statements of Cash Flows
	(In Thousands)
	2022			2021			2020
Cash Flows from Operating Activities
Net income	$	32,515		$	23,495		$	20,095
Adjustments to reconcile net income to net cash    provided by operating activities:
Equity in undistributed net income		9,849			(1,480	)		(11,652	)
Amortization of premiums on available-for-sale securities, net		61			81			154
Amortization of subordinated notes issuance fees		116			49			-
Stock-based compensation expense		899			822			1,024
Director stock awards		120			73			48
Gain on sale of available-for-sale securities		-			(293	)		-
Changes in assets and liabilities:
Other assets and liabilities		2,560			(456	)		1,742
Net cash provided by operating activities		46,120			22,291			11,411
Cash Flows from Investing Activities
Activity in available-for-sale securities:
Maturities, prepayments and calls		1,540			795			385
Sales		-			7,773			-
Purchases		(398	)		-			(745	)
Activity in certificates of deposit
Maturities		1,234			493			-
Purchases		(498	)		-			-
Cash used for acquisitions		(9,806	)		(79,235	)		-
Net cash used in investing activities		(7,928	)		(70,174	)		(360	)
Cash Flows from Financing Activities
Proceeds (repayments) of other borrowings		(30,000	)		35,000			-
Purchase of treasury stock		(308	)		(338	)		(383	)
Proceeds from issuance of subordinated notes		-			34,421			-
Payment of dividends		(10,276	)		(7,670	)		(7,186	)
Net cash provided by (used in) financing activities		(40,584	)		61,413			(7,569	)
Net Change in Cash and Cash Equivalents		(2,392	)		13,530			3,482
Cash and Cash Equivalents - Beginning of year		19,293			5,763			2,281
Cash and Cash Equivalents - End of year	$	16,901		$	19,293		$	5,763

XML

Quarterly Financial Data (Tables)

12 Months Ended

Dec. 31, 2022

Quarterly Financial Information Disclosure [Abstract]

Summary of Quarterly Financial Data

Quarterly Financial Data - UNAUDITED
	Quarter Ended in 2022
	Mar 31			June 30			Sep 30			Dec 31
Summary of Income:
Interest income	$	21,899		$	23,911		$	25,847		$	29,492
Interest expense		2,116			2,047			3,264			6,935
Net Interest Income		19,783			21,864			22,583			22,557
Provision for loan loss		580			1,628			1,637			755
Net interest income after provision of loan loss		19,203			20,236			20,946			21,802
Other income (expense)		(9,150	)		(9,915	)		(9,739	)		(12,908	)
Net income before income taxes		10,053			10,321			11,207			8,894
Income taxes		1,951			2,050			2,253			1,706
Net income	$	8,102		$	8,271		$	8,954		$	7,188
Earnings per Common Share	$	0.62		$	0.63		$	0.68		$	0.53
Average common shares outstanding		12,955,107			12,957,126			12,983,307			13,606,876

	Quarter Ended in 2021
	Mar 31			June 30			Sep 30			Dec 31
Summary of Income:
Interest income	$	16,765		$	17,530		$	20,122		$	22,423
Interest expense		1,728			1,554			1,672			2,388
Net Interest Income		15,037			15,976			18,450			20,035
Provision for loan loss		1,700			641			659			444
Net interest income after provision for loan loss		13,337			15,335			17,791			19,591
Other income (expense)		(7,368	)		(9,033	)		(10,247	)		(9,909	)
Net income before income taxes		5,969			6,302			7,544			9,682
Income taxes		1,060			1,319			1,624			1,999
Net income	$	4,909		$	4,983		$	5,920		$	7,683
Earnings per Common Share	$	0.44		$	0.44		$	0.53		$	0.59
Average common shares outstanding		11,197,012			11,191,043			11,209,732			13,046,299

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Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Nov. 30, 2022
Summary Of Significant Accounting Policies [Line Items]
Period for federal funds sold outstanding									1 day
Loan non-accrual classification period									90 days
Days to charged consumer loans to the value of the collateral									90 days
Maximum time for re-evaluation (in months)									12 months
Re-evaluation period for real estate									2 years
Amount of fair value of capital over carrying value												$ 427,500
Percentage of fair value of capital over carrying value												137.20%
Number of times fair value of capital in excess of carrying value of goodwill description									over 4.9 times
Other real estate owned	$ 0				$ 159				$ 0	$ 159
Percentage of likelihood of realization of recognized tax benefit, minimum									50.00%
Provision for loan loss	$ 755	$ 1,637	$ 1,628	$ 580	$ 444	$ 659	$ 641	$ 1,700	$ 4,600	$ 3,444	$ 6,981
Maximum [Member]
Summary Of Significant Accounting Policies [Line Items]
Maturity period of cash equivalents									3 months
Maximum [Member] | Accounting Standards Update 2016-13 [Member] | One-time Cumulative-effect Adjustment [Member]
Summary Of Significant Accounting Policies [Line Items]
Provision for loan loss									$ 7,000
Minimum [Member] | Accounting Standards Update 2016-13 [Member] | One-time Cumulative-effect Adjustment [Member]
Summary Of Significant Accounting Policies [Line Items]
Provision for loan loss									$ 3,000

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Summary of Significant Accounting Policies - Components of Other Comprehensive Income (Loss) and Related Tax Effects (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
OCI, Debt Securities, Available-for-Sale, Gain (Loss), after Adjustment and Tax [Abstract]
Net unrealized gain (loss) on available-for-sale securities	$ (44,366)	$ (10,948)	$ 6,091
Reclassification adjustment for (gain) loss on sale of available-for-sale securities		(293)	(270)
Net unrealized gain (loss) on available-for-sale securities	(44,366)	(11,241)	5,821
Tax expense (benefit)	(9,317)	(2,360)	1,222
Other comprehensive income (loss)	$ (35,049)	$ (8,881)	$ 4,599

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Business Combination & Asset Purchase - Additional Information (Detail)						3 Months Ended			12 Months Ended
	Oct. 01, 2022 USD ($) Office $ / shares shares	Oct. 01, 2021 USD ($) Office $ / shares shares	Apr. 30, 2021 USD ($) Office $ / shares shares	Nov. 16, 2020 USD ($) shares	Jan. 01, 2019 USD ($)	Sep. 30, 2022 USD ($)	Dec. 31, 2021 USD ($) Loan shares	Sep. 30, 2021 Loan	Dec. 31, 2022 USD ($) Loan shares	Dec. 31, 2021 USD ($) shares	Dec. 31, 2020 USD ($)	Nov. 30, 2020 USD ($) Client
Business Acquisition [Line Items]
Common stock, shares outstanding | shares							14,063,999		14,564,425	14,063,999
Remaining economic useful life									7 years
Goodwill							$ 80,434,000		$ 86,358,000	$ 80,434,000
Amortization expense									1,011,000	677,000	$ 720,000
Custar
Business Acquisition [Line Items]
Amortization expense											160,000
Customer Lists [Member]
Business Acquisition [Line Items]
Amortization expense									123,000	123,000	16,000
Peoples Federal Savings and Loan [Member]
Business Acquisition [Line Items]
Number of full-service offices | Office	3
Common stock issued in exchange of each outstanding share	0.6597
Cash payment for exchange of each share | $ / shares	$ 24.00
Minimum number of shares to be exchanged under merger agreement | shares	758,566
Common stock, shares outstanding | shares	1,167,025
Share price | $ / shares	$ 26.87
Total consideration for acquisition	$ 23,249,000
Cash paid for the capital stock	9,806,000								9,806,000
Stock issued for acquisition	13,446,000
Business combination, acquisition related costs									2,400,000
Recognition of core deposit intangible asset with acquired purchase		$ 6,000,000.0
Goodwill	5,924,000
Fair value of assets acquired									101,800,000
Gross principal and contractual interest									116,100,000
Acquisition expected to be uncollectible									$ 0
Loan receivable weighted average life									44 months 12 days
Business combination, premises and equipment written up value									$ 581,000
Business combination, average remaining life									12 years 9 months 18 days
Fair value for certificate of deposit, valuation amount									$ 662,000
Fair value for certificate of deposit, amortization period									1 year 1 month 6 days
Fair value of Federal Home Loan Bank (FHLB) advances, valuation amount									$ 69,000
Fair value of Federal Home Loan Bank (FHLB) advances, amortization period									5 years 2 months 12 days
Acquisition expected to be uncollectible									$ 0
Peoples Federal Savings and Loan [Member] | Building [Member]
Business Acquisition [Line Items]
Business combination, premises and equipment written down value									597,000
Peoples Federal Savings and Loan [Member] | Core Deposits [Member]
Business Acquisition [Line Items]
Recognition of core deposit intangible asset with acquired purchase	$ 6,000,000.0
Remaining economic useful life	7 years
Peoples Federal Savings and Loan [Member] | Data Processing [Member]
Business Acquisition [Line Items]
Business combination, acquisition related costs									1,100,000
Peoples Federal Savings and Loan [Member] | Consulting Fees [Member]
Business Acquisition [Line Items]
Business combination, acquisition related costs									542,900
Peoples Federal Savings and Loan [Member] | Employee Benefits [Member]
Business Acquisition [Line Items]
Business combination, acquisition related costs									126,500
Peoples Federal Savings and Loan [Member] | Other General and Administrative Expenses [Member]
Business Acquisition [Line Items]
Business combination, acquisition related costs									501,000.0
Perpetual Federal Savings Bank [Member]
Business Acquisition [Line Items]
Number of full-service offices | Office		1
Common stock issued in exchange of each outstanding share		1.7766
Cash payment for exchange of each share | $ / shares		$ 41.20
Business acquisition share owned subject to adjustment | shares		1,833,999
Common stock, shares outstanding | shares		2,470,032
Share price | $ / shares		$ 22.40
Total consideration for acquisition		$ 100,312,000
Cash paid for the capital stock		59,234,000								59,234,000
Stock issued for acquisition		41,078,000
Business combination, acquisition related costs									148,500,000	1,700,000
Goodwill		25,220,000
Fair value of assets acquired									334,700,000
Gross principal and contractual interest									403,300,000
Acquisition expected to be uncollectible									$ 5,600,000
Loan receivable weighted average life									52 months
Business combination, premises and equipment written down value									$ 4,000
Business combination, average remaining life									16 years 2 months 12 days
Fair value for certificate of deposit, valuation amount									$ 3,900,000
Fair value for certificate of deposit, amortization period									1 year 7 months 6 days
Fair value of Federal Home Loan Bank (FHLB) advances, valuation amount									$ 218,000
Fair value of Federal Home Loan Bank (FHLB) advances, amortization period									2 years 7 months 6 days
Fair value adjustment of loans acquired and accounted		$ 237,200					$ 189,800		$ 127,700	189,800
Number of commercial purchased credit impaired loans paid off | Loan							2
Number of consumer purchased credit impaired loans paid off | Loan							1		5
Discount recognized at acquisition related to commercial purchased credit-impaired loans							$ 47,400		$ 62,100
Business acquisition, number of shares issued to purchase assets | shares	500,426	1,833,845
Acquisition expected to be uncollectible									5,600,000
Perpetual Federal Savings Bank [Member] | Building [Member]
Business Acquisition [Line Items]
Business combination, premises and equipment written down value									297,000
Perpetual Federal Savings Bank [Member] | Core Deposits [Member]
Business Acquisition [Line Items]
Recognition of core deposit intangible asset with acquired purchase		$ 668,000
Remaining economic useful life		7 years
Perpetual Federal Savings Bank [Member] | Data Processing [Member]
Business Acquisition [Line Items]
Business combination, acquisition related costs										444,900
Perpetual Federal Savings Bank [Member] | Consulting Fees [Member]
Business Acquisition [Line Items]
Business combination, acquisition related costs										636,800
Perpetual Federal Savings Bank [Member] | Employee Benefits [Member]
Business Acquisition [Line Items]
Business combination, acquisition related costs									90,800	131,500
Perpetual Federal Savings Bank [Member] | Other General and Administrative Expenses [Member]
Business Acquisition [Line Items]
Business combination, acquisition related costs									57,700	488,300
Ossian State Bank [Member]
Business Acquisition [Line Items]
Number of full-service offices | Office			2
Ossian Financial Services, Inc. [Member]
Business Acquisition [Line Items]
Cash payment for exchange of each share | $ / shares			$ 67.71
Common stock, shares outstanding | shares			295,388
Total consideration for acquisition			$ 20,001,000
Cash paid for the capital stock			20,001,000
Business combination, acquisition related costs									31,600	2,200,000	42,500
Goodwill			7,874,000
Fair value of assets acquired									52,400,000
Gross principal and contractual interest									63,700,000
Acquisition expected to be uncollectible									$ 1,100,000
Loan receivable weighted average life									52 months
Business combination, premises and equipment written down value									$ 596,000
Business combination, average remaining life									39 years
Fair value for certificate of deposit, valuation amount									$ 59,000
Fair value for certificate of deposit, amortization period									1 year 4 months 24 days
Fair value adjustment of loans acquired and accounted			$ 324,800				$ 320,600		$ 10,100	320,600
Discount recognized at acquisition related to commercial purchased credit-impaired loans						$ 311,000				4,200
Goodwill deductible for tax purpose, period			15 years
Number of agricultural real purchased credit impaired loans paid off | Loan								2
Acquisition expected to be uncollectible									1,100,000
Ossian Financial Services, Inc. [Member] | Building [Member]
Business Acquisition [Line Items]
Business combination, premises and equipment written down value									$ 244,000
Ossian Financial Services, Inc. [Member] | Core Deposits [Member]
Business Acquisition [Line Items]
Recognition of core deposit intangible asset with acquired purchase			$ 980,200
Remaining economic useful life			7 years
Ossian Financial Services, Inc. [Member] | Data Processing [Member]
Business Acquisition [Line Items]
Business combination, acquisition related costs										938,900
Ossian Financial Services, Inc. [Member] | Consulting Fees [Member]
Business Acquisition [Line Items]
Business combination, acquisition related costs										255,200	12,500
Ossian Financial Services, Inc. [Member] | Employee Benefits [Member]
Business Acquisition [Line Items]
Business combination, acquisition related costs										694,100
Ossian Financial Services, Inc. [Member] | ATM Expense [Member]
Business Acquisition [Line Items]
Business combination, acquisition related costs										13,800
Ossian Financial Services, Inc. [Member] | Other General and Administrative Expenses [Member]
Business Acquisition [Line Items]
Business combination, acquisition related costs										$ 255,000.0	$ 30,000.0
Bank of Geneva [Member] | Core Deposits [Member]
Business Acquisition [Line Items]
Recognition of core deposit intangible asset with acquired purchase					$ 3,900,000
Adams County Financial Resources [Member]
Business Acquisition [Line Items]
Total consideration for acquisition				$ 825,000
Stock issued for acquisition				$ 825,000
Business acquisition, number of shares issued to purchase assets | shares				40,049
Assets under management amount												$ 83,000,000
Number of clients assets under management | Client												450
Adams County Financial Resources [Member] | Customer Lists [Member]
Business Acquisition [Line Items]
Recognition of core deposit intangible asset with acquired purchase				$ 800,000
Remaining economic useful life				6 years 6 months

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Business Combination & Asset Purchase - Summary of Consideration Paid and Amounts of Assets Acquired and Liabilities Assumed Recognized (Detail) - USD ($) $ in Thousands					12 Months Ended
	Oct. 01, 2022	Oct. 01, 2021	Apr. 30, 2021	Nov. 16, 2020	Dec. 31, 2022	Dec. 31, 2021
Assets
Goodwill					$ 86,358	$ 80,434
Peoples Federal Savings and Loan [Member]
Business Acquisition [Line Items]
Cash	$ 9,806				$ 9,806
Common Shares	13,446
Treasury stock repurchased	(3)
Total	23,249
Assets
Cash and cash equivalents	18,881
Other securities, at cost	1,271
Loans, net	101,755
Premises and equipment	1,906
Goodwill	5,924
Other assets	12,081
Total Assets Purchased	141,818
Deposits
Noninterest bearing	7,139
Interest bearing	104,719
Total deposits	111,858
Federal Home Loan Bank (FHLB) advances	896
Accrued expenses and other liabilities	5,815
Total Liabilities Assumed	$ 118,569
Perpetual Federal Savings Bank [Member]
Business Acquisition [Line Items]
Cash		$ 59,234				$ 59,234
Common Shares		41,078
Total		100,312
Assets
Cash and cash equivalents		44,975
Federal funds sold		1,672
Interest-bearing time deposits		6,250
Other securities, at cost		2,794
Loans, net		334,661
Premises and equipment		615
Goodwill		25,220
Other assets		3,975
Total Assets Purchased		420,162
Deposits
Noninterest bearing		2,018
Interest bearing		309,090
Total deposits		311,108
Federal Home Loan Bank (FHLB) advances		6,218
Accrued expenses and other liabilities		2,524
Total Liabilities Assumed		$ 319,850
Ossian Financial Services, Inc. [Member]
Business Acquisition [Line Items]
Cash			$ 20,001
Total			20,001
Assets
Cash and cash equivalents			20,229
Interest-bearing time deposits			20,226
Securities - available-for-sale			30,243
Other securities, at cost			281
Loans, net			52,403
Premises and equipment			494
Goodwill			7,874
Other assets			5,308
Total Assets Purchased			137,058
Deposits
Noninterest bearing			34,509
Interest bearing			81,535
Total deposits			116,044
Accrued expenses and other liabilities			1,013
Total Liabilities Assumed			$ 117,057
Adams County Financial Resources [Member]
Business Acquisition [Line Items]
Common Shares				$ 825
Total				825
Assets
Premises and equipment				25
Customer list intangible				800
Total Assets Purchased				$ 825

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Business Combination & Asset Purchase - Summary of Consideration Paid and Amounts of Assets Acquired and Liabilities Assumed Recognized (Parenthetical) (Detail) - shares	Oct. 01, 2022	Oct. 01, 2021	Nov. 16, 2020
Perpetual Federal Savings Bank [Member]
Business Acquisition [Line Items]
Common stock issued in exchange of each outstanding share	500,426	1,833,845
Treasury stock repurchased	125
Adams County Financial Resources [Member]
Business Acquisition [Line Items]
Common stock issued in exchange of each outstanding share			40,049

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Business Combination & Asset Purchase - Summary of Carrying Amount of Loans (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021	Oct. 01, 2021	Apr. 30, 2021
Perpetual Federal Savings Bank [Member]
Business Acquisition [Line Items]
Carrying amount, net of fair value adjustment	$ 267	$ 510	$ 728
Perpetual Federal Savings Bank [Member] | Consumer Real Estate [Member]
Business Acquisition [Line Items]
Carrying amount, net of fair value adjustment	288	581	608
Perpetual Federal Savings Bank [Member] | Agricultural Real Estate [Member]
Business Acquisition [Line Items]
Carrying amount, net of fair value adjustment	107	114	118
Perpetual Federal Savings Bank [Member] | Commercial Real Estate [Member]
Business Acquisition [Line Items]
Carrying amount, net of fair value adjustment		5	234
Perpetual Federal Savings Bank [Member] | Consumer [Member]
Business Acquisition [Line Items]
Carrying amount, net of fair value adjustment			$ 5
Ossian Financial Services, Inc. [Member]
Business Acquisition [Line Items]
Carrying amount, net of fair value adjustment	9	208		$ 1,309
Ossian Financial Services, Inc. [Member] | Consumer Real Estate [Member]
Business Acquisition [Line Items]
Carrying amount, net of fair value adjustment	$ 19	22		24
Ossian Financial Services, Inc. [Member] | Agricultural Real Estate [Member]
Business Acquisition [Line Items]
Carrying amount, net of fair value adjustment				981
Ossian Financial Services, Inc. [Member] | Commercial Real Estate [Member]
Business Acquisition [Line Items]
Carrying amount, net of fair value adjustment		222		315
Ossian Financial Services, Inc. [Member] | Commercial and Industrial [Member]
Business Acquisition [Line Items]
Carrying amount, net of fair value adjustment		$ 285		$ 314

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Business Combination & Asset Purchase - Summary of Carrying Amount of Loans (Parenthetical) (Detail) - USD ($)	Dec. 31, 2022	Dec. 31, 2021	Oct. 01, 2021	Apr. 30, 2021
Perpetual Federal Savings Bank [Member]
Business Acquisition [Line Items]
Fair value adjustment	$ 127,700	$ 189,800	$ 237,200
Ossian Financial Services, Inc. [Member]
Business Acquisition [Line Items]
Fair value adjustment	$ 10,100	$ 320,600		$ 324,800

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Business Combination & Asset Purchase - Summary of Loans Acquired and Contractually Required Payments Receivable (Detail) $ in Thousands	Dec. 31, 2021 USD ($)
Perpetual Federal Savings Bank [Member]
Business Acquisition [Line Items]
Total required payments receivable	$ 1,407
Cash flows expected to be collected at acquisition	728
Basis in acquired loans at acquisition	965
Ossian Financial Services, Inc. [Member]
Business Acquisition [Line Items]
Total required payments receivable	2,057
Cash flows expected to be collected at acquisition	1,309
Basis in acquired loans at acquisition	1,634
Consumer Real Estate [Member] | Perpetual Federal Savings Bank [Member]
Business Acquisition [Line Items]
Total required payments receivable	962
Consumer Real Estate [Member] | Ossian Financial Services, Inc. [Member]
Business Acquisition [Line Items]
Total required payments receivable	28
Agricultural Real Estate [Member] | Perpetual Federal Savings Bank [Member]
Business Acquisition [Line Items]
Total required payments receivable	146
Agricultural Real Estate [Member] | Ossian Financial Services, Inc. [Member]
Business Acquisition [Line Items]
Total required payments receivable	1,142
Commercial Real Estate [Member] | Perpetual Federal Savings Bank [Member]
Business Acquisition [Line Items]
Total required payments receivable	293
Commercial Real Estate [Member] | Ossian Financial Services, Inc. [Member]
Business Acquisition [Line Items]
Total required payments receivable	527
Consumer [Member] | Perpetual Federal Savings Bank [Member]
Business Acquisition [Line Items]
Total required payments receivable	6
Commercial and Industrial [Member] | Ossian Financial Services, Inc. [Member]
Business Acquisition [Line Items]
Total required payments receivable	$ 360

XML

Business Combination & Asset Purchase - Summary of Changes in Accretable Yield or Income Expected to be Collected (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Peoples Federal Savings and Loan [Member]
Business Acquisition [Line Items]
Additions	$ 856
Accretion	(58)
Ending Balance	798
Perpetual Federal Savings Bank [Member]
Business Acquisition [Line Items]
Beginning Balance	5,262
Additions	294	$ 5,592
Accretion	(1,318)	(330)
Disposals	(2)
Ending Balance	4,236	5,262
Ossian Financial Services, Inc. [Member]
Business Acquisition [Line Items]
Beginning Balance	645
Additions	1	762
Accretion	(176)	(117)
Ending Balance	470	645
Limberlost Bancshares, Inc. [Member]
Business Acquisition [Line Items]
Beginning Balance	1,198	1,653
Additions	13	17
Accretion	(426)	(431)
Disposals		(41)
Ending Balance	$ 785	$ 1,198

XML

Business Combination & Asset Purchase - Schedule of Pro-forma Results (Detail) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Summary of Operations
Net Interest Income - Before Provision for Loan Losses	$ 90,290	$ 84,362	$ 81,636
Provision for Loan Losses	4,513	3,445	6,901
Net Interest Income After Provision for Loan Losses	85,777	80,917	74,735
Noninterest Income	14,099	18,931	17,668
Noninterest Expense	57,426	57,622	55,765
Income Before Income Taxes	42,450	42,226	36,638
Income Taxes	8,185	8,458	7,242
Net Income	$ 34,265	$ 33,768	$ 29,396
Basic and Diluted Earnings Per Share	$ 2.59	$ 2.57	$ 2.24

XML

Business Combination & Asset Purchase - Schedule of Future Amortization of Core Deposit Intangible Assets (Detail) $ in Thousands	Dec. 31, 2022 USD ($)
Core Deposits [Member]
Business Acquisition [Line Items]
2023	$ 1,656
2024	1,656
2025	1,656
2026	1,096
2027	1,096
Thereafter	1,627
Total	8,787
Core Deposits [Member] | Geneva [Member]
Business Acquisition [Line Items]
2023	560
2024	560
2025	560
Total	1,680
Core Deposits [Member] | Ossian Financial Services, Inc. [Member]
Business Acquisition [Line Items]
2023	140
2024	140
2025	140
2026	140
2027	140
Thereafter	47
Total	747
Core Deposits [Member] | Perpetual Federal Savings Bank [Member]
Business Acquisition [Line Items]
2023	95
2024	95
2025	95
2026	95
2027	95
Thereafter	74
Total	549
Core Deposits [Member] | Peoples Federal Savings and Loan [Member]
Business Acquisition [Line Items]
2023	861
2024	861
2025	861
2026	861
2027	861
Thereafter	1,506
Total	5,811
Customer Lists [Member]
Business Acquisition [Line Items]
2023	123
2024	123
2025	123
2026	123
2027	47
Total	$ 539

XML

Securities - Amortized Cost and Fair Value of Securities with Gross Unrealized Gains and Losses (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 439,186	$ 433,962
Gross Unrealized Gains	69	3,032
Gross Unrealized Losses	(48,466)	(7,063)
Fair Value	390,789	429,931
U.S. Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	104,507	90,775
Gross Unrealized Losses	(9,829)	(1,598)
Fair Value	94,678	89,177
U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	156,817	159,673
Gross Unrealized Gains		695
Gross Unrealized Losses	(17,050)	(3,482)
Fair Value	139,767	156,886
Mortgage-backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	101,068	118,550
Gross Unrealized Gains		839
Gross Unrealized Losses	(14,141)	(1,462)
Fair Value	86,927	117,927
State and Local Governments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	76,794	64,964
Gross Unrealized Gains	69	1,498
Gross Unrealized Losses	(7,446)	(521)
Fair Value	$ 69,417	$ 65,941

XML

Securities - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Schedule of Available-for-sale Securities [Line Items]
Realized gains on sales		$ 9.3	$ 11.8
Investments pledged, carrying value	$ 134.8	$ 115.0
Minimum [Member]
Schedule of Available-for-sale Securities [Line Items]
Underwater security	10 years
Loss position existed	3 years

XML

Securities - Gross Unrealized Losses, Aggregated by Investment Category and Length of Time (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Schedule of Available-for-sale Securities [Line Items]
Gross Unrealized Losses, Less Than Twelve Months	$ (6,965)	$ (4,842)
Fair Value, Less Than Twelve Months	99,357	256,800
Gross Unrealized Losses, Twelve Months and Over	(41,501)	(2,221)
Fair Value, Twelve Months and Over	286,095	63,659
U.S. Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Unrealized Losses, Less Than Twelve Months	(207)	(1,598)
Fair Value, Less Than Twelve Months	9,121	89,177
Gross Unrealized Losses, Twelve Months and Over	(9,622)
Fair Value, Twelve Months and Over	85,557
U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Unrealized Losses, Less Than Twelve Months	(1,081)	(1,898)
Fair Value, Less Than Twelve Months	24,560	86,739
Gross Unrealized Losses, Twelve Months and Over	(15,969)	(1,584)
Fair Value, Twelve Months and Over	114,906	41,738
Mortgage-backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Unrealized Losses, Less Than Twelve Months	(2,454)	(1,050)
Fair Value, Less Than Twelve Months	26,905	63,157
Gross Unrealized Losses, Twelve Months and Over	(11,687)	(412)
Fair Value, Twelve Months and Over	60,022	16,434
State and Local Governments [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Unrealized Losses, Less Than Twelve Months	(3,223)	(296)
Fair Value, Less Than Twelve Months	38,771	17,727
Gross Unrealized Losses, Twelve Months and Over	(4,223)	(225)
Fair Value, Twelve Months and Over	$ 25,610	$ 5,487

XML

Securities - Gross Realized Gains (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Debt Securities, Available-for-Sale, Realized Gain (Loss) [Abstract]
Gross realized gains	$ 293	$ 270
Net realized gains	293	270
Tax expense related to net realized gains	$ 62	$ 57

XML

Securities - Amortized Cost and Fair Value of Debt Securities, by Contractual Maturity (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Available-for-Sale Securities, Debt Maturities [Abstract]
Amortized Cost, One year or less	$ 20,732
Amortized Cost, After one year through five years	209,735
Amortized Cost, After five years through ten years	105,681
Amortized Cost, After ten years	1,970
Amortized Cost, Total	338,118
Amortized Cost, Mortgage-backed securities	101,068
Amortized Cost	439,186	$ 433,962
Fair Value, One year or less	20,283
Fair Value, After one year through five years	190,333
Fair Value, After five years through ten years	91,379
Fair Value, After ten years	1,867
Fair Value, Total	303,862
Fair Value, Mortgage-backed securities	86,927
Total, Fair Value	$ 390,789	$ 429,931

XML

Loans - Additional Information (Detail) - USD ($)	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans held for sale	$ 827,000	$ 7,714,000	$ 7,700,000
Loans	2,357,903,000	1,859,157,000
Allowance for loan losses	20,313,000	16,242,000	$ 13,672,000	$ 7,228,000
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans	242,360,000	208,270,000
Allowance for loan losses	$ 0
Commercial and Industrial [Member] | PPP Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans		$ 2,900,000

XML

Loans - Loans (Detail) - USD ($)	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Loans:
Loans - Gross	$ 2,357,903,000	$ 1,859,157,000
Less: Net deferred loan fees and costs	(1,516,000)	(1,738,000)
Loans after net deferred loan fees and costs	2,356,387,000	1,857,419,000
Less: Allowance for loan losses	(20,313,000)	(16,242,000)	$ (13,672,000)	$ (7,228,000)
Loans - Net	2,336,074,000	1,841,177,000
Consumer Real Estate [Member]
Loans:
Loans - Gross	494,423,000	395,873,000
Loans after net deferred loan fees and costs	494,423,000	395,805,000
Agricultural Real Estate [Member]
Loans:
Loans - Gross	220,819,000	198,343,000
Loans after net deferred loan fees and costs	220,514,000	198,033,000
Agricultural [Member]
Loans:
Loans - Gross	128,733,000	118,368,000
Loans after net deferred loan fees and costs	128,926,000	118,504,000
Commercial Real Estate [Member]
Loans:
Loans - Gross	1,152,603,000	848,477,000
Loans after net deferred loan fees and costs	1,150,511,000	847,110,000
Commercial and Industrial [Member]
Loans:
Loans - Gross	242,360,000	208,270,000
Loans after net deferred loan fees and costs	242,301,000	208,049,000
Less: Allowance for loan losses	0
Consumer [Member]
Loans:
Loans - Gross	89,147,000	57,737,000
Loans after net deferred loan fees and costs	89,894,000	57,829,000
Other Loan [Member]
Loans:
Loans - Gross	29,818,000	32,089,000
Loans after net deferred loan fees and costs	$ 29,818,000	$ 32,089,000

XML

Loans - Contractual Maturity Schedule by Major Category of Loans Excluding Fair Value Adjustments (Detail) $ in Thousands	Dec. 31, 2022 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	$ 2,366,308
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	500,407
Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	221,938
Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	128,776
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	1,152,864
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	242,996
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	89,498
Other Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	29,829
Major Category Of Receivables Due Within One Year [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	179,080
Major Category Of Receivables Due Within One Year [Member] | Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	8,890
Major Category Of Receivables Due Within One Year [Member] | Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	525
Major Category Of Receivables Due Within One Year [Member] | Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	59,119
Major Category Of Receivables Due Within One Year [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	26,670
Major Category Of Receivables Due Within One Year [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	81,552
Major Category Of Receivables Due Within One Year [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	2,089
Major Category Of Receivables Due Within One Year [Member] | Other Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	235
Major Category Of Receivables Due Within One Year to Five Years [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	583,080
Major Category Of Receivables Due Within One Year to Five Years [Member] | Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	34,961
Major Category Of Receivables Due Within One Year to Five Years [Member] | Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	7,116
Major Category Of Receivables Due Within One Year to Five Years [Member] | Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	47,113
Major Category Of Receivables Due Within One Year to Five Years [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	336,890
Major Category Of Receivables Due Within One Year to Five Years [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	108,729
Major Category Of Receivables Due Within One Year to Five Years [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	47,052
Major Category Of Receivables Due Within One Year to Five Years [Member] | Other Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	1,219
Major Category Of Receivables Over Five Years [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	1,604,148
Major Category Of Receivables Over Five Years [Member] | Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	456,556
Major Category Of Receivables Over Five Years [Member] | Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	214,297
Major Category Of Receivables Over Five Years [Member] | Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	22,544
Major Category Of Receivables Over Five Years [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	789,304
Major Category Of Receivables Over Five Years [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	52,715
Major Category Of Receivables Over Five Years [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	40,357
Major Category Of Receivables Over Five Years [Member] | Other Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans excluding fair value adjustments	$ 28,375

XML

Loans - Distribution of Fixed Rate Loans and Variable Rate Loans by Major Loan Category (Detail) $ in Thousands	Dec. 31, 2022 USD ($)
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	$ 354,420
Distribution of variable rate loans by major loan category, Variable Rate	140,003
Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	144,702
Distribution of variable rate loans by major loan category, Variable Rate	76,117
Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	52,867
Distribution of variable rate loans by major loan category, Variable Rate	75,866
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	941,927
Distribution of variable rate loans by major loan category, Variable Rate	210,676
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	130,513
Distribution of variable rate loans by major loan category, Variable Rate	111,847
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	88,972
Distribution of variable rate loans by major loan category, Variable Rate	175
Other Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	20,029
Distribution of variable rate loans by major loan category, Variable Rate	$ 9,789

XML

Loans - Contractual Aging of Recorded Investment in Past Due Loans by Portfolio Classification of Loans (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	$ 2,356,387	$ 1,857,419
Recorded Investment > 90 Days and Accruing	0	0
30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	3,197	749
60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	674	131
Greater Than 90 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	2,154	575
Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	6,025	1,455
Current
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	2,350,362	1,855,964
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	494,423	395,805
Consumer Real Estate [Member] | 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,536	228
Consumer Real Estate [Member] | 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	635
Consumer Real Estate [Member] | Greater Than 90 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	90	246
Consumer Real Estate [Member] | Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	2,261	474
Consumer Real Estate [Member] | Current
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	492,162	395,331
Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	220,514	198,033
Agricultural Real Estate [Member] | 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	118	436
Agricultural Real Estate [Member] | 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	2
Agricultural Real Estate [Member] | Greater Than 90 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,550
Agricultural Real Estate [Member] | Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,670	436
Agricultural Real Estate [Member] | Current
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	218,844	197,597
Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	128,926	118,504
Agricultural [Member] | 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	433
Agricultural [Member] | Greater Than 90 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	152
Agricultural [Member] | Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	585
Agricultural [Member] | Current
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	128,341	118,504
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	1,150,511	847,110
Commercial Real Estate [Member] | 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	74
Commercial Real Estate [Member] | Greater Than 90 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	180	180
Commercial Real Estate [Member] | Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	254	180
Commercial Real Estate [Member] | Current
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,150,257	846,930
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	272,119	240,138
Commercial and Industrial [Member] | 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	953	21
Commercial and Industrial [Member] | 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due		131
Commercial and Industrial [Member] | Greater Than 90 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	182	149
Commercial and Industrial [Member] | Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,135	301
Commercial and Industrial [Member] | Current
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	270,984	239,837
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	89,894	57,829
Consumer [Member] | 30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	83	64
Consumer [Member] | 60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	37
Consumer [Member] | Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	120	64
Consumer [Member] | Current
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	$ 89,774	$ 57,765

XML

Loans - Recorded Investment in Nonaccrual Loans by Portfolio Class of Loans (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investment in nonaccrual loans	$ 4,689	$ 8,076
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investment in nonaccrual loans	612	824
Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investment in nonaccrual loans	1,921	6,477
Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investment in nonaccrual loans	152	20
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investment in nonaccrual loans	903	600
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investment in nonaccrual loans	1,096	149
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investment in nonaccrual loans	$ 5	$ 6

XML

Loans (Tier Risk Rating System) - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2022
Minimum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Repayment period of loan with a reasonable reduction of principal balance	2 years

XML

Loans - Risk Category of Loans by Portfolio Class (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	$ 2,356,387	$ 1,857,419
Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	220,514	198,033
Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	128,926	118,504
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	1,150,511	847,110
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	242,301	208,049
Other Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	29,818	32,089
1-2 [Member] | Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	9,912	8,720
1-2 [Member] | Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	5,857	4,178
1-2 [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	8,718	10,894
1-2 [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	780	4,604
3 [Member] | Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	47,405	42,180
3 [Member] | Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	33,671	38,623
3 [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	370,035	238,132
3 [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	67,506	46,547
3 [Member] | Other Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	10,921	11,408
4 [Member] | Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	146,143	129,301
4 [Member] | Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	88,992	75,164
4 [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	737,745	568,038
4 [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	167,291	152,736
4 [Member] | Other Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	18,897	20,681
5 [Member] | Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	10,389	4,599
5 [Member] | Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	228	227
5 [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	9,751	14,509
5 [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	3,592	986
6 [Member] | Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	6,665	13,233
6 [Member] | Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	178	312
6 [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	24,262	15,537
6 [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	$ 3,132	$ 3,176

XML

Loans - Recorded Investment for Consumer Loans, Credit Quality based on Status of Loan and Payment Activity (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	$ 2,356,387	$ 1,857,419
Performing	659	1,449
Consumer - Credit [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Performing		3,919
Consumer - Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Performing	89,894	53,910
Performing [Member] | Consumer - Credit [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Performing		3,906
Performing [Member] | Consumer - Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Performing	89,853	53,820
Nonperforming [Member] | Consumer - Credit [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Performing		13
Nonperforming [Member] | Consumer - Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Performing	41	90
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	494,423	395,805
Performing	405	712
Pass [Member] | Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	492,575	392,940
5 [Member] | Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	676	1,673
6 [Member] | Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	$ 1,172	$ 1,192

XML

Loans - Schedule of Impaired Loans (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Receivables [Abstract]
Impaired loans without a valuation allowance	$ 4,194	$ 1,228
Impaired loans with a valuation allowance	4,663	10,711
Total impaired loans	8,857	11,939
Valuation allowance related to impaired loans	1,996	2,184
Total nonaccrual loans	4,689	8,076
Total loans past-due ninety days or more and still accruing	0	0
Average investment in impaired loans	10,710	12,247	$ 10,232
Interest income recognized on impaired loans	361	292	269
Interest income recognized on a cash basis on impaired loans	$ 97	$ 188	$ 135

XML

Loans (Impaired Loans) - Additional Information (Detail)		1 Months Ended			12 Months Ended
	Jul. 30, 2021	Apr. 30, 2022 Loan	Jun. 30, 2021 Loan	Mar. 31, 2021 Loan	Dec. 31, 2022 USD ($) Loan Contract	Dec. 31, 2021 USD ($) Loan	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Additional funds available to be advanced in connection with impaired loans					$ 0
Impaired loans classified as troubled debt restructured					$ 3,600,000	$ 7,600,000
Number of contracts modified | Loan					3	3
TDR impaired loans paid off | Loan		2	2	3	1
Term of loan	5 years					3 years
Loan amortization period						10 years
Allowance for loan losses					$ 20,313,000	$ 16,242,000	$ 13,672,000	$ 7,228,000
TDR loans, subsequently defaulted during the period					0	0
Maximum time for re-evaluation (in months)					12 months
Re-evaluation period for real estate					2 years
Unsecured consumer loans, credit card credits and overdraft lines of credit reach					90 days
Delinquent period for charging down consumer loans					90 days
Litigation and any deficiency charged off period					150 days
Delinquent period for charging down/allocated commercial and agricultural credits					120 days
Foreclosed residential real estate property						$ 159,000
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of contracts modified | Contract					1
Foreclosed residential real estate property					$ 0	159,000
Residential real estate properties foreclosure proceedings						255,000
Specific Allocation on Principal Balance [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses						$ 825,000
Principal Forgiveness [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of contracts modified | Contract					0
Sale Of Property
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of contracts modified | Loan						1
Payment Changes from Monthly Payment to Principal and Interest at Maturity [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of contracts modified | Loan						1
Allowance for loan losses					$ 837,000	$ 313,000

XML

Loans - Impaired Loans Classified as Troubled Debt Restructured (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2022 USD ($) Contract Loan	Dec. 31, 2021 USD ($) Contract Loan
Financing Receivable Modifications [Line Items]
Number of Contracts Modified in the Last 12 Months | Loan	3	3
Consumer Real Estate [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts Modified in the Last 12 Months | Contract	1
Pre-Modification Outstanding Recorded Investment	$ 95
Post-Modification Outstanding Recorded Investment	$ 95
Agricultural Real Estate [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts Modified in the Last 12 Months | Contract		1
Pre-Modification Outstanding Recorded Investment		$ 1,655
Post-Modification Outstanding Recorded Investment		$ 1,655
Commercial and Industrial [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts Modified in the Last 12 Months | Contract	2	1
Pre-Modification Outstanding Recorded Investment	$ 1,232	$ 1,000
Post-Modification Outstanding Recorded Investment	$ 1,232	$ 1,000
Commercial Real Estate [Member]
Financing Receivable Modifications [Line Items]
Number of Contracts Modified in the Last 12 Months | Contract	1	1
Pre-Modification Outstanding Recorded Investment	$ 74	$ 382
Post-Modification Outstanding Recorded Investment	$ 74	$ 382

XML

Loans - Loans Individually Evaluated for Impairment by Portfolio Class of Loans (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	$ 4,194	$ 1,228
With a specific allowance recorded, Recorded Investment	4,663	10,711
Related Allowance	1,996	2,184
Recorded Investment	8,857	11,939
Average Recorded Investment	10,710	12,247	$ 10,232
Interest Income Recognized	361	292	269
Interest Income Recognized Cash Basis	97	188	$ 135
Consumer Real Estate [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	509	604
With no related allowance recorded, Unpaid Principal Balance	509	604
With no related allowance recorded, Average Recorded Investment	355	456
With no related allowance recorded, Interest Income Recognized	5	5
With no related allowance recorded, Interest Income Recognized Cash Basis	12	15
With a specific allowance recorded, Recorded Investment	60
With a specific allowance recorded, Unpaid Principal Balance	60
Related Allowance	6
With a specific allowance recorded, Average Recorded Investment	15	59
With a specific allowance recorded, Interest Income Recognized Cash Basis	1
Recorded Investment	569	604
Unpaid Principal Balance	569	604
Average Recorded Investment	370	515
Interest Income Recognized	5	5
Interest Income Recognized Cash Basis	13	15
Agricultural Real Estate [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	2,280	423
With no related allowance recorded, Unpaid Principal Balance	2,385	423
With no related allowance recorded, Average Recorded Investment	2,048	1,000
With no related allowance recorded, Interest Income Recognized	25	33
With no related allowance recorded, Interest Income Recognized Cash Basis	6
With a specific allowance recorded, Recorded Investment		6,302
With a specific allowance recorded, Unpaid Principal Balance		6,406
Related Allowance		691
With a specific allowance recorded, Average Recorded Investment	1,388	5,414
With a specific allowance recorded, Interest Income Recognized		54
Recorded Investment	2,280	6,725
Unpaid Principal Balance	2,385	6,829
Average Recorded Investment	3,436	6,414
Interest Income Recognized	25	87
Interest Income Recognized Cash Basis	6
Agricultural [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	152
With no related allowance recorded, Unpaid Principal Balance	152
With no related allowance recorded, Average Recorded Investment	588	143
With no related allowance recorded, Interest Income Recognized		18
With no related allowance recorded, Interest Income Recognized Cash Basis	2	3
With a specific allowance recorded, Recorded Investment		20
With a specific allowance recorded, Unpaid Principal Balance		20
Related Allowance		1
With a specific allowance recorded, Average Recorded Investment		94
Recorded Investment	152	20
Unpaid Principal Balance	152	20
Average Recorded Investment	588	237
Interest Income Recognized		18
Interest Income Recognized Cash Basis	2	3
Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	1,234	180
With no related allowance recorded, Unpaid Principal Balance	1,272	180
With no related allowance recorded, Average Recorded Investment	1,252	1,445
With no related allowance recorded, Interest Income Recognized	29	70
With no related allowance recorded, Interest Income Recognized Cash Basis	43	9
With a specific allowance recorded, Recorded Investment	2,874	3,381
With a specific allowance recorded, Unpaid Principal Balance	2,874	3,381
Related Allowance	438	664
With a specific allowance recorded, Average Recorded Investment	3,176	2,199
With a specific allowance recorded, Interest Income Recognized	150	70
With a specific allowance recorded, Interest Income Recognized Cash Basis		3
Recorded Investment	4,108	3,561
Unpaid Principal Balance	4,146	3,561
Average Recorded Investment	4,428	3,644
Interest Income Recognized	179	140
Interest Income Recognized Cash Basis	43
Commercial and Industrial [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	17	21
With no related allowance recorded, Unpaid Principal Balance	417	21
With no related allowance recorded, Average Recorded Investment	135	920
With no related allowance recorded, Interest Income Recognized	2	24
With no related allowance recorded, Interest Income Recognized Cash Basis	10	158
With a specific allowance recorded, Recorded Investment	1,564	982
With a specific allowance recorded, Unpaid Principal Balance	1,564	982
Related Allowance	1,551	825
With a specific allowance recorded, Average Recorded Investment	1,736	498
With a specific allowance recorded, Interest Income Recognized	149	17
With a specific allowance recorded, Interest Income Recognized Cash Basis	23
Recorded Investment	1,581	1,003
Unpaid Principal Balance	1,981	1,003
Average Recorded Investment	1,871	1,418
Interest Income Recognized	151	41
Interest Income Recognized Cash Basis	33	158
Consumer [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	2	26
With no related allowance recorded, Unpaid Principal Balance	2	26
With no related allowance recorded, Average Recorded Investment	15	17
With no related allowance recorded, Interest Income Recognized	1
With a specific allowance recorded, Recorded Investment	165
With a specific allowance recorded, Unpaid Principal Balance	165
Related Allowance	1	3
With a specific allowance recorded, Average Recorded Investment	2	2
With a specific allowance recorded, Interest Income Recognized		1
Recorded Investment	167	26
Unpaid Principal Balance	167	26
Average Recorded Investment	17	19
Interest Income Recognized	$ 1	$ 1

XML

Loans - Summary of Activities in Allowance for Credit Losses (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Allowance for Loan Losses
Balance at beginning of year				$ 16,242				$ 13,672	$ 16,242	$ 13,672	$ 7,228
Provision for loan loss	$ 755	$ 1,637	$ 1,628	$ 580	$ 444	$ 659	$ 641	$ 1,700	4,600	3,444	6,981
Loans charged off									(827)	(1,332)	(720)
Recoveries									298	458	183
Balance at ending of year	20,313				16,242				20,313	16,242	13,672
Allowance for Unfunded Loan Commitments & Letters of Credit	1,262				1,041				1,262	1,041	641
Total Allowance for Credit Losses	$ 21,575				$ 17,283				$ 21,575	$ 17,283	$ 14,313

XML

Loans - Analysis of Allowance for Credit Losses (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance				$ 17,283				$ 14,313	$ 17,283	$ 14,313
Charge Offs									(827)	(1,332)	$ (720)
Recoveries									298	458	183
Provision (Credit)	$ 755	$ 1,637	$ 1,628	580	$ 444	$ 659	$ 641	1,700	4,600	3,444	6,981
Other Non-interest expense related to unfunded									221	400
Ending Balance	21,575				17,283				21,575	17,283	14,313
Ending balance: individually evaluated for impairment	1,996				2,184				1,996	2,184
Ending balance: collectively evaluated for impairment	19,579				15,099				19,579	15,099
Ending balance: loans acquired with deteriorated credit quality	0				37				0	37
FINANCING RECEIVABLES:
Ending balance	2,356,387				1,857,419				2,356,387	1,857,419
Ending balance: individually evaluated for impairment	8,857				11,939				8,857	11,939
Ending balance: collectively evaluated for impairment	2,346,871				1,844,031				2,346,871	1,844,031
Ending balance: loans acquired with deteriorated credit quality	659				1,449				659	1,449
Consumer Real Estate [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance				857				633	857	633
Charge Offs										(19)
Recoveries									20	13
Provision (Credit)									121	230
Ending Balance	998				857				998	857	633
Ending balance: individually evaluated for impairment	6								6
Ending balance: collectively evaluated for impairment	992				857				992	857
Ending balance: loans acquired with deteriorated credit quality	0				37				0	37
FINANCING RECEIVABLES:
Ending balance	494,423				395,805				494,423	395,805
Ending balance: individually evaluated for impairment	569				604				569	604
Ending balance: collectively evaluated for impairment	493,449				394,489				493,449	394,489
Ending balance: loans acquired with deteriorated credit quality	405				712				405	712
Agricultural Real Estate [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance				1,040				958	1,040	958
Charge Offs										(105)
Provision (Credit)									(691)	187
Ending Balance	349				1,040				349	1,040	958
Ending balance: individually evaluated for impairment					691					691
Ending balance: collectively evaluated for impairment	349				349				349	349
Ending balance: loans acquired with deteriorated credit quality	0				0				0	0
FINANCING RECEIVABLES:
Ending balance	220,514				198,033				220,514	198,033
Ending balance: individually evaluated for impairment	2,280				6,725				2,280	6,725
Ending balance: collectively evaluated for impairment	218,039				191,107				218,039	191,107
Ending balance: loans acquired with deteriorated credit quality	195				201				195	201
Agricultural [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance				709				701	709	701
Charge Offs										(143)
Recoveries									7	14
Provision (Credit)									35	137
Ending Balance	751				709				751	709	701
Ending balance: individually evaluated for impairment					1					1
Ending balance: collectively evaluated for impairment	751				708				751	708
Ending balance: loans acquired with deteriorated credit quality	0				0				0	0
FINANCING RECEIVABLES:
Ending balance	128,926				118,504				128,926	118,504
Ending balance: individually evaluated for impairment	152				20				152	20
Ending balance: collectively evaluated for impairment	128,774				118,484				128,774	118,484
Commercial Real Estate [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance				9,130				7,415	9,130	7,415
Recoveries									9	10
Provision (Credit)									2,785	1,705
Ending Balance	11,924				9,130				11,924	9,130	7,415
Ending balance: individually evaluated for impairment	438				664				438	664
Ending balance: collectively evaluated for impairment	11,486				8,466				11,486	8,466
Ending balance: loans acquired with deteriorated credit quality	0				0				0	0
FINANCING RECEIVABLES:
Ending balance	1,150,511				847,110				1,150,511	847,110
Ending balance: individually evaluated for impairment	4,108				3,561				4,108	3,561
Ending balance: collectively evaluated for impairment	1,146,389				843,299				1,146,389	843,299
Ending balance: loans acquired with deteriorated credit quality	14				250				14	250
Commercial and Industrial [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance				3,847				3,346	3,847	3,346
Charge Offs									(418)	(814)
Recoveries									93	257
Provision (Credit)									1,860	1,058
Ending Balance	5,382				3,847				5,382	3,847	3,346
Ending balance: individually evaluated for impairment	1,551				825				1,551	825
Ending balance: collectively evaluated for impairment	3,831				3,022				3,831	3,022
Ending balance: loans acquired with deteriorated credit quality	0				0				0	0
FINANCING RECEIVABLES:
Ending balance	272,119				240,138				272,119	240,138
Ending balance: individually evaluated for impairment	1,581				1,003				1,581	1,003
Ending balance: collectively evaluated for impairment	270,493				238,849				270,493	238,849
Ending balance: loans acquired with deteriorated credit quality	45				286				45	286
Consumer [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance				625				606	625	606
Charge Offs									(409)	(251)
Recoveries									169	164
Provision (Credit)									506	106
Ending Balance	891				625				891	625	606
Ending balance: individually evaluated for impairment	1				3				1	3
Ending balance: collectively evaluated for impairment	890				622				890	622
Ending balance: loans acquired with deteriorated credit quality	0				0				0	0
FINANCING RECEIVABLES:
Ending balance	89,894				57,829				89,894	57,829
Ending balance: individually evaluated for impairment	167				26				167	26
Ending balance: collectively evaluated for impairment	89,727				57,803				89,727	57,803
Unallocated [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance				34				13	34	13
Provision (Credit)									(16)	21
Ending Balance	18				34				18	34	13
Ending balance: collectively evaluated for impairment	18				34				18	34
Ending balance: loans acquired with deteriorated credit quality	0				0				0	0
Unfunded Loan Commitment & Letters of Credit [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance				$ 1,041				$ 641	1,041	641
Other Non-interest expense related to unfunded									221	400
Ending Balance	1,262				1,041				1,262	1,041	$ 641
Ending balance: collectively evaluated for impairment	1,262				1,041				1,262	1,041
Ending balance: loans acquired with deteriorated credit quality	$ 0				$ 0				$ 0	$ 0

XML

Premises and Equipment - Major Categories of Banking Premises and Equipment and Accumulated Depreciation (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Property, Plant and Equipment [Line Items]
Premises and Equipment (Gross)	$ 67,845	$ 60,741
Less: Accumulated depreciation	(39,464)	(33,828)
Premises and Equipment (Net)	28,381	26,913
Land [Member]
Property, Plant and Equipment [Line Items]
Premises and Equipment (Gross)	6,896	6,652
Buildings [Member]
Property, Plant and Equipment [Line Items]
Premises and Equipment (Gross)	34,501	30,929
Furnishings [Member]
Property, Plant and Equipment [Line Items]
Premises and Equipment (Gross)	$ 26,448	$ 23,160

XML

Premises and Equipment - Major Categories of Banking Premises and Equipment and Accumulated Depreciation (Parenthetical) (Detail)	12 Months Ended
	Dec. 31, 2022
Buildings [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	15 years
Buildings [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	39 years
Furnishings [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	3 years
Furnishings [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	15 years

XML

Premises and Equipment - Additional Information (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2022 USD ($) Office	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Property, Plant and Equipment [Abstract]
Depreciation Expenses	$ 2,700	$ 2,600	$ 2,500
Construction in progress	$ 278
Number of construction of new offices | Office	3

XML

Servicing - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Transfers and Servicing [Abstract]
Loans serviced for others unpaid principal amount	$ 375,600	$ 380,800
Capitalized service right assets included in other assets	3,500	3,600
Fair market value of the capitalized servicing rights	$ 5,100	$ 3,200
Prepayment rate	7.70%	21.70%
Discount yield	5.94%	1.97%
Valuation allowance		$ 414

XML

Servicing - Summary of Mortgage Servicing Rights Capitalized and Amortized (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Servicing Assets at Fair Value [Line Items]
Beginning of Year	$ 3,157
Valuation Allowance		$ (414)
End of Year	3,549	3,157
Mortgage Servicing Rights [Member]
Servicing Assets at Fair Value [Line Items]
Beginning of Year	3,571	3,320
Capitalized Additions	537	1,417
Amortization	(559)	(1,166)
Valuation Allowance		(414)
End of Year	3,549	3,571
Mortgage Servicing Rights net, December 31	$ 3,549	$ 3,157

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Deposits - Time Deposits (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Deposits [Abstract]
Time deposits under $250,000	$ 495,891	$ 397,102
Time deposits of $250,000 or more	62,089	74,377
Total	$ 557,980	$ 471,479

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Deposits - Scheduled Maturities for Time Deposits (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Maturities of Time Deposits [Abstract]
2023	$ 383,052
2024	91,267
2025	62,412
2026	13,862
2027	7,068
Thereafter	319
Total	$ 557,980	$ 471,479

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Federal Funds Purchased and Securities Sold Under Agreement to Repurchase - Additional Information (Detail) - USD ($)	Dec. 31, 2022	Dec. 31, 2021
Variable Interest Entity [Line Items]
Federal funds purchased	$ 22,573,000	$ 0
Securities sold under agreements to repurchase	31,600,000
Pledged as Collateral
Variable Interest Entity [Line Items]
Securities sold under agreements to repurchase	$ 43,600,000	$ 31,100,000

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Federal Funds Purchased and Securities Sold Under Agreement to Repurchase - Daily Securities Sold under Agreement to Repurchase (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amount Outstanding at End of Period	$ 31,600
Daily Securities Sold Under Agreement to Repurchase [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amount Outstanding at End of Period	$ 1,115	$ 1,062
Weighted Average Rate End of Period	0.95%	0.70%
Maximum Amount Borrowings Outstanding Month End	$ 1,450	$ 1,991
Approximate Average Outstanding in Period	$ 1,169	$ 1,514
Approximate Weighted Average Interest Rate For the Period	0.43%	0.43%
Term CDs Sold Under Agreement to Repurchase [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amount Outstanding at End of Period	$ 30,518	$ 28,206
Weighted Average Rate End of Period	0.97%	1.00%
Maximum Amount Borrowings Outstanding Month End	$ 34,504	$ 28,362
Approximate Average Outstanding in Period	$ 31,573	$ 28,315
Approximate Weighted Average Interest Rate For the Period	2.54%	2.56%

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Federal Funds Purchased and Securities Sold Under Agreement to Repurchase - Schedule of Remaining Contractual Maturity in Repurchase Agreements and Collateral Pledged (Detail) - USD ($)	Dec. 31, 2022	Dec. 31, 2021
Assets Sold under Agreements to Repurchase [Line Items]
Federal funds purchased	$ 22,573,000	$ 0
Repurchase agreements, Remaining contractual maturity of the agreements	31,600,000
Total	54,206,000	$ 29,268,000
US Treasury & Agency Securities [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Repurchase agreements, Remaining contractual maturity of the agreements	31,633,000
Overnight & Continuous [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Federal funds purchased	22,573,000
Total	23,688,000
Overnight & Continuous [Member] | US Treasury & Agency Securities [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Repurchase agreements, Remaining contractual maturity of the agreements	1,115,000
Greater Than 90 Days [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Total	30,518,000
Greater Than 90 Days [Member] | US Treasury & Agency Securities [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Repurchase agreements, Remaining contractual maturity of the agreements	$ 30,518,000

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Borrowings and Subordinated Notes - Additional Information (Detail) $ in Thousands		12 Months Ended
	Jul. 30, 2021 USD ($)	Dec. 31, 2022 USD ($) Loan	Dec. 31, 2021 USD ($)	Sep. 29, 2022 USD ($)
Debt Instrument [Line Items]
Number of loans secured | Loan		2
Term note		$ 30,000
Line of credit		$ 10,000		$ 10,000
Percentage of interest on loan accrues rate		2.50%
Percentage of line of credit accrues rate				5.50%
Maturity date		Sep. 30, 2023
Total borrowings excluding for fair value related to acquisition		$ 127,438	$ 23,900
Total borrowings, fair value related to acquisition		47	197
Advances, secured by mortgage loans		659	1,449
Unsecured borrowings through correspondent banks		73,000	69,000
Unpledged securities which could be sold or used as collateral		249,600	313,600
Additional borrowings available from the Federal Home Loan Bank based on current pledging		2,000	$ 91,200
Debt instrument basis points	2.63%
Debt instrument, frequency of periodic payment	semi-annually
Term of loan	5 years		3 years
Redemption price of principal amount of notes redeemed	100.00%
Private Placement
Debt Instrument [Line Items]
Subordinated notes	$ 35,000
Fixed-to-floating interest rate	3.25%
Subordinated notes, due date	Jul. 30, 2031
Percentage of notes prices on principal amount	100.00%
Peoples Federal Savings And Loan Bank [Member]
Debt Instrument [Line Items]
Bank undertook amount		$ 965
Peoples Federal Savings And Loan Bank [Member] | Minimum [Member]
Debt Instrument [Line Items]
Bank loan maturity year		2022
Peoples Federal Savings And Loan Bank [Member] | Maximum [Member]
Debt Instrument [Line Items]
Bank loan maturity year		2028
Perpetual Federal Savings Bank {Member]
Debt Instrument [Line Items]
Bank undertook amount		$ 6,000
Mortgage Loans at Cost [Member] | Asset Pledged as Collateral without Right [Member] | Federal Home Loan Bank Advances [Member]
Debt Instrument [Line Items]
Advances, secured by mortgage loans		232,900	$ 193,200
Cash Management Advance
Debt Instrument [Line Items]
Unsecured borrowings through correspondent banks		$ 130,400	$ 94,200
Term Note [Member]
Debt Instrument [Line Items]
Short term debt, term		12-month
Line of Credit [Member]
Debt Instrument [Line Items]
Short term debt, term		12-month

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Borrowings and Subordinated Notes - Schedule of Maturities of Borrowings Exclusive of Fair Value (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Debt Disclosure [Abstract]
2023	$ 71,507
2024	32,500
2025	11,500
2027	9,064
Thereafter	2,867
Total	$ 127,438	$ 23,900

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Borrowings and Subordinated Notes - Schedule of Subordinated Notes (Detail) - Subordinated Notes - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Principal	$ 35,000	$ 35,000
Unamortized Note Issuance Costs	$ (414)	$ (529)

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Income Taxes - Components of Income Tax Expense (Benefit) (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Current:
Federal									$ 7,430	$ 7,536	$ 6,289
State									359	271	513
Total current									7,789	7,807	6,802
Deferred:
Federal									227	(1,746)	(1,596)
State									(56)	(59)	(95)
Total deferred									171	(1,805)	(1,691)
Total Income Tax	$ 1,706	$ 2,253	$ 2,050	$ 1,951	$ 1,999	$ 1,624	$ 1,319	$ 1,060	$ 7,960	$ 6,002	$ 5,111

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Income Taxes - Reconciliation of the Statutory Federal Income Tax Rate to the Effective Tax Rate (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Income Tax Expense (Benefit), Effective Income Tax Rate Reconciliation, Amount [Abstract]
Federal income tax at statutory rates									$ 8,489	$ 6,194	$ 5,294
(Decrease) increase resulting from:
State income tax, net of federal benefit									239	167	330
Tax exempt interest									(133)	(116)	(146)
Section 831 deduction									(270)	(294)	(266)
Other									(365)	51	(101)
Total Income Tax	$ 1,706	$ 2,253	$ 2,050	$ 1,951	$ 1,999	$ 1,624	$ 1,319	$ 1,060	$ 7,960	$ 6,002	$ 5,111

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Income Taxes - Components of Deferred Tax Assets and Liabilities (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Deferred Tax Assets:
Allowance for loan losses	$ 4,623	$ 3,629
Deferred compensation	570	561
Net unrealized loss on available-for-sale securities	10,163	846
Fair value adjustments	2,152	1,913
Other	554	277
Total deferred tax assets	18,062	7,226
Deferred Tax Liabilities:
Accreted discounts on bonds	54	22
Depreciation	1,083	772
FHLB stock dividends	1,011	828
Intangible amortization	2,640	1,282
Mortgage servicing rights	787	778
Prepaids	500	471
Other	424	173
Total deferred tax liabilities	6,499	4,326
Net Deferred Tax Asset	$ 11,563	$ 2,900

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Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Perpetual Federal Savings Bank [Member]
Income Taxes [Line Items]
Operating loss carryforwards		$ 377,807
Deferred taxes business combination allocated to additional paid in capital		$ 2,779,000
Unrecognized deferred taxes	$ 1,040,000
Peoples Federal Savings and Loan [Member]
Income Taxes [Line Items]
Operating loss carryforwards	2,638,002
Operating loss carryforward at acquisition	2,789,124
Deferred taxes business combination allocated to additional paid in capital	$ 2,174,000

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Employee Benefit Plans - Additional Information (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2022 USD ($) Employee shares	Dec. 31, 2021 USD ($) Employee shares	Dec. 31, 2020 USD ($) Employee shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Minimum percentage of eligible compensation on a pre-tax or post-tax basis for eligible employees to save	1.00%
Employee contribution matching percentage	50.00%
Percentage of total eligible compensation, contribution by Bank, maximum limit	6.00%
Vesting percentage in participant's deferral contributions and employer matching contributions	100.00%
Nonelective employer contribution vesting percentage	100.00%
Defined contribution plan employer matching contribution description	In order to be eligible for discretionary contributions, employees must work 1,000 hours in the plan year and be employed on the last day of the year.
Employer matching contribution and the discretionary contribution | $	$ 1,700	$ 1,500	$ 1,000
Restricted stock awards, shares issued	56,496	48,750	37,382
Awards grants originated in 2019, 2018 and 2017 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of employees, received the stock | Employee			1
Number of shares vested			1,050
Awards grants originated in 2018, 2019 and 2020 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of employees, received the stock | Employee		7
Number of shares vested		4,425
Awards grants originated in 2017, 2018, 2019 and 2020 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of employees, received the stock | Employee			8
Four employees received shares from awards granted due to retirement			10,890
Awards grants originated in 2019, 2020 and 2021 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of employees, received the stock | Employee	3
Number of shares vested	3,775
Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
Restricted stock awards, shares issued	56,496	48,750	37,382
Stock issued to number of employees | Employee	109	96	92
Shares vest under the plan	100.00%	100.00%	100.00%
Shares forfeited due to employee termination	8,000	2,575	2,175
Number of shares vested	30,675	23,270	35,431
Number of employees, received the stock | Employee	60	50	58
Number of shares vested	3,775	4,425	10,890
Compensation expense | $	$ 899	$ 822	$ 1,000
Unrecognized compensation cost related to the nonvested portion of restricted stock awards under the plan | $	$ 2,100
Unrecognized compensation cost related to the nonvested portion of restricted stock awards under the plan, period for recognition	3 years
Restricted Stock Awards [Member] | 2018 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vested		18,845
Number of employees, received the stock | Employee		50
Restricted Stock Awards [Member] | 2019 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vested	26,900		1,600
Number of employees, received the stock | Employee	60
Restricted Stock Awards [Member] | 2017 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vested			21,340
Number of employees, received the stock | Employee			53
Restricted Stock Awards [Member] | Immediate Vesting [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of employees, received the stock | Employee			1
Number of shares vested			551

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Employee Benefit Plans - Summary of Restricted Shares Issued, Vested and Forfeited (Detail)	12 Months Ended
	Dec. 31, 2022 Employee shares	Dec. 31, 2021 Employee shares	Dec. 31, 2020 Employee shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock awards, shares issued	56,496	48,750	37,382
Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock awards, shares issued	56,496	48,750	37,382
Restricted shares vested	26,900	18,845	23,491
Restricted shares awarded due to retirement	3,775	4,425	10,890
Restricted shares awarded for other			1,050
Restricted shares forfeited	8,000	2,575	2,175
Restricted shares issued | Employee	109	96	92
Restricted shares vested | Employee	60	50	58
Restricted shares awarded due to retirement | Employee	3	7	8
Restricted shares awarded for other | Employee			1
Restricted shares forfeited | Employee	9	4	5

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Employee Benefit Plans - Activity of Restricted Stock Awards (Detail) - Restricted Stock Awards [Member] - $ / shares	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Number of Shares, Beginning of period	111,131	88,226	88,450
Number of Shares, Granted	56,496	48,750	37,382
Number of Shares, Vested	(30,675)	(23,270)	(35,431)
Number of Shares, Forfeited	(8,000)	(2,575)	(2,175)
Number of Shares, Nonvested, end of period	128,952	111,131	88,226
Weighted average fair value per award, Beginning of period	$ 23.02	$ 28.40	$ 31.52
Weighted average fair value per award, Granted	30.46	22.70	21.80
Weighted average fair value per award, Vested	24.77	42.03	29.27
Weighted average fair value per award, Forfeited	30.15	24.28	21.92
Weighted average fair value per award, Nonvested, end of period	$ 25.75	$ 23.02	$ 28.40

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Earnings Per Share - Additional Information (Detail)	Jun. 03, 2022 USD ($) Director shares	Jun. 04, 2021 USD ($) Director shares	Oct. 01, 2021 USD ($) shares	Nov. 20, 2020 shares	Jun. 05, 2020 USD ($) shares
Earnings Per Share Basic [Line Items]
Compensation annual basis committee award | $	$ 10,013	$ 6,000			$ 4,000
Number of directors received shares | shares	240	272		20	176
Number of directors received shares | Director	12	10
Number of directors received prorated dollar value of shares | Director		4
Perpetual Federal Savings Bank {Member]
Earnings Per Share Basic [Line Items]
Compensation annual basis committee award | $			$ 1,523
Number of directors received shares | shares			68

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Earnings Per Share - Calculation of Basic Earnings Per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Earnings Per Share [Abstract]
Net income	$ 7,188	$ 8,954	$ 8,271	$ 8,102	$ 7,683	$ 5,920	$ 4,983	$ 4,909	$ 32,515	$ 23,495	$ 20,095
Less: distributed earnings allocated to participating securities									(97)	(70)	(57)
Less: undistributed earnings allocated to participating securities									(187)	(121)	(96)
Net earnings available to common shareholders									$ 32,231	$ 23,304	$ 19,942
Weighted average common shares outstanding including participating securities									13,206,713	11,664,852	11,146,270
Less: average unvested restricted shares									(115,291)	(94,634)	(84,879)
Weighted average common shares outstanding	13,606,876	12,983,307	12,957,126	12,955,107	13,046,299	11,209,732	11,191,043	11,197,012	13,091,422	11,570,218	11,061,391
Basic Earnings Per Share	$ 0.53	$ 0.68	$ 0.63	$ 0.62	$ 0.59	$ 0.53	$ 0.44	$ 0.44	$ 2.46	$ 2.01	$ 1.80
Diluted Earnings Per Share	$ 0.53	$ 0.68	$ 0.63	$ 0.62	$ 0.59	$ 0.53	$ 0.44	$ 0.44	$ 2.46	$ 2.01	$ 1.80

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Related Party Transactions - Additional Information (Detail) - Directors and Executive Officers [Member] $ in Thousands	12 Months Ended
	Dec. 31, 2022 USD ($) SecurityLoan	Dec. 31, 2021 USD ($)
Related Party Transaction [Line Items]
Granted loans to affiliate companies	$ 20,200	$ 20,100
Subsequent advances	12,500
Payment received	21,900
Difference in related borrowings amounts	151
Ownership interest amount	$ 41,500	$ 43,700
Number of new loans approved | SecurityLoan	2

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Off Balance Sheet Activities - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Commitments and Contingencies Disclosure [Abstract]
Allowance for credit losses relates to unfunded loan commitments	$ 1.0	$ 1.0

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Off Balance Sheet Activities - Outstanding Financial Instruments Whose Contract Amounts Represent Credit Risk (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Standby letters of credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Concentration of Risk	$ 1,046	$ 983
Commitments to extend credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Concentration of Risk	$ 691,501	557,094
Credit card arrangements [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Concentration of Risk		$ 23,179

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Minimum Regulatory Capital Requirements - Additional Information (Detail)	Dec. 31, 2022	Dec. 31, 2021	Jan. 01, 2019
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Minimum ratio of capital to risk-weighted assets	0.0800	0.0800	0.080
Minimum ratio of capital to risk-weighted assets including capital conservation buffer			10.50%
Minimum leverage ratio calculated as ratio of Tier 1 capital to average quarterly assets	0.0903	0.1025	0.040
Common Equity Tier 1 Capital [Member]
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Minimum ratio of capital to risk-weighted assets			0.045
Capital conservation buffer			2.50%
Minimum ratio of capital to risk-weighted assets including capital conservation buffer			7.00%
Tier 1 Capital [Member]
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]
Minimum ratio of capital to risk-weighted assets			0.060
Minimum ratio of capital to risk-weighted assets including capital conservation buffer			8.50%

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Minimum Regulatory Capital Requirements - Summary of Bank's Actual and Required Capital Amounts and Ratios (Detail) $ in Thousands	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)	Jan. 01, 2019
Federal Home Loan Banks [Abstract]
Common Equity Tier 1 Capital to Risk Weighted Assets Actual, Amount	$ 259,510	$ 256,943
Total Risk-Based Capital to Risk Weighted Assets Actual, Amount	281,085	274,226
Tier 1 Capital to Risk Weighted Assets Actual, Amount	259,510	256,943
Tier 1 leverage Capital to Adjusted Total Assets Actual, Amount	$ 259,510	$ 256,943
Common Equity Tier 1 Capital to Risk Weighted Assets Actual, Ratio	11.15%	14.26%
Total Risk-Based Capital to Risk Weighted Assets Actual, Ratio	0.1207	0.1522
Tier 1 Capital to Risk Weighted Assets Actual, Ratio	0.1115	0.1426
Tier 1 leverage Capital to Adjusted Total Assets Actual, Ratio	0.0903	0.1025	0.040
Common Equity Tier 1 Capital For Capital Adequacy Purposes, Amount	$ 104,763	$ 81,074
Total Risk-Based Capital to Risk Weighted Assets For Capital Adequacy Purposes, Amount	186,245	144,138
Tier 1 Capital to Risk Weighted Assets For Capital Adequacy Purposes, Amount	139,684	108,104
Tier 1 leverage Capital to Adjusted Total Assets For Capital Adequacy Purposes, Amount	$ 114,972	$ 100,317
Common Equity Tier 1 Capital to Risk Weighted Assets For Capital Adequacy Purposes, Ratio	4.50%	4.50%
Total Risk-Based Capital to Risk Weighted Assets For Capital Adequacy Purposes, Ratio	0.0800	0.0800	0.080
Tier 1 Capital to Risk Weighted Assets For Capital Adequacy Purposes, Ratio	0.0600	0.0600
Tier 1 leverage Capital to Adjusted Total Assets For Capital Adequacy Purposes, Ratio	0.0400	0.0400
Common Equity Tier 1 Capital to Risk Weighted Assets To Be Well Capitalized Under the Prompt Corrective Action Provisions, Amount	$ 151,324	$ 117,112
Total Risk-Based Capital to Risk Weighted Assets To Be Well Capitalized Under the Prompt Corrective Action Provisions, Amount	232,806	180,173
Tier 1 Capital to Risk Weighted Assets To Be Well Capitalized Under the Prompt Corrective Action Provisions, Amount	186,245	144,138
Tier 1 leverage Capital to Adjusted Total Assets To Be Well Capitalized Under the Prompt Corrective Action Provisions, Amount	$ 143,714	$ 125,396
Common Equity Tier 1 Capital to Risk Weighted Assets To Be Well Capitalized Under the Prompt Corrective Action Provisions, Ratio	6.50%	6.50%
Total Risk-Based Capital to Risk Weighted Assets To Be Well Capitalized Under the Prompt Corrective Action Provisions, Ratio	0.1000	0.1000
Tier 1 Capital to Risk Weighted Assets To Be Well Capitalized Under the Prompt Corrective Action Provisions, Ratio	0.0800	0.0800
Tier 1 leverage Capital to Adjusted Total Assets To Be Well Capitalized Under the Prompt Corrective Action Provisions, Ratio	0.0500	0.0500

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Restrictions of Dividends & Inter-company Borrowings - Additional Information (Detail) $ in Millions	12 Months Ended
	Dec. 31, 2022 USD ($)
Class of Stock [Line Items]
Dividends may be paid without prior regulatory approval	$ 42.9
Perpetual Federal Savings Bank [Member]
Class of Stock [Line Items]
Dividend approved by federal reserve for the acquisition	$ 40.0

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Fair Value of Financial Instruments - Estimated Fair Values and Related Carrying or Notional Amounts (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Financial Assets:
Securities - available-for-sale	$ 390,789	$ 429,931
Financial Liabilities:
Other borrowings	10,000	40,000
Subordinated notes, net of unamortized issuance costs	34,586	34,471
Reported Value Measurement [Member]
Financial Assets:
Cash and cash equivalents	84,409	180,823
Interest-bearing time deposits	4,442	10,913
Securities - available-for-sale	390,789	429,931
Other securities	9,799	8,162
Loans held for sale	827	7,714
Loans, net	2,336,074	1,841,177
Interest receivable	10,440	7,209
Financial Liabilities:
Total Deposits	2,468,864	2,193,462
Fed funds purchased and securities sold under agreement to repurchase	54,206	29,268
Federal Home Loan Bank advances	127,485	24,065
Other borrowings	10,000	40,000
Subordinated notes, net of unamortized issuance costs	34,586	34,471
Interest payable	1,739	1,125
Fair Value [Member]
Financial Assets:
Cash and cash equivalents	84,409	180,823
Interest-bearing time deposits	4,440	10,933
Securities - available-for-sale	390,789	429,931
Other securities	9,799	8,162
Loans held for sale	815	7,844
Loans, net	2,171,152	1,864,386
Interest receivable	10,440	7,209
Financial Liabilities:
Total Deposits	2,454,475	2,197,543
Fed funds purchased and securities sold under agreement to repurchase	54,206	29,268
Federal Home Loan Bank advances	125,761	24,305
Other borrowings	10,000	40,000
Subordinated notes, net of unamortized issuance costs	30,993	35,000
Interest payable	1,739	1,125
Level 1 [Member]
Financial Assets:
Cash and cash equivalents	84,409	180,823
Securities - available-for-sale	94,678	89,177
Financial Liabilities:
Total Deposits	532,794
Level 2 [Member]
Financial Assets:
Interest-bearing time deposits	4,440	10,933
Securities - available-for-sale	292,766	335,981
Financial Liabilities:
Total Deposits		473,689
Other borrowings	10,000	40,000
Subordinated notes, net of unamortized issuance costs	30,993	35,000
Level 3 [Member]
Financial Assets:
Securities - available-for-sale	3,345	4,773
Other securities	9,799	8,162
Loans held for sale	815	7,844
Loans, net	2,171,152	1,864,386
Interest receivable	10,440	7,209
Financial Liabilities:
Total Deposits	1,921,681	1,723,854
Fed funds purchased and securities sold under agreement to repurchase	54,206	29,268
Federal Home Loan Bank advances	125,761	24,305
Interest payable	1,739	1,125
Interest Bearing Deposits [Member] | Reported Value Measurement [Member]
Financial Liabilities:
Total Deposits	1,378,090	1,248,294
Interest Bearing Deposits [Member] | Fair Value [Member]
Financial Liabilities:
Total Deposits	1,377,944	1,248,044
Interest Bearing Deposits [Member] | Level 3 [Member]
Financial Liabilities:
Total Deposits	1,377,944	1,248,044
Non Interest Bearing Deposits [Member] | Reported Value Measurement [Member]
Financial Liabilities:
Total Deposits	532,794	473,689
Non Interest Bearing Deposits [Member] | Fair Value [Member]
Financial Liabilities:
Total Deposits	532,794	473,689
Non Interest Bearing Deposits [Member] | Level 1 [Member]
Financial Liabilities:
Total Deposits	532,794
Non Interest Bearing Deposits [Member] | Level 2 [Member]
Financial Liabilities:
Total Deposits		473,689
Time Deposits [Member] | Reported Value Measurement [Member]
Financial Liabilities:
Total Deposits	557,980	471,479
Time Deposits [Member] | Fair Value [Member]
Financial Liabilities:
Total Deposits	543,737	475,810
Time Deposits [Member] | Level 3 [Member]
Financial Liabilities:
Total Deposits	$ 543,737	$ 475,810

XML

Fair Value of Financial Instruments - Financial Assets Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Total Securities Available-for-Sale	$ 390,789	$ 429,931
Level 1 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Total Securities Available-for-Sale	94,678	89,177
Level 1 [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Total Securities Available-for-Sale	94,678	89,177
Level 2 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Total Securities Available-for-Sale	292,766	335,981
Level 2 [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Total Securities Available-for-Sale	292,766	335,981
Level 3 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Total Securities Available-for-Sale	3,345	4,773
Level 3 [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Total Securities Available-for-Sale	3,345	4,773
U.S. Treasury [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Total Securities Available-for-Sale	94,678	89,177
U.S. Treasury [Member] | Level 1 [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Total Securities Available-for-Sale	94,678	89,177
U.S. Government Agencies [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Total Securities Available-for-Sale	139,767	156,886
U.S. Government Agencies [Member] | Level 2 [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Total Securities Available-for-Sale	139,767	156,886
Mortgage-backed Securities [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Total Securities Available-for-Sale	86,927	117,927
Mortgage-backed Securities [Member] | Level 2 [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Total Securities Available-for-Sale	86,927	117,927
State and Local Governments [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Total Securities Available-for-Sale	69,417	65,941
State and Local Governments [Member] | Level 2 [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Total Securities Available-for-Sale	66,072	61,168
State and Local Governments [Member] | Level 3 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Total Securities Available-for-Sale	3,345	4,773
State and Local Governments [Member] | Level 3 [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Total Securities Available-for-Sale	$ 3,345	$ 4,773

XML

Fair Value of Financial Instruments - Changes in the Level 3 Fair Value Category of Unobservable Inputs (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
State and Local Governments Tax-Exempt [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	$ 2,307	$ 0
Change in Market Value	$ (76)	44
Fair Value, Asset, Recurring Basis, Unobservable Input Reconciliation, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration]	Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent
Purchases	$ 0	2,418
Sales	0	0
Payments & Maturities	(160)	0
Reclassification and Adjustments	0	(155)
Ending Balance	2,071	2,307
State and Local Governments Taxable[Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	2,466	1,562
Change in Market Value	$ (203)	(96)
Fair Value, Asset, Recurring Basis, Unobservable Input Reconciliation, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration]	Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent
Purchases	$ 0	1,000
Sales	0	0
Payments & Maturities	0	0
Reclassification and Adjustments	(989)	0
Ending Balance	1,274	2,466
State and Local Governments [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	4,773	1,562
Change in Market Value	$ (279)	(52)
Fair Value, Asset, Recurring Basis, Unobservable Input Reconciliation, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration]	Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent
Purchases	$ 0	3,418
Sales	0	0
Payments & Maturities	(160)	0
Reclassification and Adjustments	(989)	(155)
Ending Balance	$ 3,345	$ 4,773

XML

Fair Value of Financial Instruments - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Transfer of assets into or out of level 3	$ 1	$ 0
Transfer of liabilities into or out of level 3	1	0
Collateral dependent impaired loans categorized as Level 3	8,857,000	11,939,000
Specific allocation for collateral dependent impaired loans	1,996,000	2,184,000
Collateral Dependent [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Specific allocation for collateral dependent impaired loans	1,996,000	2,184,000
Level 3 [Member] | Collateral Dependent [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Collateral dependent impaired loans categorized as Level 3	$ 2,667,000	$ 8,527,000

XML

Fair Value of Financial Instruments - Collateral Dependent Impaired Loans and Other Real Estate (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total	$ 0	$ 159
Collateral Dependent Impaired Loans [Member] | Level 3 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total	2,667	8,527
Mortgage Servicing Rights [Member] | Level 3 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total		3,157
Other Real Estate Owned-Residential [Member] | Level 3 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total		99
Fair Value on Nonrecurring Basis [Member] | Collateral Dependent Impaired Loans [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total	2,667	8,527
Fair Value on Nonrecurring Basis [Member] | Collateral Dependent Impaired Loans [Member] | Level 3 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total	$ 2,667	8,527
Fair Value on Nonrecurring Basis [Member] | Mortgage Servicing Rights [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total		3,157
Fair Value on Nonrecurring Basis [Member] | Mortgage Servicing Rights [Member] | Level 3 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total		3,157
Fair Value on Nonrecurring Basis [Member] | Other Real Estate Owned-Residential [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total		99
Fair Value on Nonrecurring Basis [Member] | Other Real Estate Owned-Residential [Member] | Level 3 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total		$ 99

XML

Fair Value of Financial Instruments - Quantitative Information about Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements (Detail) $ in Thousands	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	$ 390,789	$ 429,931
Fair Value	0	159
State and Local Governments [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	69,417	65,941
Level 3 [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	3,345	4,773
Level 3 [Member] | State and Local Governments [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value	$ 3,345	$ 4,773
Valuation Technique	us-gaap:ValuationTechniqueDiscountedCashFlowMember	us-gaap:ValuationTechniqueDiscountedCashFlowMember
Unobservable Inputs	us-gaap:MeasurementInputDiscountRateMember	us-gaap:MeasurementInputDiscountRateMember
Level 3 [Member] | Collateral Dependent Impaired Loans [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Unobservable Inputs	us-gaap:MeasurementInputAppraisedValueMember	us-gaap:MeasurementInputAppraisedValueMember
Fair Value	$ 2,667	$ 8,527
Valuation Technique	us-gaap:MarketApproachValuationTechniqueMember	us-gaap:MarketApproachValuationTechniqueMember
Level 3 [Member] | Mortgage Servicing Rights [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value		$ 3,157
Valuation Technique		us-gaap:ValuationTechniqueDiscountedCashFlowMember
Unobservable Inputs		us-gaap:MeasurementInputDiscountRateMember
Level 3 [Member] | Minimum [Member] | State and Local Governments [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Discount rate	2.08	0.21
Level 3 [Member] | Minimum [Member] | Collateral Dependent Impaired Loans [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Discount rate	20.00	20.00
Level 3 [Member] | Minimum [Member] | Mortgage Servicing Rights [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Discount rate		1.94
Level 3 [Member] | Maximum [Member] | State and Local Governments [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Discount rate	5.01	1.77
Level 3 [Member] | Maximum [Member] | Collateral Dependent Impaired Loans [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Discount rate	29.01	53.95
Level 3 [Member] | Maximum [Member] | Mortgage Servicing Rights [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Discount rate		27.70
Level 3 [Member] | Weighted Average | State and Local Governments [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Discount rate	4.38	1.33
Level 3 [Member] | Weighted Average | Collateral Dependent Impaired Loans [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Discount rate	24.13	34.78
Level 3 [Member] | Weighted Average | Mortgage Servicing Rights [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Discount rate		18.44
Level 3 [Member] | Other Real Estate Owned-Residential [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair Value		$ 99
Valuation Technique		us-gaap:MarketApproachValuationTechniqueMember
Unobservable Inputs		us-gaap:MeasurementInputAppraisedValueMember
Discount rate		32.72
Level 3 [Member] | Other Real Estate Owned-Residential [Member] | Weighted Average
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Discount rate		32.72

XML

Condensed Financial Statements of Parent Company - Balance Sheets (Detail) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Assets
Interest-bearing time deposits	$ 4,442	$ 10,913
Related party receivables:
Total Assets	3,015,351	2,638,300
Liabilities
Other borrowings	10,000	40,000
Subordinated notes, net of unamortized issuance costs	34,586	34,471
Dividends payable	2,832	2,461
Total liabilities	2,717,211	2,341,133
Stockholders' Equity	298,140	297,167	$ 249,160	$ 230,258
Total Liabilities and Stockholders' Equity	3,015,351	2,638,300
Farmers & Merchants State Bank [Member]
Assets
Cash	16,901	19,293
Interest-bearing time deposits	498	1,234
Related party receivables:
Dividends and accounts receivable from subsidiary	2,114	4,636
Accrued interest receivable - municipals / interest bearing time deposits	38	43
Securities - municipals	7,460	9,027
Investment in subsidiaries	319,371	340,733
Total Assets	346,382	374,966
Liabilities
Other borrowings	10,000	40,000
Subordinated notes, net of unamortized issuance costs	34,586	34,471
Dividends payable	2,832	2,461
Accrued interest payable	618	743
Accrued expenses	206	124
Total liabilities	48,242	77,799
Stockholders' Equity	298,140	297,167
Total Liabilities and Stockholders' Equity	$ 346,382	$ 374,966

XML

Condensed Financial Statements of Parent Company - Statements of Income and Comprehensive Income (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Income
Interest - municipals / interest-bearing time deposits									$ 1,415	$ 1,170	$ 1,079
Loss on sales of available-for-sale securities										293	270
Total interest income	$ 29,492	$ 25,847	$ 23,911	$ 21,899	$ 22,423	$ 20,122	$ 17,530	$ 16,765	101,149	76,840	70,169
Expenses
Interest	6,935	3,264	2,047	2,116	2,388	1,672	1,554	1,728	14,362	7,342	10,393
Income Before Income Taxes	8,894	11,207	10,321	10,053	9,682	7,544	6,302	5,969	40,475	29,497	25,206
Income Taxes (Benefit)	1,706	2,253	2,050	1,951	1,999	1,624	1,319	1,060	7,960	6,002	5,111
Net Income	$ 7,188	$ 8,954	$ 8,271	$ 8,102	$ 7,683	$ 5,920	$ 4,983	$ 4,909	32,515	23,495	20,095
Other Comprehensive Income (Loss):
Comprehensive Income (Loss)									(2,534)	14,614	24,694
Farmers & Merchants State Bank [Member]
Income
Dividends from subsidiaries									44,285	23,200	8,800
Interest - municipals / interest-bearing time deposits									308	253	382
Loss on sales of available-for-sale securities										293
Total interest income									44,593	23,746	9,182
Expenses
Interest									1,588	743
Operating expenses									1,176	1,335	923
Total expenses									2,764	2,078	923
Income Before Income Taxes									41,829	21,668	8,259
Income Taxes (Benefit)									(535)	(347)	(184)
Income from operation before equity in undistributed earnings of subsidiary									42,364	22,015	8,443
Equity in undistributed earnings of subsidiaries									(9,849)	1,480	11,652
Net Income									32,515	23,495	20,095
Other Comprehensive Income (Loss):
Unrealized gains (losses) on securities, net of taxes									(35,049)	(8,881)	4,599
Comprehensive Income (Loss)									$ (2,534)	$ 14,614	$ 24,694

XML

Condensed Financial Statements of Parent Company - Statements of Cash Flows (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Cash Flows from Operating Activities
Net income	$ 32,515	$ 23,495	$ 20,095
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of premiums on available-for-sale securities, net	2,090	2,203	1,289
Amortization of subordinated note issuance costs	115	50
Stock-based compensation expense	899	822	1,024
Director stock awards	120	73	48
Gain on sales of available-for-sale securities		(293)	(270)
Changes in assets and liabilities:
Other assets and liabilities	(5,265)	3,169	(573)
Net cash provided by operating activities	40,669	34,741	27,382
Activity in available-for-sale securities:
Maturities, prepayments and calls	31,064	56,310	91,003
Sales		9,292	11,843
Purchases	(38,377)	(170,629)	(183,563)
Activity in certificates of deposit
Net cash used in investing activities	(389,904)	(265,694)	(177,724)
Cash Flows from Financing Activities
Proceeds (repayments) of other borrowings	(30,000)	40,000
Purchase of treasury stock	(308)	(338)	(383)
Proceeds from issuance of subordinated notes		34,421
Payment of dividends	(10,276)	(7,670)	(7,186)
Net cash provided by financing activities	252,821	236,070	274,752
Net Increase (Decrease) in Cash and Cash Equivalents	(96,414)	5,117	124,410
Cash and Cash Equivalents - Beginning of Year	180,823	175,706	51,296
Cash and Cash Equivalents - End of Year	84,409	180,823	175,706
Farmers & Merchants State Bank [Member]
Cash Flows from Operating Activities
Net income	32,515	23,495	20,095
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income	9,849	(1,480)	(11,652)
Amortization of premiums on available-for-sale securities, net	61	81	154
Amortization of subordinated note issuance costs	116	49
Stock-based compensation expense	899	822	1,024
Director stock awards	120	73	48
Gain on sales of available-for-sale securities		(293)
Changes in assets and liabilities:
Other assets and liabilities	2,560	(456)	1,742
Net cash provided by operating activities	46,120	22,291	11,411
Activity in available-for-sale securities:
Maturities, prepayments and calls	1,540	795	385
Sales		7,773
Purchases	(398)		(745)
Activity in certificates of deposit
Maturities	1,234	493
Purchases	(498)
Acquisition, net of cash received	(9,806)	(79,235)
Net cash used in investing activities	(7,928)	(70,174)	(360)
Cash Flows from Financing Activities
Proceeds (repayments) of other borrowings	(30,000)	35,000
Purchase of treasury stock	(308)	(338)	(383)
Proceeds from issuance of subordinated notes		34,421
Payment of dividends	(10,276)	(7,670)	(7,186)
Net cash provided by financing activities	(40,584)	61,413	(7,569)
Net Increase (Decrease) in Cash and Cash Equivalents	(2,392)	13,530	3,482
Cash and Cash Equivalents - Beginning of Year	19,293	5,763	2,281
Cash and Cash Equivalents - End of Year	$ 16,901	$ 19,293	$ 5,763

XML

Quarterly Financial Data - Summary of Quarterly Financial Data (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2022	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Summary of Income:
Interest income	$ 29,492	$ 25,847	$ 23,911	$ 21,899	$ 22,423	$ 20,122	$ 17,530	$ 16,765	$ 101,149	$ 76,840	$ 70,169
Interest expense	6,935	3,264	2,047	2,116	2,388	1,672	1,554	1,728	14,362	7,342	10,393
Net Interest Income Before Provision for Loan Losses	22,557	22,583	21,864	19,783	20,035	18,450	15,976	15,037	86,787	69,498	59,776
Provision for loan loss	755	1,637	1,628	580	444	659	641	1,700	4,600	3,444	6,981
Net Interest Income After Provision for Loan Losses	21,802	20,946	20,236	19,203	19,591	17,791	15,335	13,337	82,187	66,054	52,795
Other income (expense)	(12,908)	(9,739)	(9,915)	(9,150)	(9,909)	(10,247)	(9,033)	(7,368)
Income Before Income Taxes	8,894	11,207	10,321	10,053	9,682	7,544	6,302	5,969	40,475	29,497	25,206
Income Taxes	1,706	2,253	2,050	1,951	1,999	1,624	1,319	1,060	7,960	6,002	5,111
Net Income	$ 7,188	$ 8,954	$ 8,271	$ 8,102	$ 7,683	$ 5,920	$ 4,983	$ 4,909	$ 32,515	$ 23,495	$ 20,095
Earnings per Common Share, Basic	$ 0.53	$ 0.68	$ 0.63	$ 0.62	$ 0.59	$ 0.53	$ 0.44	$ 0.44	$ 2.46	$ 2.01	$ 1.80
Earnings per Common Share, Diluted	$ 0.53	$ 0.68	$ 0.63	$ 0.62	$ 0.59	$ 0.53	$ 0.44	$ 0.44	$ 2.46	$ 2.01	$ 1.80
Average common shares outstanding	13,606,876	12,983,307	12,957,126	12,955,107	13,046,299	11,209,732	11,191,043	11,197,012	13,091,422	11,570,218	11,061,391

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Subsequent Events - Additional Information (Detail) - shares	Jan. 24, 2023	Dec. 31, 2022	Dec. 31, 2021
Subsequent Event [Line Items]
Common stock, shares outstanding		14,564,425	14,063,999
Maximum [Member] | Subsequent Event [Member] | Board of Directors [Member]
Subsequent Event [Line Items]
Common stock, shares outstanding	650,000