10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period March 31, 2016

or

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

For the transition period from                      to                     

Commission File Number 0-14492

FARMERS & MERCHANTS BANCORP, INC.

(Exact name of registrant as specified in its charter)

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)

(419) 446-2501

Registrant’s telephone number, including area code

(Former name, former address and former fiscal year, if changed since last report.)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

Indicate the number of shares of each of the issuers’ classes of common stock, as of the latest practicable date:

Common Stock, No Par Value	4,605,534
Class		Outstanding as of April 22, 2016

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10Q

FARMERS & MERCHANTS BANCORP, INC.

INDEX

Form 10-Q Items		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets- March 31, 2016 and December 31, 2015		3
	Condensed Consolidated Statements of Income & Comprehensive Income - Three Months Ended March 31, 2016 and March 31, 2015		4
	Condensed Consolidated Statements of Cash Flows- Three Months Ended March 31, 2016 and March 31, 2015		5
	Notes to Condensed Consolidated Financial Statements		6-31
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		31-44
Item 3.	Qualitative and Quantitative Disclosures About Market Risk		44-45
Item 4.	Controls and Procedures		45
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		45
Item 1A.	Risk Factors		46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		46
Item 3.	Defaults Upon Senior Securities		46
Item 4.	Mine Safety Disclosures		46
Item 5.	Other Information		46
Item 6.	Exhibits		46
Signatures			48
Exhibit 31.	Certifications Under Section 302
Exhibit 32.	Certifications Under Section 906
101.INS	XBRL Instance Document (1)
101.SCH	XBRL Taxonomy Extension Schema Document (1)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB	XBRL Taxonomy Extension Laabel Linkbase Document (1)
101.PRE	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.

2

ITEM 1 FINANCIAL STATEMENTS

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	(in thousands of dollars)
	March 31, 2016			December 31, 2015
	(Unaudited)
Assets
Cash and due from banks	$	25,205		$	21,333
Federal funds sold		703			685
Total cash and cash equivalents		25,908			22,018
Interest-bearing time deposits		1,960			—
Securities - available-for-sale		226,512			235,115
Other securities, at cost		3,717			3,717
Loans, net		701,375			679,821
Premises and equipment		20,872			20,587
Goodwill		4,074			4,074
Mortgage servicing rights		2,108			2,056
Other real estate owned		1,061			1,175
Other assets		21,481			20,505
Total Assets	$	1,009,068		$	989,068
Liabilities and Stockholders’ Equity
Liabilities
Deposits
Noninterest-bearing	$	163,769		$	171,112
Interest-bearing
NOW accounts		208,928			190,890
Savings		240,713			225,052
Time		184,722			184,285
Total deposits		798,132			771,339
Federal Funds purchased and securities sold under agreements to repurchase		69,390			78,815
Federal Home Loan Bank (FHLB) advances		10,000			10,000
Dividend payable		1,005			1,007
Accrued expenses and other liabilities		7,858			7,810
Total liabilities		886,385			868,971
Commitments and Contingencies
Stockholders’ Equity
Common stock - No par value - 6,500,000 shares authorized 5,200,000 shares issued and outstanding		12,181			12,086
Treasury Stock - 594,466 shares 2016, 587,466 shares 2015		(12,583	)		(12,389	)
Retained earnings		121,664			120,188
Accumulated other comprehensive income		1,421			212
Total stockholders’ equity		122,683			120,097
Total Liabilities and Stockholders’ Equity	$	1,009,068		$	989,068

See Notes to Condensed Consolidated Unaudited Financial Statements.

Note: The December 31, 2015, Condensed Consolidated Balance Sheet has been derived from the audited Consolidated Balance Sheet as of that date.

3

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME

(Unaudited)

Condensed Consolidated Statements of Income & Comprehensive Income

(in thousands of dollars, except per share data)

	Three Months Ended
	March 31, 2016			March 31, 2015
Interest Income
Loans, including fees	$	8,006		$	7,094
Debt securities:
U.S. Treasury and government agencies		580			596
Municipalities		369			447
Dividends		38			37
Federal funds sold		—			2
Other		11			8
Total interest income		9,004			8,184
Interest Expense
Deposits		854			797
Federal funds purchased and securities sold under agreements to repurchase		105			61
Borrowed funds		37			—
Total interest expense		996			858
Net Interest Income - Before Provision for Loan Losses		8,008			7,326
Provision for Loan Losses		277			114
Net Interest Income After Provision
For Loan Losses		7,731			7,212
Noninterest Income
Customer service fees		1,478			1,359
Other service charges and fees		910			914
Net gain on sale of loans		169			175
Net gain on sale of available for sale securities		113			109
Total noninterest income		2,670			2,557
Noninterest Expense
Salaries and Wages		2,840			2,655
Employee benefits		862			1,064
Net occupancy expense		378			355
Furniture and equipment		412			422
Data processing		411			329
Franchise taxes		214			187
Net loss on sale of other assets owned		45			6
FDIC Assessment		121			119
Mortgage servicing rights amortization		89			80
Other general and administrative		1,614			1,348
Total other operating expenses		6,986			6,565
Income Before Income Taxes		3,415			3,204
Income Taxes		934			853
Net Income		2,481			2,351
Other Comprehensive Income (Net of Tax):
Net unrealized gain on available for sale securities		1,945			1,730
Reclassification adjustment for gain on sale of available for sale securities		(113	)		(109	)
Net unrealized gain on available for sale securities		1,832			1,621
Tax expense		623			551
Other comprehensive income		1,209			1,070
Comprehensive Income	$	3,690		$	3,421
Earnings Per Share - Basic and Diluted	$	0.54		$	0.51
Dividends Declared	$	0.22		$	0.21
See Notes to Condensed Consolidated Unaudited Financial Statements

4

FARMERS & MERCHANTS BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Condensed Consolidated Statements of Cash Flows
	(in thousands of dollars)
	Three Months Ended
	March 31, 2016			March 31, 2015
Cash Flows from Operating Activities
Net income	$	2,481		$	2,351
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		367			390
Accretion and amortization of available for sale securities, net		274			294
Amortization of servicing rights		89			80
Amortization of core deposit intangible		81			81
Compensation expense related to stock awards		104			78
Provision for loan loss		277			114
Gain on sale of loans held for sale		(169	)		(175	)
Originations of loans held for sale		(12,010	)		(9,199	)
Proceeds from sale of loans held for sale		12,426			9,658
Loss on sale of other assets		45			6
Gain on sales of securities available for sale		(113	)		(109	)
Change in other assets and other liabilities, net		(1,545	)		(1,701	)
Net cash provided by operating activities		2,307			1,868
Cash Flows from Investing Activities
Activity in securities:
Maturities, prepayments and calls		4,230			1,790
Sales		17,453			16,301
Purchases		(11,408	)		(14,233	)
Net change in interest-bearing time deposits		(1,960	)		—
Proceeds from sales of assets		1			1
Additions to premises and equipment		(653	)		(88	)
Loan originations and principal collections, net		(22,247	)		6,716
Net cash provided by (used in) investing activities		(14,584	)		10,487
Cash Flows from Financing Activities
Net change in deposits		26,793			14,127
Net change in federal funds purchased and securities sold under agreements to repurchase		(9,425	)		(4,221	)
Purchase of Treasury Stock		(194	)		(490	)
Cash dividends paid on common stock		(1,007	)		(965	)
Net cash provided by financing activities		16,167			8,451
Net Increase in Cash and Cash Equivalents		3,890			20,806
Cash and cash equivalents - Beginning of year		22,018			24,295
Cash and cash equivalents - End of period	$	25,908		$	45,101
Supplemental Information
Cash paid during the year for:
Interest	$	958		$	852
Income taxes	$	746		$	520
Noncash investing activities:
Transfer of loans to other real estate owned	$	—		$	46
See Notes to Condensed Consolidated Unaudited Financial Statements.

5

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

NOTE 1 BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10Q and Rule 10-01 of Regulation S-X; accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that are expected for the year ended December 31, 2016. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2015.

NOTE 2 ASSET PURCHASES

The Company recognized core deposit intangible assets of $1.09 million with the purchase of the Hicksville office on July 9, 2010. These are being amortized over an estimated remaining economic useful life of the deposits of 7 years on a straight line basis.

An office was purchased on December 13, 2013 in Custar, Ohio. Core deposit intangible assets of $1.17 million were recognized and are being amortized over its remaining economic useful life of the deposits of 7 years on a straight line basis.

The amortization expense for the year ended December 31, 2015 was $323 thousand. Of the $322 thousand to be expensed in 2016, $81 thousand has been expensed for the three months ended March 31, 2016. $81 thousand was also expensed for the three months ended March 31, 2015.

	Hicksville		Custar		Total
2016	$	155	$	167	$	322
2017		78		167		245
2018		—		167		167
2019		—		167		167
2020		—		161		161
Thereafter		—		—		—
	$	233	$	829	$	1,062

6

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 3 SECURITIES

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

	(In Thousands)
	March 31, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available-for-Sale:
U.S. Treasury	$	33,696	$	56	$	(31	)	$	33,721
U.S. Government agencies		102,437		420		(43	)		102,814
Mortgage-backed securities		24,787		372		(12	)		25,147
State and local governments		63,439		1,420		(29	)		64,830
Total available-for-sale securities	$	224,359	$	2,268	$	(115	)	$	226,512
	(In Thousands)
	December 31, 2015
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available-for-Sale:
U.S. Treasury	$	38,778	$	36	$	(309	)	$	38,505
U.S. Government agencies		99,000		55		(835	)		98,220
Mortgage-backed securities		26,157		283		(116	)		26,324
State and local governments		70,858		1,290		(82	)		72,066
Total available-for-sale securities	$	234,793	$	1,664	$	(1,342	)	$	235,115

Investment securities will at times depreciate to an unrealized loss position. The Company 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 an other than temporary impairment.

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 Company currently does not hold any securities with other than temporary impairment.

7

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 3 SECURITIES (Continued)

Information pertaining to securities with gross unrealized losses at March 31, 2016 and December 31, 2015, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

	(In Thousands)
	March 31, 2016
	Less Than Twelve Months					Twelve Months & Over
	Gross Unrealized			Fair		Gross Unrealized			Fair
	Losses			Value		Losses			Value
U.S. Treasury	$	(31	)	$	19,510	$	—		$	—
U.S. Government agencies		(11	)		7,984		(32	)		4,969
Mortgage-backed securities		(12	)		4,953		—			—
State and local governments		(19	)		1,034		(10	)		1,220
Total available-for-sale securities	$	(73	)	$	33,481	$	(42	)	$	6,189
	(In Thousands)
	December 31, 2015
	Less Than Twelve Months					Twelve Months & Over
	Gross Unrealized			Fair		Gross Unrealized			Fair
	Losses			Value		Losses			Value
U.S. Treasury	$	(142	)	$	23,241	$	(167	)	$	10,195
U.S. Government agencies		(635	)		68,957		(200	)		9,793
Mortgage-backed securities		(60	)		6,331		(56	)		3,580
State and local governments		(54	)		7,920		(28	)		1,725
Total available-for-sale securities	$	(891	)	$	106,449	$	(451	)	$	25,293

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. Additionally, the decline in value is primarily due to changes in interest rates since the securities were purchased. The fair value is expected to recover as the bonds approach the maturity date.

Below are the gross realized gains and losses as of March 31 for each of the years presented.

	(In Thousands)
	2016			2015
Gross realized gains	$	123		$	109
Gross realized losses		(10	)		—
Net realized gains	$	113		$	109
Tax expense related to net realized gain	$	38		$	37

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 tax expense in the condensed consolidated statements of income and comprehensive income.

8

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 3 SECURITIES (Continued)

The amortized cost and fair value of debt securities at March 31, 2016, 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	$	7,679	$	7,722
After one year through five years		152,418		153,383
After five years through ten years		32,591		33,145
After ten years		6,884		7,115
Total	$	199,572	$	201,365
Mortgage-backed securities		24,787		25,147
Total	$	224,359	$	226,512

Investments with a carrying value of $197.1 million and $189.3 million at March 31, 2016 and December 31, 2015, respectively, were pledged to secure public deposits and securities sold under repurchase agreements.

Other securities include Federal Home Loan Bank of Cincinnati and Farmer Mac stock as of March 31, 2016 and December 31, 2015.

NOTE 4 LOANS

The Company had $1.1 million in loans held for sale at March 31, 2016 as compared to $1.2 million in loans held for sale at December 31, 2015. Due to materiality, these loans are included in the Consumer Real Estate and Agricultural Real Estate loan numbers.

Loan balances as of March 31, 2016 and December 31, 2015:

	(In Thousands)
Loans:	March 31, 2016			December 31, 2015
Consumer Real Estate	$	88,365		$	88,189
Agricultural Real Estate		59,533			58,525
Agricultural		77,909			82,654
Commercial Real Estate		345,223			322,762
Commercial and Industrial		102,892			100,125
Consumer		27,995			27,770
Industrial Development Bonds		6,420			6,491
		708,337			686,516
Less: Net deferred loan fees and costs		(677	)		(638	)
		707,660			685,878
Less: Allowance for loan losses		(6,285	)		(6,057	)
Loans - Net	$	701,375		$	679,821

9

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 4 LOANS (Continued)

The following is a maturity schedule by major category of loans as of March 31, 2016:

	Maturities (In Thousands)
	Within One Year		After One Year Within Five Years		After Five Years
Consumer Real Estate	$	1,033	$	12,132	$	75,200
Agricultural Real Estate		955		3,569		55,009
Agricultural		48,960		23,832		5,117
Commercial Real Estate		14,434		77,031		253,758
Commercial and Industrial		50,820		31,829		20,243
Consumer		5,186		17,525		5,284
Industrial Development Bonds		1,300		185		4,935

The distribution of fixed rate loans and variable rate loans by major loan category is as follows as of March 31, 2016. Variable rate loans whose current rates are equal to their floor or ceiling are classified as fixed in this table.

	(In Thousands)
	Fixed		Variable
	Rate		Rate
Consumer Real Estate	$	55,792	$	32,573
Agricultural Real Estate		43,422		16,111
Agricultural		45,761		32,148
Commercial Real Estate		224,647		120,576
Commercial and Industrial		60,300		42,592
Consumer		23,957		4,038
Industrial Development Bonds		6,290		130

As of March 31, 2016 and December 31, 2015 one to four family residential mortgage loans amounting to $18.8 and $20.0 million, respectively, have been pledged as security for future loans the Bank has received from the Federal Home Loan Bank.

Unless listed separately, Industrial Development Bonds are included in the commercial and industrial category for the remainder of the tables in this Note 4.

10

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 4 LOANS (Continued)

The following table represents the contractual aging of the recorded investment in past due loans by portfolio classification of loans as of March 31, 2016 and December 31, 2015, net of deferred loan fees and costs:

March 31, 2016	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	$	621	$	156	$	443	$	1,220	$	86,877	$	88,097	$	0
Agricultural Real Estate		—		57		162		219		59,260		59,479		—
Agricultural		—		3		—		3		78,018		78,021		—
Commercial Real Estate		148		—		422		570		344,091		344,661		—
Commercial and Industrial		—		—		19		19		109,367		109,386		—
Consumer		37		10		4		51		27,965		28,016		—
Total	$	806	$	226	$	1,050	$	2,082	$	705,578	$	707,660	$	0
December 31, 2015	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	$	303	$	47	$	357	$	707	$	87,240	$	87,947	$	0
Agricultural Real Estate		—		—		162		162		58,301		58,463		—
Agricultural		—		145		—		145		82,617		82,762		—
Commercial Real Estate		236		—		841		1,077		321,153		322,230		—
Commercial and Industrial		51		—		20		71		106,618		106,689		—
Consumer		19		9		—		28		27,759		27,787		—
Total	$	609	$	201	$	1,380	$	2,190	$	683,688	$	685,878	$	0

11

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 4 LOANS (Continued)

The following table presents the recorded investment in nonaccrual loans by class of loans as of March 31, 2016 and December 31, 2015:

	(In Thousands)
	March 31,		December 31,
	2016		2015
Consumer Real Estate	$	1,196	$	1,155
Agricultural Real Estate		162		162
Agricultural		—		—
Commercial Real Estate		422		484
Commercial		200		202
Consumer		23		38
Total	$	2,003	$	2,041

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

Commercial Real Estate – Construction, purchase, and refinance of business purpose real estate. Risks discussed during the approval process include construction delays and overruns, vacancies, collateral value subject to market value fluctuations, interest rate, market demands, borrower’s ability to repay in a timely 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.

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.

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.

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.

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 federal crop insurance.

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 others.

Industrial Development Bonds – Funds for public improvements in the Bank’s service area. Repayment ability is based on the continuance of the taxation revenue as the source of repayment.

12

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 4 LOANS (Continued)

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 Risk Management Association 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 grade is summarized by high liquidity, minimum risk, strong ratios, and low handling costs.

3. Two (2) Good. Desirable loans of somewhat less stature than Grade 1, but with strong financial statements. Loan supported by financial statements containing strong balance sheets, generally with a leverage position less than 1.50, 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. Generally, customers should have a leverage position less than 2.00. May be some weakness but with offsetting features of other support readily available. Loans that are meeting the terms of repayment.

Loans may be graded 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 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 the credit weaknesses is observed, a lower risk grade is warranted.

5. Four (4) Satisfactory / Monitored. A “4” (Satisfactory/Monitored) risk grade 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 deserves 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.

13

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 4 LOANS (Continued)

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.

14

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 4 LOANS (Continued)

The following table represents the risk category of loans by portfolio class, net of deferred fees and costs, based on the most recent analysis performed as of March 31, 2016 and December 31, 2015:

	(In Thousands)
	Agricultural Real Estate		Agricultural		Commercial Real Estate		Commercial and Industrial		Industrial Development Bonds
March 31, 2016
1-2	$	5,912	$	9,251	$	536	$	509	$	—
3		17,289		23,093		27,635		21,747		3,073
4		35,750		45,467		312,972		79,918		3,347
5		110		192		1,284		52		—
6		361		—		1,812		559		—
7		57		18		422		181		—
8		—		—		—		—		—
Total	$	59,479	$	78,021	$	344,661	$	102,966	$	6,420
	Agricultural Real Estate		Agricultural		Commercial Real Estate		Commercial and Industrial		Industrial Development Bonds
December 31, 2015
1-2	$	5,841	$	12,025	$	597	$	261	$	—
3		16,593		21,247		24,264		22,300		3,100
4		35,475		49,220		293,381		76,855		3,391
5		192		250		1,738		57		—
6		362		—		1,828		543		—
7		—		20		422		182		—
8		—		—		—		—		—
Total	$	58,463	$	82,762	$	322,230	$	100,198	$	6,491

15

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 4 LOANS (Continued)

For consumer residential real estate, and other, 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 March 31, 2016 and December 31, 2015.

	(In Thousands)
	Consumer Real Estate		Consumer Real Estate
	March 31, 2016		December 31, 2015
Grade
Pass	$	87,257	$	87,292
Special Mention (5)		—		48
Substandard (6)		330		332
Doubtful (7)		510		275
Total	$	88,097	$	87,947

	(In Thousands)
	Consumer—Credit				Consumer —Other
	March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015
Performing	$	3,587	$	3,901	$	24,408	$	23,863
Nonperforming		—		—		21		23
Total	$	3,587	$	3,901	$	24,429	$	23,886

Information about impaired loans as of March 31, 2016, December 31, 2015 and March 31, 2015 are as follows:

	March 31, 2016		December 31, 2015		March 31, 2015
Impaired loans without a valuation allowance	$	1,042	$	1,257	$	624
Impaired loans with a valuation allowance		1,169		879		1,619
Total impaired loans	$	2,211	$	2,136	$	2,243
Valuation allowance related to impaired loans	$	426	$	330	$	428
Total non-accrual loans	$	2,003	$	2,041	$	2,424
Total loans past-due ninety days or more and still accruing	$	—	$	—	$	—
Quarter ended average investment in impaired loans	$	2,130	$	2,207	$	1,958
Year to date average investment in impaired loans	$	2,130	$	2,509	$	1,958

No additional funds are committed to be advanced in connection with impaired loans.

16

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 4 LOANS (Continued)

The Bank had approximately $1.1 million of its impaired loans classified as troubled debt restructured (TDR) as of March 31, 2016, $1.1 million as of December 31, 2015 and $1.3 million as of March 31, 2015. During the first quarter 2016, one new loan was considered TDR. This loan is making interest-only payments.

The following table represents three months ended March 31, 2016.

Three Months March 31, 2016 Troubled Debt Restructurings	Number of Contracts Modified in the Last 3 Months		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial Real Estate		—	$	—	$	—
Commercial and Industrial		—		—		—
Consumer Real Estate		1		138		138

The following table represents three months ended March 31, 2015.

Three Months March 31, 2015 Troubled Debt Restructurings	Number of Contracts Modified in the Last 3 Months		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial Real Estate		1	$	528	$	430
Commercial and Industrial		1		28		24
Consumer Real Estate		—		—		—

For the three month period ended March 31, 2016 and 2015, there were no TDRs that subsequently defaulted after modification.

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.

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-off in whole or in part is realized when unsecured consumer loans, credit card credits and overdraft lines of credit reach 90 days delinquency. At 120 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. Commercial and agricultural credits are charged down 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.

17

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 4 LOANS (Continued)

The following tables present loans individually evaluated for impairment by class of loans for three months ended March 31, 2016 and March 31, 2015.

	(In Thousands)
Three Months Ended March 31, 2016	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	$	365	$	365	$	—	$	156	$	3	$	3
Agricultural Real Estate		162		162		—		162		—		—
Agricultural		—		—		—		—		—		—
Commercial Real Estate		515		515		—		409		8		7
Commercial and Industrial		—		—		—		454		6		—
Consumer		—		—		—		—		—		—
With a specific allowance recorded:
Consumer Real Estate		509		628		104		307		1		—
Agricultural Real Estate		57		57		57		38		1		—
Agricultural		—		—		—		—		—		—
Commercial Real Estate		422		422		152		422		—		—
Commercial and Industrial		181		239		113		182		—		—
Consumer		—		—		—		—		—		—
Totals:
Consumer Real Estate	$	874	$	993	$	104	$	463	$	4	$	3
Agricultural Real Estate	$	219	$	219	$	57	$	200	$	1	$	—
Agricultural	$	—	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate	$	937	$	937	$	152	$	831	$	8	$	7
Commercial and Industrial	$	181	$	239	$	113	$	636	$	6	$	—
Consumer	$	—	$	—	$	—	$	—	$	—	$	—

18

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 4 LOANS (Continued)

Three Months Ended March 31, 2015	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	$	157	$	157	$	—	$	173	$	—	$	—
Agricultural Real Estate		—		—		—		—		—		—
Agricultural		—		—		—		—		—		—
Commercial Real Estate		—		—		—		—		—		—
Commercial and Industrial		467		467		—		469		7		—
Consumer		—		—		—		—		—		—
With a specific allowance recorded:
Consumer Real Estate		96		96		35		96		3		3
Agricultural Real Estate		—		—		—		—		—		—
Agricultural		24		24		24		24		—		—
Commercial Real Estate		1,139		1,139		131		852		—		—
Commercial and Industrial		360		360		238		337		—		—
Consumer		—		—		—		7		—		—
Totals:
Consumer Real Estate	$	253	$	253	$	35	$	269	$	3	$	3
Agricultural Real Estate	$	—	$	—	$	—	$	—	$	—	$	—
Agricultural	$	24	$	24	$	24	$	24	$	—	$	—
Commercial Real Estate	$	1,139	$	1,139	$	131	$	852	$	—	$	—
Commercial and Industrial	$	827	$	827	$	238	$	806	$	7	$	—
Consumer	$	—	$	—	$	—	$	7	$	—	$	—

As of March 31, 2016, the Company had $456 thousand of foreclosed residential real estate property obtained by physical possession and $568 thousand of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process according to local jurisdictions.

The Allowance for Loan and Lease Losses (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.

	(In Thousands)
	Three Months Ended March 31, 2016			Twelve Months Ended December 31, 2015
Allowance for Loan & Lease Losses
Balance at beginning of year	$	6,057		$	5,905
Provision for loan loss		277			625
Loans charged off		(84	)		(1,030	)
Recoveries		35			557
Allowance for Loan & Lease Losses	$	6,285		$	6,057
Allowance for Unfunded Loan Commitments & Letters of Credit	$	220		$	208
Total Allowance for Credit Losses	$	6,505		$	6,265

19

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 4 LOANS (Continued)

The Company segregates its 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, net asset line. The ACL presented above represents the full amount of reserves available to absorb possible credit losses.

[Remainder of this page intentionally left blank]

20

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 4 LOANS (Continued)

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

Additional analysis related to the allowance for credit losses for three months ended March 31, 2016 and March 31, 2015 is as follows:

	Consumer Real Estate		Agricultural Real Estate		Agricultural			Commercial Real Estate			Commercial and Industrial			Consumer			Unfunded Loan Commetment & Letters of Credit		Unallocated			Total
Three Months Ended March 31, 2016
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	338	$	211	$	582		$	2,516		$	1,229		$	337		$	208	$	844		$	6,265
Charge Offs		—		—		—			(3	)		(20	)		(61	)		—		—			(84	)
Recoveries		2		—		4			1			3			25			—		—			35
Provision (Credit)		117		61		(38	)		164			39			34			—		(100	)		277
Other Non-interest expense related to unfunded		—		—		—			—			—			—			12		—			12
Ending Balance	$	457	$	272	$	548		$	2,678		$	1,251		$	335		$	220	$	744		$	6,505
Ending balance: individually evaluated for impairment	$	104	$	57	$	—		$	152		$	113		$	—		$	—	$	—		$	426
Ending balance: collectively evaluated for impairment	$	353	$	215	$	548		$	2,526		$	1,138		$	335		$	220	$	744		$	6,079
Ending balance: loans acquired with deteriorated credit quality	$	1		—		—			—			—			—			—		—		$	1
FINANCING RECEIVABLES:
Ending balance	$	88,097	$	59,479	$	78,021		$	344,661		$	109,386		$	28,016		$	—	$	—		$	707,660
Ending balance: individually evaluated for impairment	$	874	$	219	$	—		$	937		$	181		$	—		$	—	$	—		$	2,211
Ending balance: collectively evaluated for impairment	$	87,223	$	59,260	$	78,021		$	343,724		$	109,205		$	28,016		$	—	$	—		$	705,449
Ending balance: loans acquired with deteriorated credit quality	$	502	$	—	$	—		$	—		$	—		$	—		$	—	$	—		$	502

21

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 4 LOANS (Continued)

	Consumer Real Estate			Agricultural Real Estate		Agricultural			Commercial Real Estate			Commercial and Industrial			Consumer			Unfunded Loan Commitment & Letters of Credit			Unallocated		Total
Three Months Ended March 31, 2015
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	537		$	184	$	547		$	2,367		$	1,421		$	323		$	207		$	526	$	6,112
Charge Offs		—			—		—			—			—			(92	)		—			—		(92	)
Recoveries		2			—		1			1			5			41			—			—		50
Provision (Credit)		(42	)		3		(24	)		(156	)		(7	)		12			—			328		114
Other Non-interest expense related to unfunded		—			—		—			—			—			—			(5	)		—		(5	)
Ending Balance	$	497		$	187	$	524		$	2,212		$	1,419		$	284		$	202		$	854	$	6,179
Ending balance: individually evaluated for impairment	$	35		$	—	$	24		$	131		$	238		$	—		$	—		$	—	$	428
Ending balance: collectively evaluated for impairment	$	462		$	187	$	500		$	2,081		$	1,181		$	284		$	202		$	854	$	5,751
Ending balance: loans acquired with deteriorated credit quality	$	1			—		—			—			—			—			—			—	$	1
FINANCING RECEIVABLES:
Ending balance	$	97,019		$	51,396	$	71,571		$	271,201		$	99,895		$	23,627		$	—		$	—	$	614,709
Ending balance: individually evaluated for impairment	$	253		$	—	$	24		$	1,139		$	827		$	—		$	—		$	—	$	2,243
Ending balance: collectively evaluated for impairment	$	96,766		$	51,396	$	71,547		$	270,062		$	99,068		$	23,627		$	—		$	—	$	612,466
Ending balance: loans acquired with deteriorated credit quality	$	520		$	—	$	—		$	—		$	—		$	—		$	—		$	—	$	520

22

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 5 EARNINGS PER SHARE

Basic earnings per share are 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 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.

	Three Months Ended
	March 31			March 31
	2016			2015
Earnings per share
Net income	$	2,481		$	2,351
Less: distributed earnings allocated to participating securities		(8	)		(7	)
Less: undistributed earnings allocated to participating securities		(13	)		(10	)
Net earnings available to common shareholders	$	2,460		$	2,334
Weighted average common shares outstanding including participating securities		4,609,226			4,623,322
Less: average unvested restricted shares		(38,670	)		(32,923	)
Weighted average common shares outstanding		4,570,556			4,590,399
Basic earnings and diluted per share	$	0.54		$	0.51

NOTE 6 FAIR VALUE OF INSTRUMENTS

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

Cash and Cash Equivalents

The carrying amounts reported in the balance sheet for cash, cash equivalents and federal funds sold approximate their fair values. Also included in this line item are the carrying amounts of interest-bearing deposits maturing within ninety days which approximate their fair values. Fair values of other interest-bearing deposits are estimated using discounted cash flow analyses based on current rates for similar types of deposits.

23

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 6 FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

Interest Bearing Time Deposits

Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow analysis that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Securities – Available-for-sale

Fair values for securities, excluding Federal Home Loan Bank and Farmer Mac stock, are based on quoted market price, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

Other Securities

The carrying value of Federal Home Loan Bank and Farmer Mac stock, listed as “other securities”, approximates fair value based on the redemption provisions of the Federal Home Loan Bank.

Loans, net

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

Deposits

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

Federal Funds Purchased and Securities Sold Under Agreements to Repurchase

The carrying value of federal funds purchased and securities sold under agreements to repurchase approximates fair values.

Accrued Interest Receivable and Payable

The carrying amounts of accrued interest approximate their fair values.

Dividends Payable

The carrying amounts of dividends payable approximate their fair values and are generally paid within forty days of declaration.

Off Balance Sheet Financial Instruments

Fair values for off-balance sheet, credit related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counter-parties’ credit standing.

24

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 6 FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

The estimated fair values, and related carrying or notional amounts, for on and off-balance sheet financial instruments as of March 31, 2016 and December 31, 2015 are reflected below.

	(In Thousands)
	March 31, 2016
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and Cash Equivalents	$	25,908	$	25,908	$	25,908	$	—	$	—
Interest-bearing time deposits		1,960		1,960		—		1,960		—
Securities - available-for-sale		226,512		226,512		33,721		185,676		7,115
Other Securities		3,717		3,717		—		—		3,717
Loans, net		701,375		704,996		—		—		704,996
Interest receivable		4,112		4,112		—		—		4,112
Financial Liabilities:
Interest bearing Deposits	$	449,641	$	449,641	$	—	$	—	$	449,641
Non-interest bearing Deposits		163,769		163,769		—		163,769		—
Time Deposits		184,722		184,843		—		—		184,843
Total Deposits	$	798,132	$	798,253	$	—	$	163,769	$	634,484
Fed Funds purchased and Securities sold under agreement to repurchase	$	69,390	$	69,390	$	—	$	—	$	69,390
Federal Home Loan Bank advances		10,000		9,822		—		—		9,822
Interest payable		222		222		—		—		222

25

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 6 FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

	(In Thousands)
	December 31, 2015
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and Cash Equivalents	$	22,018	$	22,018	$	22,018	$	—	$	—
Securities—available-for-sale		235,115		235,115		38,505		189,258		7,352
Other Securities		3,717		3,717		—		—		3,717
Loans, net		679,821		683,332		—		—		683,332
Interest receivable		3,589		3,589		—		—		3,589
Financial Liabilities:
Interest bearing Deposits	$	415,942	$	415,942	$	—	$	—	$	415,942
Non-interest bearing Deposits		171,112		171,112		—		171,112		—
Time Deposits		184,285		184,308		—		—		184,308
Total Deposits	$	771,339	$	771,362	$	—	$	171,112	$	600,250
Federal Funds Purchased and Securities Sold Under Agreement to Repurchase	$	78,815	$	78,815	$	—	$	—	$	78,815
Federal Home Loan Bank advances		10,000		9,986		—		—		9,986
Interest payable		185		185		—		—		185

Fair Value Measurements

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.

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 some local municipals that the Bank evaluates based on the credit strength of the underlying project such as hospital or retirement housing. The fair value is determined by valuing similar credit payment streams at similar rates.

26

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 6 FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

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 summarizes financial assets measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015, 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
March 31, 2016	Assets (Level 1)		(Level 2)		(Level 3)
Assets—(Securities Available-for-Sale)
U.S. Treasury	$	33,721	$	—	$	—
U.S. Government agencies		—		102,814		—
Mortgage-backed securities		—		25,147		—
State and local governments		—		57,715		7,115
Total Securities Available-for-Sale	$	33,721	$	185,676	$	7,115
	Quoted Prices in		Significant		Significant
	Active Markets		Observable		Observable
	for Identical		Inputs		Inputs
December 31, 2015	Assets (Level 1)		(Level 2)		(Level 3)
Assets—(Securities Available-for-Sale)
U.S. Treasury	$	38,505	$	—	$	—
U.S. Government agencies		—		98,220		—
Mortgage-backed securities		—		26,324		—
State and local governments		—		64,714		7,352
Total Securities Available-for-Sale	$	38,505	$	189,258	$	7,352

27

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 6 FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

The following table represents the changes in the Level 3 fair-value category of which unobservable inputs are relied upon as of March 31, 2016 and March 31, 2015.

	(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, 2016	$	5,904		$	1,448	$	7,352
Change in Market Value		—			33		33
Payments & Maturities		(270	)		—		(270	)
Balance at March 31, 2016	$	5,634		$	1,481	$	7,115
	(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, 2015	$	6,638		$	1,293	$	7,931
Change in Market Value		(3	)		109		106
Payments & Maturities		(200	)		—		(200	)
Balance at March 31, 2015	$	6,435		$	1,402	$	7,837

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.

The Company also has assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis. At March 31, 2016 and December 31, 2015, 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.)

28

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 6 FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

At March 31, 2016 and December 31, 2015, fair value of collateral dependent impaired loans categorized as Level 3 were $0.7 and $0.5 million, respectively. The specific allocation for impaired loans was $426 and $330 thousand as of March 31, 2016 and December 31, 2015, respectively, which are accounted for in the allowance for loan losses (see Note 4).

Other real estate is reported at either the lower of the fair value of the real estate minus the estimated costs to sell the asset or the cost of the asset. The determination of 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 quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements:

	Fair Value at March 31, 2016		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
State and local government	$	7,115	Discounted cash flow	Credit strength of underlying project or entity / Discount rate		0-5	%
Collateral dependent Impaired loans	$	743	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability		0-50	%
Other real estate owned—commercial	$	—	Appraisals	Discount to reflect current market		0-20	%
	Fair Value at December 31, 2015		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
State and local government	$	7,352	Discounted cash flow	Credit strength of underlying project or entity / Discount rate		0-5	%
Collateral dependent Impaired loans	$	549	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability		0-50	%
Other real estate owned—commercial	$	216	Appraisals	Discount to reflect current market		0-20	%

29

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 6 FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

The following table presents impaired loans and other real estate owned as recorded at fair value on March 31, 2016 and December 31, 2015:

	Assets Measured at Fair Value on a Nonrecurring Basis at March 31, 2016
	Quoted Prices in Active
(In Thousands)	Balance at March 31, 2016		Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Collateral dependent impaired loans	$	743	$	—	$	—	$	743
Total change in fair value							$	743
	Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2015
	Quoted Prices in Active
(In Thousands)	Balance at December 31, 2015		Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Collateral dependent impaired loans	$	549	$	—	$	—	$	549
Other real estate owned—commercial	$	216	$	—	$	—	$	216
Total change in fair value							$	765

The Company also has other assets, which under certain conditions, are subject to measurement at fair value. These assets include loans held for sale, bank owned life insurance, and mortgage servicing rights. The Company estimated the fair values of these assets utilizing Level 3 inputs, including, the discounted present value of expected future cash flows. At March 31, 2016 and December 31, 2015, the Company estimates that there is no impairment of these assets.

30

ITEM 1 NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (Continued)

NOTE 7 FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

The Company had $9 million and $22 million in Federal Funds Purchased as of March 31, 2016, and December 31, 2015, respectively. During the same time periods the company also had $60 million and $57 million in securities sold under agreement to repurchase.

	March 31, 2016
	Remaining Contratual Maturity of the Agreements
	Overnight & Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Federal funds purchased	$	9,000	$	—	$	—	$	—	$	9,000
Repurchase Agreements
US Treasury & agency securities	$	40,181	$	—	$	—	$	20,209	$	60,390
	$	49,181	$	—	$	—	$	20,209	$	69,390
	December 31, 2015
	Remaining Contratual Maturity of the Agreements
	Overnight & Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Federal funds purchased	$	22,000	$	—	$	—	$	—	$	22,000
Repurchase Agreements
US Treasury & agency securities	$	39,691	$	—	$	—	$	17,124	$	56,815
	$	61,691	$	—	$	—	$	17,124	$	78,815

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The momentum of 2015 loan growth continued through the first quarter of 2016. Higher loan balances drove the improvement in net interest income along with overall net income. Competition remains challenging, especially for the well performing larger balance customers.

The agricultural market is facing a tougher environment this season with lower commodity prices, higher input prices and currently wet fields. Many are working with decreasing working capital which is both beneficial and slightly worrisome for the Bank. Important to note, the observation is decreasing, not insufficient capital. At this time it is felt, tighter profit margins may impact equipment valuations, purchases and sales. Land prices have decreased slightly with the greater fluctuations in the lower quality land.

Unemployment rates continue to improve throughout the Company’s market area. Manufacturing activity remains similar to last year and car dealerships are reporting strong sales. Low gas prices continue to help the local economies.

Overall, the 1-4 family business has improved with increased activity in the first quarter. New regulatory rules which became effective in 2015 continue to constrain the offering of construction loans. While some community banks are leaving this market, F&M is working to design products that comply with the regulatory requirements and meet our customer’s needs. The construction loan products should be ready for bank-wide implementation in the second quarter.

31

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW (Continued)

Loan growth drove the improvement in net interest income as compared to last year and was the driving factor for the increased loan loss provision. Noninterest income also strengthened and net income after taxes ended the first quarter 2016 5.5% above first quarter 2015. The 7.2% increase in net interest income after provision for loan losses, and a 4.4% increase in noninterest income, partially offset by a 6.4% increase in noninterest expense resulted in a 5.9% increase in earnings per share for the 2016 quarter as compared to 2015’s first quarter.

NATURE OF ACTIVITIES

Farmers & Merchants Bancorp, Inc. (Company) is a financial holding company incorporated under the laws of Ohio in 1985. Our subsidiaries are, The Farmers & Merchants State Bank (Bank), a community bank operating in Northwest Ohio since 1897 and Farmers & Merchants Risk Management, Inc., a captive insurance company formed in December 2014 and is located in Nevada. We report our financial condition and net income on a consolidated basis and we have only one segment.

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

The Bank opened an additional office during April of 2016 in Fort Wayne, Indiana. The office is located within the corporation limits of Huntertown, with a Fort Wayne address. The Bank has continued its expansion strategy and the new office is expected to provide new growth opportunities. The doors officially opened on April 7^th.

The Farmers & Merchants State Bank engages in general commercial banking and savings business including commercial, agricultural and residential mortgage, consumer and credit card lending activities. The largest segment of the lending business relates to commercial, both real estate and non-real estate. The type of commercial business ranges from small business to multi-million dollar companies. The loans are a reflection of business located within the Banks’ market area. Because 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 items 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 the purchase of autos, trucks, recreational vehicles, motorcycles, and other consumer goods.

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) are provided at most branch locations along with other independent locations such as major employers and hospitals 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. Mobile banking was added in 2012 and has been widely accepted and used by consumers. Over the past couple of years, the Bank has updated its consumer offerings with “Secure” and “Pure” checking in 2014 and with KASASA Cash Bank in 2015. Upgrades to our digital products and services continue to occur in both retail and business lines.

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 fixed rate mortgage after which the interest rate will adjust annually. The majority of the Bank’s adjustable rate mortgages are of this type. In order to offer longer term fixed rate mortgages, the Bank does participate in the Freddie Mac, Farmer

32

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NATURE OF ACTIVITIES (Continued)

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 a broker.

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 principal borrowers are reviewed and an approved exception from an additional officer is required should a credit score not meet the Bank’s Loan Policy guidelines.

Consumer Loans:

• Maximum loan to value (LTV) for cars, trucks and light trucks vary from 90% to 110% depending on whether direct or indirect.

• Loans above 100% are generally due to additional charges for extended warranties and/or insurance coverage periods for wage or death.

• 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 range from 75%-90% with “in-house” first real estate mortgages requiring private mortgage insurance on those exceeding 80% LTV

• The Bank will only make Qualified Mortgages as defined by the Truth in Lending Act and Regulation Z.

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

Commercial/Agriculture/Real Estate:

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

• Accounts Receivable: Up to 80% LTV.

Inventory:

• Agriculture:

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

• Commercial:

Maximum LTV of 50% on raw and finished goods.

• Floor plan.

• New/used vehicles to 100% of wholesale.

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

Equipment:

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

• Restaurant equipment up to 35% of market value.

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

F&M Investment Services, the brokerage department of the Bank, opened for business in April, 1999. 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 (the “Act”), 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 (the “captive”) in December 2014 which is located in Nevada and regulated by the State of Nevada Division of Insurance. To enable the formation of the captive, the Company’s status was changed to a financial holding company from a bank holding company.

33

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NATURE OF ACTIVITIES (Continued)

The Bank’s primary market includes communities located in the Ohio counties of Defiance, Fulton, Henry, Lucas, Williams, Wood and in the Indiana counties of DeKalb and Steuben. In the first half of 2016 the Bank will add the Indiana county of Allen to its service area with the opening of its newly constructed office in Fort Wayne. The commercial banking business in this market is highly competitive, with approximately 17 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. The primary factors in competing for loans and deposits are the rates charged as well as location and quality of the services provided.

At March 31, 2016, we had 264 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 are contributory. We consider our employee relations to be good.

REGULATORY DEVELOPMENTS

The Bank has been attentive to the significant final mortgage rules, revisions to the rules, and additional guidance issued by the Consumer Financial Protection Bureau to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act provisions. Effective in January 2014, these rules have altered the landscape for the entire mortgage lending industry. The Bank continues to test, train, validate results, and review the applicable requirements of these new mortgage rules to enhance knowledge and understanding. The TILA-RESPA Integrated Disclosure (TRID) rules which were originally to be effective on August 1, 2015 were subsequently postponed until October 3, 2015. Bank staff worked closely with the Mortgage Loan Origination software vendor and diligently strived to achieve TRID compliance as of the October 2015 effective date. The vendor has been attentive to the key regulatory requirements and receptive to its individual clients’ needs. Further changes and enhancements to the loan origination software have served to better accommodate documentation needs and compliance strategies. Bank staff has continued outreach efforts with real estate agents, attorneys, and closing agents to further cultivate collaboration and attain TRID compliance, and thus minimize the impact of these regulatory changes on home loan borrowers. Due to the complexities of the new TRID rules, the lack of clarity or guidance involving various provisions, and the lingering uncertainties regarding liability, remaining attentive to industry questions and concerns to ensure full compliance remains an ongoing priority. The Bank has committed to make good faith efforts in compliance with the technical requirements of the TRID rules.

The Company has implemented Basel III capital rules which began to be phased in for the Company on January 1, 2015. These rules may impact the ability of some financial institutions to pay dividends, though the Company believes itself to be able to maintain its strong capital position and not be limited in that regard.

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.

These policies, along with the disclosures presented in the notes to the condensed consolidated financial statements and in the management discussion and analysis of the 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), the valuation of its Mortgage Servicing Rights and OREO as the accounting areas that require the most subjective or complex judgments, and as such could be the most subject to revision as new information becomes available.

34

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CRITICAL ACCOUNTING POLICY AND ESTIMATES (Continued)

Assets acquired 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.

Foreclosed real estate 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 a write-down is recorded by a charge to non-interest expense if the carrying value exceeds the fair value minus estimated costs to sell. Foreclosed real estate is classified as OREO. The net income from operations of foreclosed real estate held for sale is reported in non-interest income or non-interest expense determined by whether in a gain or loss position overall. At March 31, 2016, holdings were $1.1 million and were $1.2 million as of December 31, 2015 and $1.1 million as of March 31, 2015.

The ALLL and ACL represents management’s estimate of probable credit losses inherent in the Bank’s loan portfolio, unfunded loan commitments, and letters of credit at the report date. The ALLL methodology is regularly reviewed for its appropriateness and is approved annually by the Board of Directors. This written methodology is consistent with Generally Accepted Accounting Principles which provides for a consistently applied analysis.

The Bank’s methodology provides an estimate of the probable credit losses either by calculating a specific loss per credit or by applying a composite of historical factors over a relevant period of time with current internal and external factors which may affect credit collectability. Such factors which may influence estimated losses are the conditions of the local and national economy, local unemployment trends, and abilities of lending staff, valuation trends of fixed assets, and trends in credit delinquency, classified credits, and credit losses.

Inherent in most estimates is imprecision. The Bank’s ALLL provides a margin for imprecision with an unallocated portion. Bank regulatory agencies and external auditors periodically review the Bank’s methodology and adequacy of the ALLL. Any required changes in the ALLL or loan charge-offs by these agencies or auditors may have a material effect on the ALLL.

The Company is required to estimate the value of its Mortgage Servicing Rights. 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 cost, 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 in other assets on the Company’s consolidated balance sheet. The mortgage servicing rights are then amortized against noninterest income in proportion to, and over the period of the estimated future net servicing income of the underlying mortgage servicing rights. The amortization thereof is recorded in non-interest expense. 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

35

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CRITICAL ACCOUNTING POLICY AND ESTIMATES (Continued)

well as current national market interest rate levels, market forecasts and other economic conditions. Management, with the advice from its third party valuation firm, reviewed 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 valuation specialist can be directly tied back to the fact that management has only been required to record minor valuation allowances through its income statement over time based upon the valuation of each stratum of servicing 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.

MATERIAL CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The Company ended March 31, 2016 with its total asset balance over a billion dollars. It represents a new record high in the Company’s 119 year history. The Company plans to continue in its growth mode with the addition of the Bank’s 23^rd office which opened April 7, 2016 in Indiana, making it the fourth office in the state.

Liquidity in terms of cash and cash equivalents ended almost $4.9 million higher as of March 31, 2016 than it was at yearend December 31, 2015. Decreased securities along with increased deposits funded the $21.6 million in increase in net loans for the quarter. Loan growth occurred in commercial real estate, commercial and industrial, agricultural real estate and agricultural and consumer portfolios. These were slightly offset by the decrease in consumer real estate.

In comparing to the same period, prior year, the March 31, 2016 record loan balances of $707.6 million increased 15.1% compared to $614.7 million. The year over year improvement was made up of a 27.1% increase in commercial real estate loans, a 15.7% increase in agricultural real estate loans, a 9.0% increase in non-real estate agricultural loans and an 8.2% increase in commercial and industrial loans. The only portfolio which experienced a reduction was consumer real estate by 9.0%. The Company credits the growth to a strong team of lenders focused on providing customers valuable localized services and thereby increasing our market share.

The chart below shows the breakdown of the loan portfolio by category as of March 31 for the last three years, net of deferred fees and costs.

	March-16 Amount		March-15 Amount		March-14 Amount
Consumer Real Estate	$	88,097	$	97,019	$	91,368
Agricultural Real Estate		59,479		51,396		49,629
Agricultural		78,021		71,571		64,859
Commercial Real Estate		344,661		271,201		261,634
Commercial and Industrial		102,966		95,222		90,024
Consumer		28,016		23,627		21,024
Industrial Development Bonds		6,420		4,673		4,334
Total Loans, net	$	707,660	$	614,709	$	582,872

As mentioned previously, the security portfolio was utilized to fund loan growth in both 2015 and the first quarter 2016. The security portfolio decreased $8.6 million in the first quarter 2016 from yearend 2015 and is lower by $19.6 million from March 31, 2015. The current portfolio is in a net unrealized gain position of $2.2 million. With the exception of stock, which is shown as other securities, all of the Company’s security portfolio is categorized as “available for sale” and as such is recorded at fair value.

36

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MATERIAL CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES (Continued)

Management feels confident that liquidity needs for future growth can be met through additional run-off and/or sales from the security portfolio, increased deposits and additional borrowings. For short term needs, the Bank has $104.2 million of unsecured borrowing capacity through its correspondent banks.

Overall assets grew 2.0% since yearend 2015 and 6.1% since March 31, 2015. The largest growth was in the targeted loan portfolios.

Deposits accounted for the largest growth within liabilities, up 3.5% or $26.8 million since yearend and 2.8% or $21.4 million over March 31, 2015 balances. Core deposits continue to drive the increase which provide the greatest benefit for both lower cost of funds and the opportunity to generate additional noninterest income. When comparing to a year ago, other borrowed money increased $10 million as the borrowings took place during the fourth quarter of 2015.

Federal Funds purchased and securities sold under agreement to repurchase increased $17.6 million when comparing March 31, 2016 balances to March 31, 2015. This category decreased by $9.4 million when comparing March 31, 2016 to December 31, 2015. Borrowings from FHLB aided in the quarter decrease as these replaced $10 million of Fed Funds purchased.

Capital increased $2.6 million during the first quarter of 2016, as earnings exceeded dividend declarations. Accumulated other comprehensive income increased in gain position $1.2 million which encompassed the shift of $113 thousand from unrealized gain to realized gain with the sale of securities since yearend 2015. Dividends paid year-to-date differed by $42 thousand from the same period last year.

The beginning of the Basel III capital rule applies in 2016. The Bank and Company include a capital conservation buffer as a part of the transition provision. For calendar year 2016, the applicable required capital conservation buffer percentage of 0.625% is the base above which institutions avoid limitations on distributions and certain discretionary bonus payments. The total buffer requirement will increase to 2.5% for calendar year 2019. As of March 31, 2016, the Company and the Bank are both positioned well above the 2019 requirement.

The Company continues to be well-capitalized in accordance with Federal regulatory capital requirements as the capital ratios below show:

Tier I Leverage Ratio	11.72	%
Risk Based Capital Tier I	13.89	%
Total Risk Based Capital	14.66	%
Stockholders’ Equity/Total Assets	12.48	%
Capital Conservation Buffer	6.66	%

MATERIAL CHANGES IN RESULTS OF OPERATIONS

Comparison of Results of Operation for three month periods ended March 31, 2016 and 2015, and December 31, 2015.

Interest Income

Higher loan balances created the improvement in the interest income for the first quarter 2016 as compared to first quarter 2015. Interest income rose 10% or $820 thousand while loans accounted for a $912 thousand increase. Offsetting the improvement from loans was a decrease in securities income of $92 thousand. The change in the balance sheet mix along with the loan growth caused the asset yield to improve by 12 basis points to 3.97% for the first quarter 2016 compared to first quarter 2015’s 3.85%.

In terms of dollars, $271 thousand additional interest income was earned in first quarter 2016 than in fourth quarter 2015. As a percentage, the 3.1% increase for first quarter is also attributed to higher loan balances during the quarter. 2016 is off to a strong start in interest income generation.

37

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MATERIAL CHANGES IN RESULTS OF OPERATIONS (Continued)

The average interest earning asset base was $47.5 million higher in first quarter 2016 than for first quarter 2015 or up 5.4%.

The yields on tax-exempt securities and the portion of the tax-exempt IDB loans included in loans have been tax adjusted based on a 34% tax rate in the charts to follow.

	(In Thousands)
	Quarter to Date Ended March 31, 2016				Yield/Rate
Interest Earning Assets:	Average Balance		Interest/Dividends		March 31, 2016			March 31, 2015
Loans	$	692,638	$	8,006		4.63	%		4.64	%
Taxable Investment Securities		167,815		670		1.60	%		1.58	%
Tax-exempt Investment Securities		55,940		317		3.43	%		3.73	%
Fed Funds Sold & Interest Bearing Deposits		8,857		11		0.50	%		0.21	%
Total Interest Earning Assets	$	925,250	$	9,004		3.97	%		3.85	%
Change in Quarter to Date March 31, 2016 Interest Income Compared to March 31, 2015 (In Thousands)

Interest Earning Assets:	Change			Due to Volume			Due to Rate
Loans	$	912		$	947		$	(35	)
Taxable Investment Securities		(16	)		(22	)		6
Tax-exempt Investment Securities		(76	)		(67	)		(9	)
Fed Funds Sold & Interest Bearing Deposits		—			(19	)		19
Total Interest Earning Assets	$	820		$	839		$	(19	)

Interest Expense

Interest expense for the quarter was also higher for first quarter 2016 compared to the fourth quarter 2015 and first quarter 2015. At $996 thousand, first quarter 2016 was up $73 thousand as compared to fourth quarter 2015 and $138 thousand as compared to same time period 2015.

The average balance of interest-bearing liabilities was higher by $34.3 million in 2016 than first quarter 2015. $10 million of the increase is attributed to the FHLB borrowings. The higher balance coupled with the slight variation of the balance sheet mix, resulted in a 5 basis points increase in the cost of funds at 0.58% for first quarter 2016 as compared to 2015’s 0.53%.

The Federal Funds and prime rate increase of 25 basis points in December 2015 had only a marginal effect on the Bank’s pricing methodologies. Rates, both loan and deposit, remain at low levels.

38

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MATERIAL CHANGES IN RESULTS OF OPERATIONS (Continued)

	(In Thousands)
	Quarter to Date Ended March 31, 2016				Yield/Rate
Interest Bearing Liabilities:	Average Balance		Interest/Dividends		March 31, 2016			March 31, 2015
Savings Deposits	$	427,173	$	410		0.38	%		0.37	%
Other Time Deposits		183,864		444		0.97	%		0.88	%
Other Borrowed Money		10,000		37		1.48	%		0.00	%
Fed Funds Purchased & Securities Sold under Agreement to Repurch.		66,708		105		0.63	%		0.45	%
Total Interest Bearing Liabilities	$	687,745	$	996		0.58	%		0.53	%
Change in Quarter to Date March 31, 2016 Interest Expense Compared to March 31, 2015 (In Thousands)

Interest Bearing Liabilities:	Change		Due to Volume			Due to Rate
Savings Deposits	$	37	$	20		$	17
Other Time Deposits		20		(21	)		41
Other Borrowed Money		37		37			—
Fed Funds Purchased & Securities Sold under Agreement to Repurch.		44		20			24
Total Interest Bearing Liabilities	$	138	$	56		$	82

Net Interest Income

Overall, net interest spread and net interest margin figures for the first quarter 2016 have improved over the last two years. As the chart below illustrates, both higher yields on interest and dividend income, even offset by higher interest expense resulted with total net interest margin up 9 basis points since the first quarter of 2015 and over first quarter 2014 by 20 basis points.

	3/31/2016			3/31/2015			3/31/2014
Interest/Dividend income/yield		3.97	%		3.85	%		3.76	%
Interest Expense / yield		0.58	%		0.53	%		0.52	%
Net Interest Spread		3.39	%		3.32	%		3.24	%
Net Interest Margin		3.54	%		3.45	%		3.34	%

Net interest income was up $682 thousand in the first quarter 2016 over the same time frame in 2015 due to the increase in loan income even with higher interest expense, as previously mentioned. There has been a $198 thousand increase in net interest income over fourth quarter 2015. New loans added in 2015 and 2016 will continue to generate more income; the benefits of the Company’s strategy of repositioning the balance sheet will continue to grow.

The discussion will now be separated into two distinct quarter discussions – first quarter comparisons and the two most recent quarter comparisons.

39

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MATERIAL CHANGES IN RESULTS OF OPERATIONS (Continued)

Comparison of Noninterest Results of Operation – First Quarter 2016 to First Quarter 2015

Provision Expense

Provision for loan losses was almost 2.5 times higher for first quarter 2016 as the Bank sought to provide coverage for the much higher total loan balances as compared to first quarter 2015. The provision of $277 thousand was partially due to net-charge offs of $49 thousand during the quarter. First quarter 2015 had net charge-offs of $42 thousand and $114 thousand of provision expense. Strong asset quality for both periods is reflected in the low past dues (30 days+ past due/total loans) percentages of 0.29% for March 31, 2016 and 0.43% for March 31, 2015.

In the immediate future, the Bank expects to fund the loan loss reserve for any loan growth that may occur.

The Bank uses the following guidelines as stated in policy to determine when to realize a charge-off of a loan, whether partial loan balance 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 120 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. Commercial and agricultural credits are charged down 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-offs may be realized as further unsecured positions are recognized.

Loans classified as nonaccrual were lower as of March 31, 2016 at $2.0 million compared to $2.4 million as of March 31, 2015. One new loan was categorized as TDR during the first quarter 2016.

In determining the allocation for impaired loans the Bank applies the appraised market value of the collateral securing the asset, reduced by applying a discount for estimated costs of collateral liquidation. In some instances where the discounted market value is less than the loan amount, a specific impairment allocation is assigned, which may be reduced or eliminated by the write down of the credit’s active principal outstanding balance.

For the majority of the Bank’s impaired loans, including all collateral dependent loans, the Bank will apply the appraised market value methodology. However, the Bank may also utilize a measurement incorporating the present value of expected future cash flows discounted at the loan’s effective rate of interest. To determine appraised 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 collateral value used.

The ALLL has a direct impact on the provision expense. The increase in the ALLL is funded through recoveries and provision expense. The following tables both deal with the allowance for credit losses. The first table breaks down the activity within ALLL for each loan portfolio class and shows the contribution provided by both the recoveries and the provision along with the reduction of the allowance caused by charge-offs. The second table discloses how much of the ALLL is attributed to each class of the loan portfolio, as well as the percent that each particular class of the loan portfolio represents to the entire loan portfolio in the aggregate. The consumer loan portfolio and industrial loans accounted for the largest component of charge-offs and recoveries through first three months of 2016. As was mentioned in previous discussion, the commercial real estate portfolio is currently having a major impact on the ALLL due to the loan growth.

40

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MATERIAL CHANGES IN RESULTS OF OPERATIONS (Continued)

	(In Thousands)
	Three Months Ended March-16			Three Months Ended March-15			Three Months Ended March-14
Loans	$	707,660		$	614,709		$	582,872
Daily average of outstanding loans	$	692,638		$	610,798		$	569,081
Allowance for Loan & Lease Losses—January 1	$	6,057		$	5,905		$	5,194
Loans Charged off:
Consumer Real Estate		—			—			64
Agricultural Real Estate		—			—			—
Agricultural		—			—			—
Commercial Real Estate		3			—			201
Commercial and Industrial		20			—			—
Consumer		61			92			101
		84			92			366
Loan Recoveries
Consumer Real Estate		2			2			10
Agricultural Real Estate		—			—			—
Agricultural		4			1			1
Commercial Real Estate		1			1			2
Commercial and Industrial		3			5			5
Consumer		25			41			51
		35			50			69
Net Charge Offs		49			42			297
Provision for loan loss		277			114			428
Allowance for Loan & Lease Losses—March 31	$	6,285		$	5,977		$	5,325
Allowance for Unfunded Loan Commitments & Letters of Credit—March 31		220			202			180
Total Allowance for Credit Losses—March 31	$	6,505		$	6,179		$	5,505
Ratio of net charge-offs to average Loans outstanding		0.01	%		0.01	%		0.05	%
Ratio of Allowance for Loan Loss to Nonperforming Loans		310.50	%		246.56	%		203.68	%

41

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MATERIAL CHANGES IN RESULTS OF OPERATIONS (Continued)

The following table presents the balances for allowance of loan losses by loan type for three months ended March 31, 2016 and March 31, 2015.

	(In Thousands)				(In Thousands)
	March-2016				March-2015
	Amount		% of Loan Category		Amount		% of Loan Category
Balance at End of Period Applicable To:
Consumer Real Estate	$	457		12.45	$	497		15.80
Agricultural Real Estate		272		8.41		187		8.36
Agricultural		548		11.03		524		11.64
Commercial Real Estate		2,678		48.69		2,212		44.13
Commercial and Industrial		1,251		15.46		1,419		16.25
Consumer		335		3.96		284		3.84
Unallocated		744		0.00		854		0.00
Allowance for Loan & Lease Losses		6,285				5,977
Off Balance Sheet Commitments		220				202
Total Allowance for Credit Losses	$	6,505			$	6,179

Noninterest Income

Noninterest income was up $113 thousand in the first quarter 2016 over the same time frame in 2015. The bulk of this increase came from an increase in customer service fees. Customer service fees were positively impacted by the structural changes made to the Bank’s bill pay program and checking accounts. All other categories of noninterest income showed only slight variations when comparing the two quarters.

$17.5 million in sales of investment securities were conducted so far in 2016 to capture the benefit of movement in market interest rates. The sales resulted in a gain of $113 thousand. The same time period 2015 had similar sales of $16.3 million resulting in gains of $109 thousand. The difference between 2016 and 2015 sales was the utilization of the funds. 2016 went to fund loan growth while only a portion did in 2015 with the balances held in cash and reinvested in securities beginning in the second quarter.

The impact of mortgage servicing rights, both to income and expense, is shown in the following table which reconciles the value of mortgage servicing rights. The capitalization runs through non-interest income while the amortization thereof is included in non-interest expense. For first quarter 2016, mortgage servicing rights caused a net $52 thousand more in income. This is a reversal of 2015’s first quarter net expense cost of $7 thousand. The higher capitalized additions for 2016 are attributed to a higher loan origination level of 1-4 families in 2016 as compared to 2015. The carrying value is well below the market value of $3.0 million which indicates any large expense to fund the valuation allowance to be unlikely in 2016.

	(In Thousands)
	2016			2015
Beginning Balance, January 1	$	2,056		$	2,023
Capitalized Additions		141			73
Amortization		(89	)		(80	)
Ending Balance, March 31		2,108			2,016
Valuation Allowance		—			—
Mortgage Servicing Rights, net March 31	$	2,108		$	2,016

42

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MATERIAL CHANGES IN RESULTS OF OPERATIONS (Continued)

Noninterest Expense

For the first quarter 2016, noninterest expenses were $421 thousand higher than in 2015. An increase of $185 thousand in salaries and wages was overshadowed by a decrease of $202 thousand in employee benefits. The decrease in employee benefits was derived from lower costs related to medical claims for the quarter and lower pension costs due to an adjustment in first quarter 2015 for the accrual.

Data processing fees were $82 thousand higher than last year due to the increased number of customers, accounts and updated services.

The largest increase for the 2016 first quarter was in other general and administrative. This line item on the income statement was up by $266 thousand over 2015. Audit and exam fees were higher by $140 thousand so far in 2016 than for 2015. This related to an accrual adjustment in 2015 which lowered the expense for that time period. Marketing expenses were up $52 thousand as advertising for the new office and KASASA Cash Back went full swing in the first quarter 2016.

Net Income

Overall, net income in the first quarter of 2016 was up $130 thousand as compared to the same quarter last year. The Company has done an exceptional job of growing loans while keeping past dues low. The Company remains strong, stable, and well capitalized and has the capacity to continue to cover the increased costs of doing business in a tough economy while seeking good loans to improve profitability. The opening of the new office may create a slight drag in the short run; however, the Company remains focused on the long term.

The Company continues to look for new opportunities to generate and protect revenue and provide additional channels through which to serve our customers and maintain our high level of customer satisfaction.

Comparison of Noninterest Results of Operations – First Quarter 2016 to Fourth Quarter 2015

Provision Expense

In comparing the provision expense of first quarter 2016 to fourth quarter 2015, an increase of $191.1 thousand was realized. The increased provision was for the continued loan growth experienced throughout the first quarter. The ratio of loans past due 30 and more days to total loans stood at 0.32% as of December 31, 2015 and 0.29% as of March 31, 2016. The average percentage for all of 2015 was 0.44%. The Bank continues to keep a tight watch and works to maintain its strong asset quality position. Increases to the ACL were for loan growth as net charge-offs remain at low levels also. Nonaccruals decreased slightly from yearend 2015, lower by $38 thousand at first quarter end 2016.

Noninterest Income

Noninterest income for the first quarter 2016 shows under the fourth quarter by $35 thousand. A decrease in other customer service fees accounted for $198 thousand. First quarter 2016, however, had increases of over $80 thousand in both other service charges and net gain on sale of securities line items.

Noninterest Expense

Noninterest expense was higher by $377 thousand in comparison in the first quarter 2016. Medical claims were higher in the fourth quarter 2015 which is typical of yearend when deductibles have been met for the year so more elective procedures are performed. A decrease in the number of full time equivalent employees from 265 as of December 31, 2015, to 264 as of March 31, 2016 is representative of turnover and the number may increase as positions are filled with the addition of another office. Loan production offset the increase in base salaries with the establishment of deferred costs as related to personnel expense. Behind the increased cost of first quarter is the other general and administrative mentioned in the earlier first quarter comparisons discussion, mainly accounting and data processing, up $42.4 and $78.1 thousand respectively. ATM expense was also higher in the first quarter by $62.1 thousand as the cost of card replacement is higher coupled with the fact the reissue time frame has been accelerated due to “chip” acceptance.

43

ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MATERIAL CHANGES IN RESULTS OF OPERATIONS (Continued)

Net Income

Overall in comparing fourth quarter 2015 to first quarter 2016, the fourth quarter generated $292 thousand more in net income. The higher interest income of 2016 was outweighed by the higher loan provision and noninterest expense. The Company recognizes the additional cost of its expansion strategy and is pleased with the strong loan growth seen so far in 2016.

A revitalized service and product was introduced in the fourth quarter of 2015. Overdraft privilege was renamed Courtesy Pay and utilizes new dynamic limits based on customer behavior in their checking account, and KASASA Cash Back was added to the KASASA product offerings. Courtesy pay has generated an additional $24.1 thousand in net revenue and KASASA Cash Back has added 463 accounts with 85% of those being new relationships as of the first quarter end. The Company is focused on continuing to strengthen our core earnings through loan growth and improvement to the net interest margin.

FORWARD LOOKING STATEMENTS

Statements contained in this portion of the Company’s report 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 words such as “intend,” “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” and “potential.” Such forward-looking statements are based on current expectations, but actual results 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 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 differ from those projected in the forward-looking statements.

ITEM 3 QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the exposure to loss resulting from changes in interest rates and equity prices. The primary market risk to which the Company is subject is interest rate risk. The majority of 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 profitably may be adversely affected. The Company employs a sensitivity analysis utilizing interest rate shocks to help in this analysis.

44

ITEM 3 QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK (continued)

The shocks presented below assume an immediate change of rate in the percentages and directions shown covering a twelve month period:

	% Change										% Change
Net Interest	to			Rate		Rate			Cumulative		to
Margin (Ratio)	Flat Rate			Direction		Changes by			Total ($000)		Flat Rate
3.07%		-7.92	%		Rising		3.00	%		30,090		-4.81	%
3.15%		-5.47	%		Rising		2.00	%		30,506		-2.86	%
3.25%		-2.51	%		Rising		1.00	%		31,059		-1.10	%
3.33%		0.00	%		Flat		0.00	%		31,403		0.00	%
3.33%		-0.05	%		Falling		-1.00	%		31,424		0.07	%
3.07%		-7.81	%		Falling		-2.00	%		29,649		-5.58	%
2.82%		-15.40	%		Falling		-3.00	%		27,907		-11.13	%

The net interest margin represents the forecasted twelve month margin. The Company also reviews shocks with a 4.0% fluctuation with a delayed time frame of 10 months and over a 24 month time frame. It also shows what effect rate changes will have on both the margin and net interest income. The goal of the Company is to lengthen some of the liabilities or sources of funds to decrease the exposure to a rising rate environment. The Bank has offered higher rates on certificates of deposits for longer periods since 2011. Of course, customer desires also drive the ability to capture longer term deposits. Currently, the majority of customers look for terms twelve months and under while the Bank would prefer 24 months and longer. Some movement into the longer term time deposits has occurred. What the Bank has experienced is a decrease in the time balances of our deposit portfolio, therefore a loss of term funding

The shock chart currently shows a slight tightening in net interest margin over the next twelve months in an increasing rate environment with an even lower tightening in a falling rate environment. Due to the length and existence of such a low rate environment, the model does not predict expansion of net interest income in any falling category except the first one. Cost of funds are below 0.50% so at even the lowest shock of 100 basis points, the Bank cannot take full advantage and reprice funds to match the level of shock. Since the average duration of the majority of the assets is outside the 12 month shock period, the rising rate environment does not show improvement. The majority of the newer loans added to the commercial real estate portfolio begin with an initial fixed rate period of three to five years whose variable adjustment is outside of the current shock time frame. The Bank enhanced its use of the software model during 2012 by including decay rates and key rate ties on certain deposit accounts and continues to review and modify those rates as updated data is compiled. Both enhancements were based on historical performance data of the Bank. Both directional changes are within risk exposure guidelines at the 200 basis point level. 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.

Overall, what the chart shows is that the Company must concentrate on increasing loan spreads on variable loans and extend the duration on cost of funds where possible. Changes in portfolio and/or balance sheet composition are needed for the margin to improve regardless of any rate shock.

ITEM 4 CONTROLS AND PROCEDURES

As of March 31, 2016, an evaluation was performed under the supervision and with the participation of the Company’s management including the CEO and CFO, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2016. There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

None

45

ITEM 4 CONTROLS AND PROCEDURES (continued)

ITEM 1A RISK FACTORS

There have been no material changes in the risk factors disclosed by Registrant in its Report on Form 10-K for the fiscal year ended December 31, 2015.

ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Treasury stock repurchased the quarter ended March 31, 2016 ⁽¹⁾.

Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plan or Programs		(d) Maximum Number of Shares that may yet be purchased under the Plans or Programs
1/1/2016 to		—		—		—		200,000
1/31/2016
2/1/2016 to		7,000		27.75		7,000		193,000
2/29/2016
3/1/2016 to		—		—		—		193,000
3/31/2016
Total		7,000		27.75		7,000		193,000

(1) From time to time, the Company purchases shares in the market pursuant to a stock repurchase program publicly announced on January 15, 2016. On that date, the Board of Directors authorized the repurchase of 200,000 common shares between January 15, 2016 and December 31, 2016.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4 MINE SAFETY DISCLOSURES

Not applicable

ITEM 5 OTHER INFORMATION

ITEM 6 EXHIBITS

46

3.1	Amended Articles of Incorporation of the Registrant (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 1, 2006)
3.2	Code of Regulations of the Registrant (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2004)
31.1	Rule 13-a-14(a) Certification -CEO
31.2	Rule 13-a-14(a) Certification -CFO
32.1	Section 1350 Certification—CEO
32.2	Section 1350 Certification—CFO
101.INS	XBRL Instance Document (1)
101.SCH	XBRL Taxonomy Extension Schema Document (1)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB	XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document (1)

47

SIGNATURES

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

	Farmers & Merchants Bancorp, Inc.,
Date: April 27, 2016	By:	/s/ Paul S. Siebenmorgen
		Paul S. Siebenmorgen
		President and CEO
Date: April 27, 2016	By:	/s/ Barbara J. Britenriker
		Barbara J. Britenriker
		Exec. Vice-President and CFO

48

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Paul S. Siebenmorgen, President and CEO of Farmers & Merchants Bancorp, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q 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 quarterly 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 the Exchange Acts 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 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 controls 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: April 27, 2016	/s/ Paul S. Siebenmorgen
	Paul S. Siebenmorgen
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Barbara J. Britenriker, Executive Vice-President and CFO of Farmers & Merchants Bancorp, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q 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 quarterly 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 the Exchange Acts 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 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 controls 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: April 27, 2016	/s/ Barbara J. Britenriker
	Barbara J Britenriker
	Executive Vice President and
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Farmers & Merchants Bancorp, Inc. on Form 10-Q for the period ending March 31, 2016 as filed with the Securities and Exchange Commission (“the report”), I, Paul S. Siebenmorgen, President and Chief Executive Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements 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 Farmers & Merchants Bancorp, Inc. as of the dates and for the periods expressed in the Report.

Date: April 27, 2016	/s/ Paul S. Siebenmorgen
	Paul S. Siebenmorgen, President and
	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.

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of Farmers & Merchants Bancorp, Inc. on Form 10-Q for the period ending March 31, 2016, as filed with the Securities and Exchange Commission (“the report”), I, Barbara J. Britenriker, Exec. Vice-President and Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements 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 Farmers & Merchants Bancorp, Inc. as of the dates and for the periods expressed in the Report.

Date: April 27, 2016	/s/ Barbara J. Britenriker
	Barbara J. Britenriker, Exec. Vice President
	and 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.

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	Apr. 22, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Trading Symbol	FMAO
Entity Registrant Name	FARMERS & MERCHANTS BANCORP INC
Entity Central Index Key	0000792966
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		4,605,534

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Assets
Cash and due from banks	$ 25,205	$ 21,333
Federal funds sold	703	685
Total cash and cash equivalents	25,908	22,018
Interest-bearing time deposits	1,960
Securities - available-for-sale	226,512	235,115
Other securities, at cost	3,717	3,717
Loans, net	701,375	679,821
Premises and equipment	20,872	20,587
Goodwill	4,074	4,074
Mortgage servicing rights	2,108	2,056
Other real estate owned	1,061	1,175
Other assets	21,481	20,505
Total Assets	1,009,068	989,068
Deposits
Noninterest-bearing	163,769	171,112
Interest-bearing
NOW accounts	208,928	190,890
Savings	240,713	225,052
Time	184,722	184,285
Total deposits	798,132	771,339
Federal Funds purchased and securities sold under agreements to repurchase	69,390	78,815
Federal Home Loan Bank (FHLB) advances	10,000	10,000
Dividend payable	1,005	1,007
Accrued expenses and other liabilities	7,858	7,810
Total liabilities	$ 886,385	$ 868,971
Commitments and Contingencies
Stockholders' Equity
Common stock - No par value - 6,500,000 shares authorized 5,200,000 shares issued and outstanding	$ 12,181	$ 12,086
Treasury Stock - 594,466 shares 2016, 587,466 shares 2015	(12,583)	(12,389)
Retained earnings	121,664	120,188
Accumulated other comprehensive income	1,421	212
Total stockholders' equity	122,683	120,097
Total Liabilities and Stockholders' Equity	$ 1,009,068	$ 989,068

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Common stock, no par value
Common stock, shares authorized	6,500,000	6,500,000
Common stock, shares issued	5,200,000	5,200,000
Common stock, shares outstanding	5,200,000	5,200,000
Treasury Stock, shares	594,466	587,466

XML

Condensed Consolidated Statements of Income & Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Interest Income
Loans, including fees	$ 8,006	$ 7,094
Debt securities:
U.S. Treasury and government agencies	580	596
Municipalities	369	447
Dividends	38	37
Federal funds sold		2
Other	11	8
Total interest income	9,004	8,184
Interest Expense
Deposits	854	797
Federal funds purchased and securities sold under agreements to repurchase	105	61
Borrowed funds	37
Total interest expense	996	858
Net Interest Income - Before Provision for Loan Losses	8,008	7,326
Provision for Loan Losses	277	114
Net Interest Income After Provision For Loan Losses	7,731	7,212
Noninterest Income
Customer service fees	1,478	1,359
Other service charges and fees	910	914
Net gain on sale of loans	169	175
Net gain on sale of available for sale securities	113	109
Total noninterest income	2,670	2,557
Noninterest Expense
Salaries and Wages	2,840	2,655
Employee benefits	862	1,064
Net occupancy expense	378	355
Furniture and equipment	412	422
Data processing	411	329
Franchise taxes	214	187
Net loss on sale of other assets owned	45	6
FDIC Assessment	121	119
Mortgage servicing rights amortization	89	80
Other general and administrative	1,614	1,348
Total other operating expenses	6,986	6,565
Income Before Income Taxes	3,415	3,204
Income Taxes	934	853
Net Income	2,481	2,351
Other Comprehensive Income (Net of Tax):
Net unrealized gain on available for sale securities	1,945	1,730
Reclassification adjustment for gain on sale of available for sale securities	(113)	(109)
Net unrealized gain on available for sale securities	1,832	1,621
Tax expense	623	551
Other comprehensive income	1,209	1,070
Comprehensive Income	$ 3,690	$ 3,421
Earnings Per Share - Basic and Diluted	$ 0.54	$ 0.51
Dividends Declared	$ 0.22	$ 0.21

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash Flows from Operating Activities
Net income	$ 2,481	$ 2,351
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	367	390
Accretion and amortization of available for sale securities, net	274	294
Amortization of servicing rights	89	80
Amortization of core deposit intangible	81	81
Compensation expense related to stock awards	104	78
Provision for loan loss	277	114
Gain on sale of loans held for sale	(169)	(175)
Originations of loans held for sale	(12,010)	(9,199)
Proceeds from sale of loans held for sale	12,426	9,658
Loss on sale of other assets	45	6
Gain on sales of securities available for sale	(113)	(109)
Change in other assets and other liabilities, net	(1,545)	(1,701)
Net cash provided by operating activities	2,307	1,868
Activity in securities:
Maturities, prepayments and calls	4,230	1,790
Sales	17,453	16,301
Purchases	(11,408)	(14,233)
Net change in interest-bearing time deposits	(1,960)
Proceeds from sales of assets	1	1
Additions to premises and equipment	(653)	(88)
Loan originations and principal collections, net	(22,247)	6,716
Net cash provided by (used in) investing activities	(14,584)	10,487
Cash Flows from Financing Activities
Net change in deposits	26,793	14,127
Net change in federal funds purchased and securities sold under agreements to repurchase	(9,425)	(4,221)
Purchase of Treasury Stock	(194)	(490)
Cash dividends paid on common stock	(1,007)	(965)
Net cash provided by financing activities	16,167	8,451
Net Increase in Cash and Cash Equivalents	3,890	20,806
Cash and cash equivalents - Beginning of year	22,018	24,295
Cash and cash equivalents - End of period	25,908	45,101
Cash paid during the year for:
Interest	958	852
Income taxes	$ 746	520
Noncash investing activities:
Transfer of loans to other real estate owned		$ 46

XML

Basis of Presentation

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

NOTE 1 BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10Q and Rule 10-01 of Regulation S-X; accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that are expected for the year ended December 31, 2016. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2015.

XML

Asset Purchases

3 Months Ended

Mar. 31, 2016

Business Combinations [Abstract]

Asset Purchases

NOTE 2 ASSET PURCHASES

The Company recognized core deposit intangible assets of $1.09 million with the purchase of the Hicksville office on July 9, 2010. These are being amortized over an estimated remaining economic useful life of the deposits of 7 years on a straight line basis.

An office was purchased on December 13, 2013 in Custar, Ohio. Core deposit intangible assets of $1.17 million were recognized and are being amortized over its remaining economic useful life of the deposits of 7 years on a straight line basis.

The amortization expense for the year ended December 31, 2015 was $323 thousand. Of the $322 thousand to be expensed in 2016, $81 thousand has been expensed for the three months ended March 31, 2016. $81 thousand was also expensed for the three months ended March 31, 2015.

	Hicksville		Custar		Total
2016	$	155	$	167	$	322
2017		78		167		245
2018		—		167		167
2019		—		167		167
2020		—		161		161
Thereafter		—		—		—
	$	233	$	829	$	1,062

XML

Securities

3 Months Ended

Mar. 31, 2016

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)
	March 31, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available-for-Sale:
U.S. Treasury	$	33,696	$	56	$	(31	)	$	33,721
U.S. Government agencies		102,437		420		(43	)		102,814
Mortgage-backed securities		24,787		372		(12	)		25,147
State and local governments		63,439		1,420		(29	)		64,830
Total available-for-sale securities	$	224,359	$	2,268	$	(115	)	$	226,512
	(In Thousands)
	December 31, 2015
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available-for-Sale:
U.S. Treasury	$	38,778	$	36	$	(309	)	$	38,505
U.S. Government agencies		99,000		55		(835	)		98,220
Mortgage-backed securities		26,157		283		(116	)		26,324
State and local governments		70,858		1,290		(82	)		72,066
Total available-for-sale securities	$	234,793	$	1,664	$	(1,342	)	$	235,115

Investment securities will at times depreciate to an unrealized loss position. The Company 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 an other than temporary impairment.

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 Company currently does not hold any securities with other than temporary impairment.

Information pertaining to securities with gross unrealized losses at March 31, 2016 and December 31, 2015, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

	(In Thousands)
	March 31, 2016
	Less Than Twelve Months					Twelve Months & Over
	Gross Unrealized			Fair		Gross Unrealized			Fair
	Losses			Value		Losses			Value
U.S. Treasury	$	(31	)	$	19,510	$	—		$	—
U.S. Government agencies		(11	)		7,984		(32	)		4,969
Mortgage-backed securities		(12	)		4,953		—			—
State and local governments		(19	)		1,034		(10	)		1,220
Total available-for-sale securities	$	(73	)	$	33,481	$	(42	)	$	6,189
	(In Thousands)
	December 31, 2015
	Less Than Twelve Months					Twelve Months & Over
	Gross Unrealized			Fair		Gross Unrealized			Fair
	Losses			Value		Losses			Value
U.S. Treasury	$	(142	)	$	23,241	$	(167	)	$	10,195
U.S. Government agencies		(635	)		68,957		(200	)		9,793
Mortgage-backed securities		(60	)		6,331		(56	)		3,580
State and local governments		(54	)		7,920		(28	)		1,725
Total available-for-sale securities	$	(891	)	$	106,449	$	(451	)	$	25,293

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. Additionally, the decline in value is primarily due to changes in interest rates since the securities were purchased. The fair value is expected to recover as the bonds approach the maturity date.

Below are the gross realized gains and losses as of March 31 for each of the years presented.

	(In Thousands)
	2016			2015
Gross realized gains	$	123		$	109
Gross realized losses		(10	)		—
Net realized gains	$	113		$	109
Tax expense related to net realized gain	$	38		$	37

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 tax expense in the condensed consolidated statements of income and comprehensive income.

The amortized cost and fair value of debt securities at March 31, 2016, 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	$	7,679	$	7,722
After one year through five years		152,418		153,383
After five years through ten years		32,591		33,145
After ten years		6,884		7,115
Total	$	199,572	$	201,365
Mortgage-backed securities		24,787		25,147
Total	$	224,359	$	226,512

Investments with a carrying value of $197.1 million and $189.3 million at March 31, 2016 and December 31, 2015, respectively, were pledged to secure public deposits and securities sold under repurchase agreements.

Other securities include Federal Home Loan Bank of Cincinnati and Farmer Mac stock as of March 31, 2016 and December 31, 2015.

XML

Loans

3 Months Ended

Mar. 31, 2016

Receivables [Abstract]

Loans

NOTE 4 LOANS

The Company had $1.1 million in loans held for sale at March 31, 2016 as compared to $1.2 million in loans held for sale at December 31, 2015. Due to materiality, these loans are included in the Consumer Real Estate and Agricultural Real Estate loan numbers.

Loan balances as of March 31, 2016 and December 31, 2015:

	(In Thousands)
Loans:	March 31, 2016			December 31, 2015
Consumer Real Estate	$	88,365		$	88,189
Agricultural Real Estate		59,533			58,525
Agricultural		77,909			82,654
Commercial Real Estate		345,223			322,762
Commercial and Industrial		102,892			100,125
Consumer		27,995			27,770
Industrial Development Bonds		6,420			6,491
		708,337			686,516
Less: Net deferred loan fees and costs		(677	)		(638	)
		707,660			685,878
Less: Allowance for loan losses		(6,285	)		(6,057	)
Loans - Net	$	701,375		$	679,821

The following is a maturity schedule by major category of loans as of March 31, 2016:

	Maturities (In Thousands)
	Within One Year		After One Year Within Five Years		After Five Years
Consumer Real Estate	$	1,033	$	12,132	$	75,200
Agricultural Real Estate		955		3,569		55,009
Agricultural		48,960		23,832		5,117
Commercial Real Estate		14,434		77,031		253,758
Commercial and Industrial		50,820		31,829		20,243
Consumer		5,186		17,525		5,284
Industrial Development Bonds		1,300		185		4,935

The distribution of fixed rate loans and variable rate loans by major loan category is as follows as of March 31, 2016. Variable rate loans whose current rates are equal to their floor or ceiling are classified as fixed in this table.

	(In Thousands)
	Fixed		Variable
	Rate		Rate
Consumer Real Estate	$	55,792	$	32,573
Agricultural Real Estate		43,422		16,111
Agricultural		45,761		32,148
Commercial Real Estate		224,647		120,576
Commercial and Industrial		60,300		42,592
Consumer		23,957		4,038
Industrial Development Bonds		6,290		130

As of March 31, 2016 and December 31, 2015 one to four family residential mortgage loans amounting to $18.8 and $20.0 million, respectively, have been pledged as security for future loans the Bank has received from the Federal Home Loan Bank.

Unless listed separately, Industrial Development Bonds are included in the commercial and industrial category for the remainder of the tables in this Note 4.

The following table represents the contractual aging of the recorded investment in past due loans by portfolio classification of loans as of March 31, 2016 and December 31, 2015, net of deferred loan fees and costs:

March 31, 2016	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	$	621	$	156	$	443	$	1,220	$	86,877	$	88,097	$	0
Agricultural Real Estate		—		57		162		219		59,260		59,479		—
Agricultural		—		3		—		3		78,018		78,021		—
Commercial Real Estate		148		—		422		570		344,091		344,661		—
Commercial and Industrial		—		—		19		19		109,367		109,386		—
Consumer		37		10		4		51		27,965		28,016		—
Total	$	806	$	226	$	1,050	$	2,082	$	705,578	$	707,660	$	0
December 31, 2015	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	$	303	$	47	$	357	$	707	$	87,240	$	87,947	$	0
Agricultural Real Estate		—		—		162		162		58,301		58,463		—
Agricultural		—		145		—		145		82,617		82,762		—
Commercial Real Estate		236		—		841		1,077		321,153		322,230		—
Commercial and Industrial		51		—		20		71		106,618		106,689		—
Consumer		19		9		—		28		27,759		27,787		—
Total	$	609	$	201	$	1,380	$	2,190	$	683,688	$	685,878	$	0

The following table presents the recorded investment in nonaccrual loans by class of loans as of March 31, 2016 and December 31, 2015:

	(In Thousands)
	March 31,		December 31,
	2016		2015
Consumer Real Estate	$	1,196	$	1,155
Agricultural Real Estate		162		162
Agricultural		—		—
Commercial Real Estate		422		484
Commercial		200		202
Consumer		23		38
Total	$	2,003	$	2,041

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

Commercial Real Estate – Construction, purchase, and refinance of business purpose real estate. Risks discussed during the approval process include construction delays and overruns, vacancies, collateral value subject to market value fluctuations, interest rate, market demands, borrower’s ability to repay in a timely 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.

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.

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.

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.

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 federal crop insurance.

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 others.

Industrial Development Bonds – Funds for 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 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 Risk Management Association 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 grade is summarized by high liquidity, minimum risk, strong ratios, and low handling costs.

3. Two (2) Good. Desirable loans of somewhat less stature than Grade 1, but with strong financial statements. Loan supported by financial statements containing strong balance sheets, generally with a leverage position less than 1.50, 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. Generally, customers should have a leverage position less than 2.00. May be some weakness but with offsetting features of other support readily available. Loans that are meeting the terms of repayment.

Loans may be graded 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 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 the credit weaknesses is observed, a lower risk grade is warranted.

5. Four (4) Satisfactory / Monitored. A “4” (Satisfactory/Monitored) risk grade 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 deserves 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.

The following table represents the risk category of loans by portfolio class, net of deferred fees and costs, based on the most recent analysis performed as of March 31, 2016 and December 31, 2015:

	(In Thousands)
	Agricultural Real Estate		Agricultural		Commercial Real Estate		Commercial and Industrial		Industrial Development Bonds
March 31, 2016
1-2	$	5,912	$	9,251	$	536	$	509	$	—
3		17,289		23,093		27,635		21,747		3,073
4		35,750		45,467		312,972		79,918		3,347
5		110		192		1,284		52		—
6		361		—		1,812		559		—
7		57		18		422		181		—
8		—		—		—		—		—
Total	$	59,479	$	78,021	$	344,661	$	102,966	$	6,420
	Agricultural Real Estate		Agricultural		Commercial Real Estate		Commercial and Industrial		Industrial Development Bonds
December 31, 2015
1-2	$	5,841	$	12,025	$	597	$	261	$	—
3		16,593		21,247		24,264		22,300		3,100
4		35,475		49,220		293,381		76,855		3,391
5		192		250		1,738		57		—
6		362		—		1,828		543		—
7		—		20		422		182		—
8		—		—		—		—		—
Total	$	58,463	$	82,762	$	322,230	$	100,198	$	6,491

For consumer residential real estate, and other, 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 March 31, 2016 and December 31, 2015.

	(In Thousands)
	Consumer Real Estate		Consumer Real Estate
	March 31, 2016		December 31, 2015
Grade
Pass	$	87,257	$	87,292
Special Mention (5)		—		48
Substandard (6)		330		332
Doubtful (7)		510		275
Total	$	88,097	$	87,947
	(In Thousands)
	Consumer—Credit				Consumer —Other
	March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015
Performing	$	3,587	$	3,901	$	24,408	$	23,863
Nonperforming		—		—		21		23
Total	$	3,587	$	3,901	$	24,429	$	23,886

Information about impaired loans as of March 31, 2016, December 31, 2015 and March 31, 2015 are as follows:

	March 31, 2016		December 31, 2015		March 31, 2015
Impaired loans without a valuation allowance	$	1,042	$	1,257	$	624
Impaired loans with a valuation allowance		1,169		879		1,619
Total impaired loans	$	2,211	$	2,136	$	2,243
Valuation allowance related to impaired loans	$	426	$	330	$	428
Total non-accrual loans	$	2,003	$	2,041	$	2,424
Total loans past-due ninety days or more and still accruing	$	—	$	—	$	—
Quarter ended average investment in impaired loans	$	2,130	$	2,207	$	1,958
Year to date average investment in impaired loans	$	2,130	$	2,509	$	1,958

No additional funds are committed to be advanced in connection with impaired loans.

The Bank had approximately $1.1 million of its impaired loans classified as troubled debt restructured (TDR) as of March 31, 2016, $1.1 million as of December 31, 2015 and $1.3 million as of March 31, 2015. During the first quarter 2016, one new loan was considered TDR. This loan is making interest-only payments.

The following table represents three months ended March 31, 2016.

Three Months March 31, 2016 Troubled Debt Restructurings	Number of Contracts Modified in the Last 3 Months		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial Real Estate		—	$	—	$	—
Commercial and Industrial		—		—		—
Consumer Real Estate		1		138		138

The following table represents three months ended March 31, 2015.

Three Months March 31, 2015 Troubled Debt Restructurings	Number of Contracts Modified in the Last 3 Months		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial Real Estate		1	$	528	$	430
Commercial and Industrial		1		28		24
Consumer Real Estate		—		—		—

For the three month period ended March 31, 2016 and 2015, there were no TDRs that subsequently defaulted after modification.

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.

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-off in whole or in part is realized when unsecured consumer loans, credit card credits and overdraft lines of credit reach 90 days delinquency. At 120 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. Commercial and agricultural credits are charged down 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 class of loans for three months ended March 31, 2016 and March 31, 2015.

	(In Thousands)
Three Months Ended March 31, 2016	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	$	365	$	365	$	—	$	156	$	3	$	3
Agricultural Real Estate		162		162		—		162		—		—
Agricultural		—		—		—		—		—		—
Commercial Real Estate		515		515		—		409		8		7
Commercial and Industrial		—		—		—		454		6		—
Consumer		—		—		—		—		—		—
With a specific allowance recorded:
Consumer Real Estate		509		628		104		307		1		—
Agricultural Real Estate		57		57		57		38		1		—
Agricultural		—		—		—		—		—		—
Commercial Real Estate		422		422		152		422		—		—
Commercial and Industrial		181		239		113		182		—		—
Consumer		—		—		—		—		—		—
Totals:
Consumer Real Estate	$	874	$	993	$	104	$	463	$	4	$	3
Agricultural Real Estate	$	219	$	219	$	57	$	200	$	1	$	—
Agricultural	$	—	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate	$	937	$	937	$	152	$	831	$	8	$	7
Commercial and Industrial	$	181	$	239	$	113	$	636	$	6	$	—
Consumer	$	—	$	—	$	—	$	—	$	—	$	—

Three Months Ended March 31, 2015	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	$	157	$	157	$	—	$	173	$	—	$	—
Agricultural Real Estate		—		—		—		—		—		—
Agricultural		—		—		—		—		—		—
Commercial Real Estate		—		—		—		—		—		—
Commercial and Industrial		467		467		—		469		7		—
Consumer		—		—		—		—		—		—
With a specific allowance recorded:
Consumer Real Estate		96		96		35		96		3		3
Agricultural Real Estate		—		—		—		—		—		—
Agricultural		24		24		24		24		—		—
Commercial Real Estate		1,139		1,139		131		852		—		—
Commercial and Industrial		360		360		238		337		—		—
Consumer		—		—		—		7		—		—
Totals:
Consumer Real Estate	$	253	$	253	$	35	$	269	$	3	$	3
Agricultural Real Estate	$	—	$	—	$	—	$	—	$	—	$	—
Agricultural	$	24	$	24	$	24	$	24	$	—	$	—
Commercial Real Estate	$	1,139	$	1,139	$	131	$	852	$	—	$	—
Commercial and Industrial	$	827	$	827	$	238	$	806	$	7	$	—
Consumer	$	—	$	—	$	—	$	7	$	—	$	—

As of March 31, 2016, the Company had $456 thousand of foreclosed residential real estate property obtained by physical possession and $568 thousand of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process according to local jurisdictions.

The Allowance for Loan and Lease Losses (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.

	(In Thousands)
	Three Months Ended March 31, 2016			Twelve Months Ended December 31, 2015
Allowance for Loan & Lease Losses
Balance at beginning of year	$	6,057		$	5,905
Provision for loan loss		277			625
Loans charged off		(84	)		(1,030	)
Recoveries		35			557
Allowance for Loan & Lease Losses	$	6,285		$	6,057
Allowance for Unfunded Loan Commitments & Letters of Credit	$	220		$	208
Total Allowance for Credit Losses	$	6,505		$	6,265

The Company segregates its 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, net asset line. The ACL presented above represents the full amount of reserves available to absorb possible credit losses.

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

Additional analysis related to the allowance for credit losses for three months ended March 31, 2016 and March 31, 2015 is as follows:

	Consumer Real Estate		Agricultural Real Estate		Agricultural			Commercial Real Estate			Commercial and Industrial			Consumer			Unfunded Loan Commetment & Letters of Credit		Unallocated			Total
Three Months Ended March 31, 2016
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	338	$	211	$	582		$	2,516		$	1,229		$	337		$	208	$	844		$	6,265
Charge Offs		—		—		—			(3	)		(20	)		(61	)		—		—			(84	)
Recoveries		2		—		4			1			3			25			—		—			35
Provision (Credit)		117		61		(38	)		164			39			34			—		(100	)		277
Other Non-interest expense related to unfunded		—		—		—			—			—			—			12		—			12
Ending Balance	$	457	$	272	$	548		$	2,678		$	1,251		$	335		$	220	$	744		$	6,505
Ending balance: individually evaluated for impairment	$	104	$	57	$	—		$	152		$	113		$	—		$	—	$	—		$	426
Ending balance: collectively evaluated for impairment	$	353	$	215	$	548		$	2,526		$	1,138		$	335		$	220	$	744		$	6,079
Ending balance: loans acquired with deteriorated credit quality	$	1		—		—			—			—			—			—		—		$	1
FINANCING RECEIVABLES:
Ending balance	$	88,097	$	59,479	$	78,021		$	344,661		$	109,386		$	28,016		$	—	$	—		$	707,660
Ending balance: individually evaluated for impairment	$	874	$	219	$	—		$	937		$	181		$	—		$	—	$	—		$	2,211
Ending balance: collectively evaluated for impairment	$	87,223	$	59,260	$	78,021		$	343,724		$	109,205		$	28,016		$	—	$	—		$	705,449
Ending balance: loans acquired with deteriorated credit quality	$	502	$	—	$	—		$	—		$	—		$	—		$	—	$	—		$	502

	Consumer Real Estate			Agricultural Real Estate		Agricultural			Commercial Real Estate			Commercial and Industrial			Consumer			Unfunded Loan Commitment & Letters of Credit			Unallocated		Total
Three Months Ended March 31, 2015
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	537		$	184	$	547		$	2,367		$	1,421		$	323		$	207		$	526	$	6,112
Charge Offs		—			—		—			—			—			(92	)		—			—		(92	)
Recoveries		2			—		1			1			5			41			—			—		50
Provision (Credit)		(42	)		3		(24	)		(156	)		(7	)		12			—			328		114
Other Non-interest expense related to unfunded		—			—		—			—			—			—			(5	)		—		(5	)
Ending Balance	$	497		$	187	$	524		$	2,212		$	1,419		$	284		$	202		$	854	$	6,179
Ending balance: individually evaluated for impairment	$	35		$	—	$	24		$	131		$	238		$	—		$	—		$	—	$	428
Ending balance: collectively evaluated for impairment	$	462		$	187	$	500		$	2,081		$	1,181		$	284		$	202		$	854	$	5,751
Ending balance: loans acquired with deteriorated credit quality	$	1			—		—			—			—			—			—			—	$	1
FINANCING RECEIVABLES:
Ending balance	$	97,019		$	51,396	$	71,571		$	271,201		$	99,895		$	23,627		$	—		$	—	$	614,709
Ending balance: individually evaluated for impairment	$	253		$	—	$	24		$	1,139		$	827		$	—		$	—		$	—	$	2,243
Ending balance: collectively evaluated for impairment	$	96,766		$	51,396	$	71,547		$	270,062		$	99,068		$	23,627		$	—		$	—	$	612,466
Ending balance: loans acquired with deteriorated credit quality	$	520		$	—	$	—		$	—		$	—		$	—		$	—		$	—	$	520

XML

Earnings Per Share

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Earnings Per Share

NOTE 5 EARNINGS PER SHARE

Basic earnings per share are 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 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.

	Three Months Ended
	March 31			March 31
	2016			2015
Earnings per share
Net income	$	2,481		$	2,351
Less: distributed earnings allocated to participating securities		(8	)		(7	)
Less: undistributed earnings allocated to participating securities		(13	)		(10	)
Net earnings available to common shareholders	$	2,460		$	2,334
Weighted average common shares outstanding including participating securities		4,609,226			4,623,322
Less: average unvested restricted shares		(38,670	)		(32,923	)
Weighted average common shares outstanding		4,570,556			4,590,399
Basic earnings and diluted per share	$	0.54		$	0.51

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

NOTE 6 FAIR VALUE OF INSTRUMENTS

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

Cash and Cash Equivalents

The carrying amounts reported in the balance sheet for cash, cash equivalents and federal funds sold approximate their fair values. Also included in this line item are the carrying amounts of interest-bearing deposits maturing within ninety days which approximate their fair values. Fair values of other interest-bearing deposits are estimated using discounted cash flow analyses based on current rates for similar types of deposits.

Interest Bearing Time Deposits

Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow analysis that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Securities – Available-for-sale

Fair values for securities, excluding Federal Home Loan Bank and Farmer Mac stock, are based on quoted market price, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

Other Securities

The carrying value of Federal Home Loan Bank and Farmer Mac stock, listed as “other securities”, approximates fair value based on the redemption provisions of the Federal Home Loan Bank.

Loans, net

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

Deposits

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

Federal Funds Purchased and Securities Sold Under Agreements to Repurchase

The carrying value of federal funds purchased and securities sold under agreements to repurchase approximates fair values.

Accrued Interest Receivable and Payable

The carrying amounts of accrued interest approximate their fair values.

Dividends Payable

The carrying amounts of dividends payable approximate their fair values and are generally paid within forty days of declaration.

Off Balance Sheet Financial Instruments

Fair values for off-balance sheet, credit related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counter-parties’ credit standing.

The estimated fair values, and related carrying or notional amounts, for on and off-balance sheet financial instruments as of March 31, 2016 and December 31, 2015 are reflected below.

	(In Thousands)
	March 31, 2016
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and Cash Equivalents	$	25,908	$	25,908	$	25,908	$	—	$	—
Interest-bearing time deposits		1,960		1,960		—		1,960		—
Securities - available-for-sale		226,512		226,512		33,721		185,676		7,115
Other Securities		3,717		3,717		—		—		3,717
Loans, net		701,375		704,996		—		—		704,996
Interest receivable		4,112		4,112		—		—		4,112
Financial Liabilities:
Interest bearing Deposits	$	449,641	$	449,641	$	—	$	—	$	449,641
Non-interest bearing Deposits		163,769		163,769		—		163,769		—
Time Deposits		184,722		184,843		—		—		184,843
Total Deposits	$	798,132	$	798,253	$	—	$	163,769	$	634,484
Fed Funds purchased and Securities sold under agreement to repurchase	$	69,390	$	69,390	$	—	$	—	$	69,390
Federal Home Loan Bank advances		10,000		9,822		—		—		9,822
Interest payable		222		222		—		—		222

	(In Thousands)
	December 31, 2015
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and Cash Equivalents	$	22,018	$	22,018	$	22,018	$	—	$	—
Securities—available-for-sale		235,115		235,115		38,505		189,258		7,352
Other Securities		3,717		3,717		—		—		3,717
Loans, net		679,821		683,332		—		—		683,332
Interest receivable		3,589		3,589		—		—		3,589
Financial Liabilities:
Interest bearing Deposits	$	415,942	$	415,942	$	—	$	—	$	415,942
Non-interest bearing Deposits		171,112		171,112		—		171,112		—
Time Deposits		184,285		184,308		—		—		184,308
Total Deposits	$	771,339	$	771,362	$	—	$	171,112	$	600,250
Federal Funds Purchased and Securities Sold Under Agreement to Repurchase	$	78,815	$	78,815	$	—	$	—	$	78,815
Federal Home Loan Bank advances		10,000		9,986		—		—		9,986
Interest payable		185		185		—		—		185

Fair Value Measurements

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.

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 some local municipals that the Bank evaluates based on the credit strength of the underlying project such as hospital or retirement housing. 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 summarizes financial assets measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015, 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
March 31, 2016	Assets (Level 1)		(Level 2)		(Level 3)
Assets—(Securities Available-for-Sale)
U.S. Treasury	$	33,721	$	—	$	—
U.S. Government agencies		—		102,814		—
Mortgage-backed securities		—		25,147		—
State and local governments		—		57,715		7,115
Total Securities Available-for-Sale	$	33,721	$	185,676	$	7,115
	Quoted Prices in		Significant		Significant
	Active Markets		Observable		Observable
	for Identical		Inputs		Inputs
December 31, 2015	Assets (Level 1)		(Level 2)		(Level 3)
Assets—(Securities Available-for-Sale)
U.S. Treasury	$	38,505	$	—	$	—
U.S. Government agencies		—		98,220		—
Mortgage-backed securities		—		26,324		—
State and local governments		—		64,714		7,352
Total Securities Available-for-Sale	$	38,505	$	189,258	$	7,352

The following table represents the changes in the Level 3 fair-value category of which unobservable inputs are relied upon as of March 31, 2016 and March 31, 2015.

	(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, 2016	$	5,904		$	1,448	$	7,352
Change in Market Value		—			33		33
Payments & Maturities		(270	)		—		(270	)
Balance at March 31, 2016	$	5,634		$	1,481	$	7,115
	(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, 2015	$	6,638		$	1,293	$	7,931
Change in Market Value		(3	)		109		106
Payments & Maturities		(200	)		—		(200	)
Balance at March 31, 2015	$	6,435		$	1,402	$	7,837

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.

The Company also has assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis. At March 31, 2016 and December 31, 2015, 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 March 31, 2016 and December 31, 2015, fair value of collateral dependent impaired loans categorized as Level 3 were $0.7 and $0.5 million, respectively. The specific allocation for impaired loans was $426 and $330 thousand as of March 31, 2016 and December 31, 2015, respectively, which are accounted for in the allowance for loan losses (see Note 4).

Other real estate is reported at either the lower of the fair value of the real estate minus the estimated costs to sell the asset or the cost of the asset. The determination of 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 quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements:

	Fair Value at March 31, 2016		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
State and local government	$	7,115	Discounted cash flow	Credit strength of underlying project or entity / Discount rate		0-5	%
Collateral dependent Impaired loans	$	743	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability		0-50	%
Other real estate owned—commercial	$	—	Appraisals	Discount to reflect current market		0-20	%
	Fair Value at December 31, 2015		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
State and local government	$	7,352	Discounted cash flow	Credit strength of underlying project or entity / Discount rate		0-5	%
Collateral dependent Impaired loans	$	549	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability		0-50	%
Other real estate owned—commercial	$	216	Appraisals	Discount to reflect current market		0-20	%

The following table presents impaired loans and other real estate owned as recorded at fair value on March 31, 2016 and December 31, 2015:

	Assets Measured at Fair Value on a Nonrecurring Basis at March 31, 2016
	Quoted Prices in Active
(In Thousands)	Balance at March 31, 2016		Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Collateral dependent impaired loans	$	743	$	—	$	—	$	743
Total change in fair value							$	743
	Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2015
	Quoted Prices in Active
(In Thousands)	Balance at December 31, 2015		Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Collateral dependent impaired loans	$	549	$	—	$	—	$	549
Other real estate owned—commercial	$	216	$	—	$	—	$	216
Total change in fair value							$	765

The Company also has other assets, which under certain conditions, are subject to measurement at fair value. These assets include loans held for sale, bank owned life insurance, and mortgage servicing rights. The Company estimated the fair values of these assets utilizing Level 3 inputs, including, the discounted present value of expected future cash flows. At March 31, 2016 and December 31, 2015, the Company estimates that there is no impairment of these assets.

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Federal Funds Purchased and Securities Sold Under Agreements to Repurchase

3 Months Ended

Mar. 31, 2016

Brokers and Dealers [Abstract]

Federal Funds Purchased and Securities Sold Under Agreements to Repurchase

NOTE 7 FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

The Company had $9 million and $22 million in Federal Funds Purchased as of March 31, 2016, and December 31, 2015, respectively. During the same time periods the company also had $60 million and $57 million in securities sold under agreement to repurchase.

	March 31, 2016
	Remaining Contratual Maturity of the Agreements
	Overnight & Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Federal funds purchased	$	9,000	$	—	$	—	$	—	$	9,000
Repurchase Agreements
US Treasury & agency securities	$	40,181	$	—	$	—	$	20,209	$	60,390
	$	49,181	$	—	$	—	$	20,209	$	69,390
	December 31, 2015
	Remaining Contratual Maturity of the Agreements
	Overnight & Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Federal funds purchased	$	22,000	$	—	$	—	$	—	$	22,000
Repurchase Agreements
US Treasury & agency securities	$	39,691	$	—	$	—	$	17,124	$	56,815
	$	61,691	$	—	$	—	$	17,124	$	78,815

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Asset Purchases (Tables)

3 Months Ended

Mar. 31, 2016

Business Combinations [Abstract]

Amortization Expense of Core Deposit Intangible Assets

	Hicksville		Custar		Total
2016	$	155	$	167	$	322
2017		78		167		245
2018		—		167		167
2019		—		167		167
2020		—		161		161
Thereafter		—		—		—
	$	233	$	829	$	1,062

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Securities (Tables)

3 Months Ended

Mar. 31, 2016

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)
	March 31, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available-for-Sale:
U.S. Treasury	$	33,696	$	56	$	(31	)	$	33,721
U.S. Government agencies		102,437		420		(43	)		102,814
Mortgage-backed securities		24,787		372		(12	)		25,147
State and local governments		63,439		1,420		(29	)		64,830
Total available-for-sale securities	$	224,359	$	2,268	$	(115	)	$	226,512
	(In Thousands)
	December 31, 2015
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Available-for-Sale:
U.S. Treasury	$	38,778	$	36	$	(309	)	$	38,505
U.S. Government agencies		99,000		55		(835	)		98,220
Mortgage-backed securities		26,157		283		(116	)		26,324
State and local governments		70,858		1,290		(82	)		72,066
Total available-for-sale securities	$	234,793	$	1,664	$	(1,342	)	$	235,115

Gross Unrealized Losses, Aggregated by Investment Category and Length of Time

Information pertaining to securities with gross unrealized losses at March 31, 2016 and December 31, 2015, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

	(In Thousands)
	March 31, 2016
	Less Than Twelve Months					Twelve Months & Over
	Gross Unrealized			Fair		Gross Unrealized			Fair
	Losses			Value		Losses			Value
U.S. Treasury	$	(31	)	$	19,510	$	—		$	—
U.S. Government agencies		(11	)		7,984		(32	)		4,969
Mortgage-backed securities		(12	)		4,953		—			—
State and local governments		(19	)		1,034		(10	)		1,220
Total available-for-sale securities	$	(73	)	$	33,481	$	(42	)	$	6,189
	(In Thousands)
	December 31, 2015
	Less Than Twelve Months					Twelve Months & Over
	Gross Unrealized			Fair		Gross Unrealized			Fair
	Losses			Value		Losses			Value
U.S. Treasury	$	(142	)	$	23,241	$	(167	)	$	10,195
U.S. Government agencies		(635	)		68,957		(200	)		9,793
Mortgage-backed securities		(60	)		6,331		(56	)		3,580
State and local governments		(54	)		7,920		(28	)		1,725
Total available-for-sale securities	$	(891	)	$	106,449	$	(451	)	$	25,293

Gross Realized Gains and Losses

Below are the gross realized gains and losses as of March 31 for each of the years presented.

	(In Thousands)
	2016			2015
Gross realized gains	$	123		$	109
Gross realized losses		(10	)		—
Net realized gains	$	113		$	109
Tax expense related to net realized gain	$	38		$	37

Amortized Cost and Fair Value of Debt Securities, by Contractual Maturity

The amortized cost and fair value of debt securities at March 31, 2016, 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	$	7,679	$	7,722
After one year through five years		152,418		153,383
After five years through ten years		32,591		33,145
After ten years		6,884		7,115
Total	$	199,572	$	201,365
Mortgage-backed securities		24,787		25,147
Total	$	224,359	$	226,512

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Loans (Tables)

3 Months Ended

Mar. 31, 2016

Receivables [Abstract]

Loans

Loan balances as of March 31, 2016 and December 31, 2015:

	(In Thousands)
Loans:	March 31, 2016			December 31, 2015
Consumer Real Estate	$	88,365		$	88,189
Agricultural Real Estate		59,533			58,525
Agricultural		77,909			82,654
Commercial Real Estate		345,223			322,762
Commercial and Industrial		102,892			100,125
Consumer		27,995			27,770
Industrial Development Bonds		6,420			6,491
		708,337			686,516
Less: Net deferred loan fees and costs		(677	)		(638	)
		707,660			685,878
Less: Allowance for loan losses		(6,285	)		(6,057	)
Loans - Net	$	701,375		$	679,821

Maturity Schedule by Major Category of Loans

The following is a maturity schedule by major category of loans as of March 31, 2016:

	Maturities (In Thousands)
	Within One Year		After One Year Within Five Years		After Five Years
Consumer Real Estate	$	1,033	$	12,132	$	75,200
Agricultural Real Estate		955		3,569		55,009
Agricultural		48,960		23,832		5,117
Commercial Real Estate		14,434		77,031		253,758
Commercial and Industrial		50,820		31,829		20,243
Consumer		5,186		17,525		5,284
Industrial Development Bonds		1,300		185		4,935

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 March 31, 2016. Variable rate loans whose current rates are equal to their floor or ceiling are classified as fixed in this table.

	(In Thousands)
	Fixed		Variable
	Rate		Rate
Consumer Real Estate	$	55,792	$	32,573
Agricultural Real Estate		43,422		16,111
Agricultural		45,761		32,148
Commercial Real Estate		224,647		120,576
Commercial and Industrial		60,300		42,592
Consumer		23,957		4,038
Industrial Development Bonds		6,290		130

Contractual Aging of the 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 March 31, 2016 and December 31, 2015, net of deferred loan fees and costs:

March 31, 2016	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	$	621	$	156	$	443	$	1,220	$	86,877	$	88,097	$	0
Agricultural Real Estate		—		57		162		219		59,260		59,479		—
Agricultural		—		3		—		3		78,018		78,021		—
Commercial Real Estate		148		—		422		570		344,091		344,661		—
Commercial and Industrial		—		—		19		19		109,367		109,386		—
Consumer		37		10		4		51		27,965		28,016		—
Total	$	806	$	226	$	1,050	$	2,082	$	705,578	$	707,660	$	0
December 31, 2015	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	$	303	$	47	$	357	$	707	$	87,240	$	87,947	$	0
Agricultural Real Estate		—		—		162		162		58,301		58,463		—
Agricultural		—		145		—		145		82,617		82,762		—
Commercial Real Estate		236		—		841		1,077		321,153		322,230		—
Commercial and Industrial		51		—		20		71		106,618		106,689		—
Consumer		19		9		—		28		27,759		27,787		—
Total	$	609	$	201	$	1,380	$	2,190	$	683,688	$	685,878	$	0

Recorded Investment in Nonaccrual Loans by Portfolio Class of Loans

The following table presents the recorded investment in nonaccrual loans by class of loans as of March 31, 2016 and December 31, 2015:

	(In Thousands)
	March 31,		December 31,
	2016		2015
Consumer Real Estate	$	1,196	$	1,155
Agricultural Real Estate		162		162
Agricultural		—		—
Commercial Real Estate		422		484
Commercial		200		202
Consumer		23		38
Total	$	2,003	$	2,041

Risk Category of Loans by Portfolio Class

The following table represents the risk category of loans by portfolio class, net of deferred fees and costs, based on the most recent analysis performed as of March 31, 2016 and December 31, 2015:

	(In Thousands)
	Agricultural Real Estate		Agricultural		Commercial Real Estate		Commercial and Industrial		Industrial Development Bonds
March 31, 2016
1-2	$	5,912	$	9,251	$	536	$	509	$	—
3		17,289		23,093		27,635		21,747		3,073
4		35,750		45,467		312,972		79,918		3,347
5		110		192		1,284		52		—
6		361		—		1,812		559		—
7		57		18		422		181		—
8		—		—		—		—		—
Total	$	59,479	$	78,021	$	344,661	$	102,966	$	6,420
	Agricultural Real Estate		Agricultural		Commercial Real Estate		Commercial and Industrial		Industrial Development Bonds
December 31, 2015
1-2	$	5,841	$	12,025	$	597	$	261	$	—
3		16,593		21,247		24,264		22,300		3,100
4		35,475		49,220		293,381		76,855		3,391
5		192		250		1,738		57		—
6		362		—		1,828		543		—
7		—		20		422		182		—
8		—		—		—		—		—
Total	$	58,463	$	82,762	$	322,230	$	100,198	$	6,491

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 March 31, 2016 and December 31, 2015.

	(In Thousands)
	Consumer Real Estate		Consumer Real Estate
	March 31, 2016		December 31, 2015
Grade
Pass	$	87,257	$	87,292
Special Mention (5)		—		48
Substandard (6)		330		332
Doubtful (7)		510		275
Total	$	88,097	$	87,947
	(In Thousands)
	Consumer—Credit				Consumer —Other
	March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015
Performing	$	3,587	$	3,901	$	24,408	$	23,863
Nonperforming		—		—		21		23
Total	$	3,587	$	3,901	$	24,429	$	23,886

Schedule of Impaired Loans

Information about impaired loans as of March 31, 2016, December 31, 2015 and March 31, 2015 are as follows:

	March 31, 2016		December 31, 2015		March 31, 2015
Impaired loans without a valuation allowance	$	1,042	$	1,257	$	624
Impaired loans with a valuation allowance		1,169		879		1,619
Total impaired loans	$	2,211	$	2,136	$	2,243
Valuation allowance related to impaired loans	$	426	$	330	$	428
Total non-accrual loans	$	2,003	$	2,041	$	2,424
Total loans past-due ninety days or more and still accruing	$	—	$	—	$	—
Quarter ended average investment in impaired loans	$	2,130	$	2,207	$	1,958
Year to date average investment in impaired loans	$	2,130	$	2,509	$	1,958

Impaired Loans Classified as Troubled Debt Restructured

The following table represents three months ended March 31, 2016.

Three Months March 31, 2016 Troubled Debt Restructurings	Number of Contracts Modified in the Last 3 Months		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial Real Estate		—	$	—	$	—
Commercial and Industrial		—		—		—
Consumer Real Estate		1		138		138

The following table represents three months ended March 31, 2015.

Three Months March 31, 2015 Troubled Debt Restructurings	Number of Contracts Modified in the Last 3 Months		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial Real Estate		1	$	528	$	430
Commercial and Industrial		1		28		24
Consumer Real Estate		—		—		—

Loans Individually Evaluated for Impairment by Portfolio Class of Loans

The following tables present loans individually evaluated for impairment by class of loans for three months ended March 31, 2016 and March 31, 2015.

	(In Thousands)
Three Months Ended March 31, 2016	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	$	365	$	365	$	—	$	156	$	3	$	3
Agricultural Real Estate		162		162		—		162		—		—
Agricultural		—		—		—		—		—		—
Commercial Real Estate		515		515		—		409		8		7
Commercial and Industrial		—		—		—		454		6		—
Consumer		—		—		—		—		—		—
With a specific allowance recorded:
Consumer Real Estate		509		628		104		307		1		—
Agricultural Real Estate		57		57		57		38		1		—
Agricultural		—		—		—		—		—		—
Commercial Real Estate		422		422		152		422		—		—
Commercial and Industrial		181		239		113		182		—		—
Consumer		—		—		—		—		—		—
Totals:
Consumer Real Estate	$	874	$	993	$	104	$	463	$	4	$	3
Agricultural Real Estate	$	219	$	219	$	57	$	200	$	1	$	—
Agricultural	$	—	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate	$	937	$	937	$	152	$	831	$	8	$	7
Commercial and Industrial	$	181	$	239	$	113	$	636	$	6	$	—
Consumer	$	—	$	—	$	—	$	—	$	—	$	—

Three Months Ended March 31, 2015	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	$	157	$	157	$	—	$	173	$	—	$	—
Agricultural Real Estate		—		—		—		—		—		—
Agricultural		—		—		—		—		—		—
Commercial Real Estate		—		—		—		—		—		—
Commercial and Industrial		467		467		—		469		7		—
Consumer		—		—		—		—		—		—
With a specific allowance recorded:
Consumer Real Estate		96		96		35		96		3		3
Agricultural Real Estate		—		—		—		—		—		—
Agricultural		24		24		24		24		—		—
Commercial Real Estate		1,139		1,139		131		852		—		—
Commercial and Industrial		360		360		238		337		—		—
Consumer		—		—		—		7		—		—
Totals:
Consumer Real Estate	$	253	$	253	$	35	$	269	$	3	$	3
Agricultural Real Estate	$	—	$	—	$	—	$	—	$	—	$	—
Agricultural	$	24	$	24	$	24	$	24	$	—	$	—
Commercial Real Estate	$	1,139	$	1,139	$	131	$	852	$	—	$	—
Commercial and Industrial	$	827	$	827	$	238	$	806	$	7	$	—
Consumer	$	—	$	—	$	—	$	7	$	—	$	—

Summary of Activities in Allowance for Credit Losses

The following tables summarize the activities in the allowance for credit losses.

	(In Thousands)
	Three Months Ended March 31, 2016			Twelve Months Ended December 31, 2015
Allowance for Loan & Lease Losses
Balance at beginning of year	$	6,057		$	5,905
Provision for loan loss		277			625
Loans charged off		(84	)		(1,030	)
Recoveries		35			557
Allowance for Loan & Lease Losses	$	6,285		$	6,057
Allowance for Unfunded Loan Commitments & Letters of Credit	$	220		$	208
Total Allowance for Credit Losses	$	6,505		$	6,265

Analysis of Allowance for Credit Losses

Additional analysis related to the allowance for credit losses for three months ended March 31, 2016 and March 31, 2015 is as follows:

	Consumer Real Estate		Agricultural Real Estate		Agricultural			Commercial Real Estate			Commercial and Industrial			Consumer			Unfunded Loan Commetment & Letters of Credit		Unallocated			Total
Three Months Ended March 31, 2016
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	338	$	211	$	582		$	2,516		$	1,229		$	337		$	208	$	844		$	6,265
Charge Offs		—		—		—			(3	)		(20	)		(61	)		—		—			(84	)
Recoveries		2		—		4			1			3			25			—		—			35
Provision (Credit)		117		61		(38	)		164			39			34			—		(100	)		277
Other Non-interest expense related to unfunded		—		—		—			—			—			—			12		—			12
Ending Balance	$	457	$	272	$	548		$	2,678		$	1,251		$	335		$	220	$	744		$	6,505
Ending balance: individually evaluated for impairment	$	104	$	57	$	—		$	152		$	113		$	—		$	—	$	—		$	426
Ending balance: collectively evaluated for impairment	$	353	$	215	$	548		$	2,526		$	1,138		$	335		$	220	$	744		$	6,079
Ending balance: loans acquired with deteriorated credit quality	$	1		—		—			—			—			—			—		—		$	1
FINANCING RECEIVABLES:
Ending balance	$	88,097	$	59,479	$	78,021		$	344,661		$	109,386		$	28,016		$	—	$	—		$	707,660
Ending balance: individually evaluated for impairment	$	874	$	219	$	—		$	937		$	181		$	—		$	—	$	—		$	2,211
Ending balance: collectively evaluated for impairment	$	87,223	$	59,260	$	78,021		$	343,724		$	109,205		$	28,016		$	—	$	—		$	705,449
Ending balance: loans acquired with deteriorated credit quality	$	502	$	—	$	—		$	—		$	—		$	—		$	—	$	—		$	502

	Consumer Real Estate			Agricultural Real Estate		Agricultural			Commercial Real Estate			Commercial and Industrial			Consumer			Unfunded Loan Commitment & Letters of Credit			Unallocated		Total
Three Months Ended March 31, 2015
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	537		$	184	$	547		$	2,367		$	1,421		$	323		$	207		$	526	$	6,112
Charge Offs		—			—		—			—			—			(92	)		—			—		(92	)
Recoveries		2			—		1			1			5			41			—			—		50
Provision (Credit)		(42	)		3		(24	)		(156	)		(7	)		12			—			328		114
Other Non-interest expense related to unfunded		—			—		—			—			—			—			(5	)		—		(5	)
Ending Balance	$	497		$	187	$	524		$	2,212		$	1,419		$	284		$	202		$	854	$	6,179
Ending balance: individually evaluated for impairment	$	35		$	—	$	24		$	131		$	238		$	—		$	—		$	—	$	428
Ending balance: collectively evaluated for impairment	$	462		$	187	$	500		$	2,081		$	1,181		$	284		$	202		$	854	$	5,751
Ending balance: loans acquired with deteriorated credit quality	$	1			—		—			—			—			—			—			—	$	1
FINANCING RECEIVABLES:
Ending balance	$	97,019		$	51,396	$	71,571		$	271,201		$	99,895		$	23,627		$	—		$	—	$	614,709
Ending balance: individually evaluated for impairment	$	253		$	—	$	24		$	1,139		$	827		$	—		$	—		$	—	$	2,243
Ending balance: collectively evaluated for impairment	$	96,766		$	51,396	$	71,547		$	270,062		$	99,068		$	23,627		$	—		$	—	$	612,466
Ending balance: loans acquired with deteriorated credit quality	$	520		$	—	$	—		$	—		$	—		$	—		$	—		$	—	$	520

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Calculation of Basic Earnings Per Share

	Three Months Ended
	March 31			March 31
	2016			2015
Earnings per share
Net income	$	2,481		$	2,351
Less: distributed earnings allocated to participating securities		(8	)		(7	)
Less: undistributed earnings allocated to participating securities		(13	)		(10	)
Net earnings available to common shareholders	$	2,460		$	2,334
Weighted average common shares outstanding including participating securities		4,609,226			4,623,322
Less: average unvested restricted shares		(38,670	)		(32,923	)
Weighted average common shares outstanding		4,570,556			4,590,399
Basic earnings and diluted per share	$	0.54		$	0.51

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Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2016

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 March 31, 2016 and December 31, 2015 are reflected below.

	(In Thousands)
	March 31, 2016
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and Cash Equivalents	$	25,908	$	25,908	$	25,908	$	—	$	—
Interest-bearing time deposits		1,960		1,960		—		1,960		—
Securities - available-for-sale		226,512		226,512		33,721		185,676		7,115
Other Securities		3,717		3,717		—		—		3,717
Loans, net		701,375		704,996		—		—		704,996
Interest receivable		4,112		4,112		—		—		4,112
Financial Liabilities:
Interest bearing Deposits	$	449,641	$	449,641	$	—	$	—	$	449,641
Non-interest bearing Deposits		163,769		163,769		—		163,769		—
Time Deposits		184,722		184,843		—		—		184,843
Total Deposits	$	798,132	$	798,253	$	—	$	163,769	$	634,484
Fed Funds purchased and Securities sold under agreement to repurchase	$	69,390	$	69,390	$	—	$	—	$	69,390
Federal Home Loan Bank advances		10,000		9,822		—		—		9,822
Interest payable		222		222		—		—		222

	(In Thousands)
	December 31, 2015
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and Cash Equivalents	$	22,018	$	22,018	$	22,018	$	—	$	—
Securities—available-for-sale		235,115		235,115		38,505		189,258		7,352
Other Securities		3,717		3,717		—		—		3,717
Loans, net		679,821		683,332		—		—		683,332
Interest receivable		3,589		3,589		—		—		3,589
Financial Liabilities:
Interest bearing Deposits	$	415,942	$	415,942	$	—	$	—	$	415,942
Non-interest bearing Deposits		171,112		171,112		—		171,112		—
Time Deposits		184,285		184,308		—		—		184,308
Total Deposits	$	771,339	$	771,362	$	—	$	171,112	$	600,250
Federal Funds Purchased and Securities Sold Under Agreement to Repurchase	$	78,815	$	78,815	$	—	$	—	$	78,815
Federal Home Loan Bank advances		10,000		9,986		—		—		9,986
Interest payable		185		185		—		—		185

Financial Assets Measured at Fair Value on Recurring Basis

The following summarizes financial assets measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015, 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
March 31, 2016	Assets (Level 1)		(Level 2)		(Level 3)
Assets—(Securities Available-for-Sale)
U.S. Treasury	$	33,721	$	—	$	—
U.S. Government agencies		—		102,814		—
Mortgage-backed securities		—		25,147		—
State and local governments		—		57,715		7,115
Total Securities Available-for-Sale	$	33,721	$	185,676	$	7,115
	Quoted Prices in		Significant		Significant
	Active Markets		Observable		Observable
	for Identical		Inputs		Inputs
December 31, 2015	Assets (Level 1)		(Level 2)		(Level 3)
Assets—(Securities Available-for-Sale)
U.S. Treasury	$	38,505	$	—	$	—
U.S. Government agencies		—		98,220		—
Mortgage-backed securities		—		26,324		—
State and local governments		—		64,714		7,352
Total Securities Available-for-Sale	$	38,505	$	189,258	$	7,352

Changes in the Level 3 Fair-Value Category of Which Unobservable Inputs

The following table represents the changes in the Level 3 fair-value category of which unobservable inputs are relied upon as of March 31, 2016 and March 31, 2015.

	(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, 2016	$	5,904		$	1,448	$	7,352
Change in Market Value		—			33		33
Payments & Maturities		(270	)		—		(270	)
Balance at March 31, 2016	$	5,634		$	1,481	$	7,115
	(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, 2015	$	6,638		$	1,293	$	7,931
Change in Market Value		(3	)		109		106
Payments & Maturities		(200	)		—		(200	)
Balance at March 31, 2015	$	6,435		$	1,402	$	7,837

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:

	Fair Value at March 31, 2016		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
State and local government	$	7,115	Discounted cash flow	Credit strength of underlying project or entity / Discount rate		0-5	%
Collateral dependent Impaired loans	$	743	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability		0-50	%
Other real estate owned—commercial	$	—	Appraisals	Discount to reflect current market		0-20	%
	Fair Value at December 31, 2015		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
State and local government	$	7,352	Discounted cash flow	Credit strength of underlying project or entity / Discount rate		0-5	%
Collateral dependent Impaired loans	$	549	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability		0-50	%
Other real estate owned—commercial	$	216	Appraisals	Discount to reflect current market		0-20	%

Impaired Loans and Other Real Estate

The following table presents impaired loans and other real estate owned as recorded at fair value on March 31, 2016 and December 31, 2015:

	Assets Measured at Fair Value on a Nonrecurring Basis at March 31, 2016
	Quoted Prices in Active
(In Thousands)	Balance at March 31, 2016		Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Collateral dependent impaired loans	$	743	$	—	$	—	$	743
Total change in fair value							$	743
	Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2015
	Quoted Prices in Active
(In Thousands)	Balance at December 31, 2015		Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Collateral dependent impaired loans	$	549	$	—	$	—	$	549
Other real estate owned—commercial	$	216	$	—	$	—	$	216
Total change in fair value							$	765

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Federal Funds Purchased and Securities Sold Under Agreements to Repurchase (Tables)

3 Months Ended

Mar. 31, 2016

Brokers and Dealers [Abstract]

Schedule of Remaining Contractual Maturity in Repurchase Agreements

	March 31, 2016
	Remaining Contratual Maturity of the Agreements
	Overnight & Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Federal funds purchased	$	9,000	$	—	$	—	$	—	$	9,000
Repurchase Agreements
US Treasury & agency securities	$	40,181	$	—	$	—	$	20,209	$	60,390
	$	49,181	$	—	$	—	$	20,209	$	69,390
	December 31, 2015
	Remaining Contratual Maturity of the Agreements
	Overnight & Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Federal funds purchased	$	22,000	$	—	$	—	$	—	$	22,000
Repurchase Agreements
US Treasury & agency securities	$	39,691	$	—	$	—	$	17,124	$	56,815
	$	61,691	$	—	$	—	$	17,124	$	78,815

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Asset Purchases - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 13, 2013	Jul. 09, 2010
Business Acquisition [Line Items]
Amortization expense	$ 81	$ 81		$ 323
Scenario, Forecast [Member]
Business Acquisition [Line Items]
Amortization expense			$ 322
Custar [Member]
Business Acquisition [Line Items]
Recognition of core deposit intangible asset with acquired purchase					$ 1,170
Number of years amortized over an estimated remaining economic useful life of deposits					7 years
Hicksville [Member]
Business Acquisition [Line Items]
Recognition of core deposit intangible asset with acquired purchase						$ 1,090
Number of years amortized over an estimated remaining economic useful life of deposits	7 years

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Asset Purchases - Amortization Expense of Core Deposit Intangible Assets (Detail) $ in Thousands	Mar. 31, 2016 USD ($)
Business Acquisition [Line Items]
2016	$ 322
2017	245
2018	167
2019	167
2020	161
Thereafter	0
Total	1,062
Hicksville [Member]
Business Acquisition [Line Items]
2016	155
2017	78
Thereafter	0
Total	233
Custar [Member]
Business Acquisition [Line Items]
2016	167
2017	167
2018	167
2019	167
2020	161
Thereafter	0
Total	$ 829

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Securities - Amortized Cost and Fair Value of Securities with Gross Unrealized Gains and Losses (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 224,359	$ 234,793
Gross Unrealized Gains	2,268	1,664
Gross Unrealized Losses	(115)	(1,342)
Fair Value	226,512	235,115
U.S. Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	33,696	38,778
Gross Unrealized Gains	56	36
Gross Unrealized Losses	(31)	(309)
Fair Value	33,721	38,505
U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	102,437	99,000
Gross Unrealized Gains	420	55
Gross Unrealized Losses	(43)	(835)
Fair Value	102,814	98,220
Mortgage-backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	24,787	26,157
Gross Unrealized Gains	372	283
Gross Unrealized Losses	(12)	(116)
Fair Value	25,147	26,324
State and Local Governments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	63,439	70,858
Gross Unrealized Gains	1,420	1,290
Gross Unrealized Losses	(29)	(82)
Fair Value	$ 64,830	$ 72,066

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Securities - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Investments with a carrying value and fair value	$ 197.1	$ 189.3
Minimum [Member]
Schedule of Available-for-sale Securities [Line Items]
Underwater security	10 years
Loss position existed	3 years

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Securities - Gross Unrealized Losses, Aggregated by Investment Category and Length of Time (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Gross Unrealized Losses, Less Than Twelve Months	$ (73)	$ (891)
Fair Value, Less Than Twelve Months	33,481	106,449
Gross Unrealized Losses, Twelve Months and Over	(42)	(451)
Fair Value, Twelve Months and Over	6,189	25,293
U.S. Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Unrealized Losses, Less Than Twelve Months	(31)	(142)
Fair Value, Less Than Twelve Months	19,510	23,241
Gross Unrealized Losses, Twelve Months and Over		(167)
Fair Value, Twelve Months and Over		10,195
U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Unrealized Losses, Less Than Twelve Months	(11)	(635)
Fair Value, Less Than Twelve Months	7,984	68,957
Gross Unrealized Losses, Twelve Months and Over	(32)	(200)
Fair Value, Twelve Months and Over	4,969	9,793
Mortgage-backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Unrealized Losses, Less Than Twelve Months	(12)	(60)
Fair Value, Less Than Twelve Months	4,953	6,331
Gross Unrealized Losses, Twelve Months and Over		(56)
Fair Value, Twelve Months and Over		3,580
State and Local Governments [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Unrealized Losses, Less Than Twelve Months	(19)	(54)
Fair Value, Less Than Twelve Months	1,034	7,920
Gross Unrealized Losses, Twelve Months and Over	(10)	(28)
Fair Value, Twelve Months and Over	$ 1,220	$ 1,725

XML

Securities - Gross Realized Gains and Losses (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Available-for-sale Securities, Gross Realized Gain (Loss), Disclosures [Abstract]
Gross realized gains	$ 123	$ 109
Gross realized losses	(10)
Net realized gains	113	109
Tax expense related to net realized gain	$ 38	$ 37

XML

Securities - Amortized Cost and Fair Value of Debt Securities, by Contractual Maturity (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Available-for-sale Securities, Debt Maturities [Abstract]
Amortized Cost, One year or less	$ 7,679
Amortized Cost, After one year through five years	152,418
Amortized Cost, After five years through ten years	32,591
Amortized Cost, After ten years	6,884
Amortized Cost, Total	199,572
Amortized Cost, Mortgage-backed securities	24,787
Amortized Cost	224,359	$ 234,793
Fair Value, One year or less	7,722
Fair Value, After one year through five years	153,383
Fair Value, After five years through ten years	33,145
Fair Value, After ten years	7,115
Fair Value, Total	201,365
Fair Value, Mortgage-backed securities	25,147
Total, Fair Value	$ 226,512	$ 235,115

XML

Loans - Additional Information (Detail) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Residential mortgage loan	$ 18.8	$ 20.0
Consumer Real Estate [Member] | Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans held for sale	$ 1.1	$ 1.2

XML

Loans - Loans (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015	Dec. 31, 2014
Loans:
Loans - Gross	$ 708,337	$ 686,516
Less: Net deferred loan fees and costs	(677)	(638)
Loans after net deferred loan fees and costs	707,660	685,878	$ 614,709
Less: Allowance for loan losses	(6,285)	(6,057)		$ (5,905)
Loans - Net	701,375	679,821
Agricultural Real Estate [Member]
Loans:
Loans - Gross	59,533	58,525
Loans after net deferred loan fees and costs	59,479	58,463	51,396
Agricultural [Member]
Loans:
Loans - Gross	77,909	82,654
Loans after net deferred loan fees and costs	78,021	82,762	71,571
Industrial Development Bonds [Member]
Loans:
Loans - Gross	6,420	6,491
Loans after net deferred loan fees and costs	6,420	6,491
Consumer Real Estate [Member]
Loans:
Loans - Gross	88,365	88,189
Loans after net deferred loan fees and costs	88,097	87,947	97,019
Commercial Real Estate [Member]
Loans:
Loans - Gross	345,223	322,762
Loans after net deferred loan fees and costs	344,661	322,230	271,201
Consumer [Member]
Loans:
Loans - Gross	27,995	27,770
Loans after net deferred loan fees and costs	28,016	27,787	$ 23,627
Commercial and Industrial [Member]
Loans:
Loans - Gross	102,892	100,125
Loans after net deferred loan fees and costs	$ 102,966	$ 100,198

XML

Loans - Maturity Schedule by Major Category of Loans (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	$ 708,337	$ 686,516
Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	59,533	58,525
Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	77,909	82,654
Industrial Development Bonds [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	6,420	6,491
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	88,365	88,189
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	345,223	322,762
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	27,995	27,770
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	102,892	$ 100,125
Major Category Of Receivables Due Within One Year [Member] | Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	955
Major Category Of Receivables Due Within One Year [Member] | Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	48,960
Major Category Of Receivables Due Within One Year [Member] | Industrial Development Bonds [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	1,300
Major Category Of Receivables Due Within One Year [Member] | Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	1,033
Major Category Of Receivables Due Within One Year [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	14,434
Major Category Of Receivables Due Within One Year [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	5,186
Major Category Of Receivables Due Within One Year [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	50,820
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 - Gross	3,569
Major Category Of Receivables Due Within One Year to Five Years [Member] | Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	23,832
Major Category Of Receivables Due Within One Year to Five Years [Member] | Industrial Development Bonds [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	185
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 - Gross	12,132
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 - Gross	77,031
Major Category Of Receivables Due Within One Year to Five Years [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	17,525
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 - Gross	31,829
Major Category Of Receivables Over Five Years [Member] | Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	55,009
Major Category Of Receivables Over Five Years [Member] | Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	5,117
Major Category Of Receivables Over Five Years [Member] | Industrial Development Bonds [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	4,935
Major Category Of Receivables Over Five Years [Member] | Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	75,200
Major Category Of Receivables Over Five Years [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	253,758
Major Category Of Receivables Over Five Years [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	5,284
Major Category Of Receivables Over Five Years [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	$ 20,243

XML

Loans - Distribution of Fixed Rate Loans and Variable Rate Loans by Major Loan Category (Detail) $ in Thousands	Mar. 31, 2016 USD ($)
Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	$ 43,422
Distribution of variable rate loans by major loan category, Variable Rate	16,111
Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	45,761
Distribution of variable rate loans by major loan category, Variable Rate	32,148
Industrial Development Bonds [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	6,290
Distribution of variable rate loans by major loan category, Variable Rate	130
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	55,792
Distribution of variable rate loans by major loan category, Variable Rate	32,573
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	224,647
Distribution of variable rate loans by major loan category, Variable Rate	120,576
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	23,957
Distribution of variable rate loans by major loan category, Variable Rate	4,038
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	60,300
Distribution of variable rate loans by major loan category, Variable Rate	$ 42,592

XML

Loans - Contractual Aging of Recorded Investment in Past Due Loans by Portfolio Classification of Loans (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	$ 2,082	$ 2,190
Current	705,578	683,688
Loans after net deferred loan fees and costs	707,660	685,878	$ 614,709
Recorded Investment > 90 Days and Accruing	0	0	0
Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	219	162
Current	59,260	58,301
Loans after net deferred loan fees and costs	59,479	58,463	51,396
Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	3	145
Current	78,018	82,617
Loans after net deferred loan fees and costs	78,021	82,762	71,571
Commercial And Industrial and Industrial Development Bonds [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	19	71
Current	109,367	106,618
Loans after net deferred loan fees and costs	109,386	106,689	99,895
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,220	707
Current	86,877	87,240
Loans after net deferred loan fees and costs	88,097	87,947	97,019
Recorded Investment > 90 Days and Accruing	0	0
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	570	1,077
Current	344,091	321,153
Loans after net deferred loan fees and costs	344,661	322,230	271,201
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	51	28
Current	27,965	27,759
Loans after net deferred loan fees and costs	28,016	27,787	$ 23,627
30 to 59 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	806	609
30 to 59 Days Past Due [Member] | Commercial And Industrial and Industrial Development Bonds [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due		51
30 to 59 Days Past Due [Member] | Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	621	303
30 to 59 Days Past Due [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	148	236
30 to 59 Days Past Due [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	37	19
60 to 89 Days Past Due [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	226	201
60 to 89 Days Past Due [Member] | Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	57
60 to 89 Days Past Due [Member] | Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	3	145
60 to 89 Days Past Due [Member] | Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	156	47
60 to 89 Days Past Due [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	10	9
Greater Than 90 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,050	1,380
Greater Than 90 Days [Member] | Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	162	162
Greater Than 90 Days [Member] | Commercial And Industrial and Industrial Development Bonds [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	19	20
Greater Than 90 Days [Member] | Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	443	357
Greater Than 90 Days [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	422	$ 841
Greater Than 90 Days [Member] | Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	$ 4

XML

Loans - Recorded Investment in Nonaccrual Loans by Portfolio Class of Loans (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investment in nonaccrual loans	$ 2,003	$ 2,041	$ 2,424
Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investment in nonaccrual loans	162	162
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investment in nonaccrual loans	1,196	1,155
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investment in nonaccrual loans	422	484
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investment in nonaccrual loans	23	38
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investment in nonaccrual loans	$ 200	$ 202

XML

Loans (Tier Risk Rating System) - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2016
Minimum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Repayment period of loan with a reasonable reduction of principal balance	2 years
3 [Member] | Maximum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Leverage position	2.00%
Good [Member] | Maximum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Leverage position	1.50%

XML

Loans - Risk Category of Loans by Portfolio Class (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	$ 707,660	$ 685,878	$ 614,709
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	102,966	100,198
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	344,661	322,230	271,201
1-2 [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	509	261
1-2 [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	536	597
3 [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	21,747	22,300
3 [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	27,635	24,264
4 [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	79,918	76,855
4 [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	312,972	293,381
5 [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	52	57
5 [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	1,284	1,738
6 [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	559	543
6 [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	1,812	1,828
7 [Member] | Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	181	182
7 [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	422	422
Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	59,479	58,463	51,396
Agricultural Real Estate [Member] | 1-2 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	5,912	5,841
Agricultural Real Estate [Member] | 3 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	17,289	16,593
Agricultural Real Estate [Member] | 4 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	35,750	35,475
Agricultural Real Estate [Member] | 5 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	110	192
Agricultural Real Estate [Member] | 6 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	361	362
Agricultural Real Estate [Member] | 7 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	57
Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	78,021	82,762	$ 71,571
Agricultural [Member] | 1-2 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	9,251	12,025
Agricultural [Member] | 3 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	23,093	21,247
Agricultural [Member] | 4 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	45,467	49,220
Agricultural [Member] | 5 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	192	250
Agricultural [Member] | 7 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	18	20
Industrial Development Bonds [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	6,420	6,491
Industrial Development Bonds [Member] | 3 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	3,073	3,100
Industrial Development Bonds [Member] | 4 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	$ 3,347	$ 3,391

XML

Loans - Recorded Investment for Consumer Loans, Credit Quality based on Status of Loan and Payment Activity (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	$ 707,660	$ 685,878	$ 614,709
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	88,097	87,947	$ 97,019
Pass [Member] | Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	87,257	87,292
5 [Member] | Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs		48
6 [Member] | Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	330	332
7 [Member] | Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans after net deferred loan fees and costs	510	275
Consumer - Credit Card [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	3,587	3,901
Consumer - Credit Card [Member] | Performing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	3,587	3,901
Consumer - Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	24,429	23,886
Consumer - Other [Member] | Performing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	24,408	23,863
Consumer - Other [Member] | Nonperforming [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	$ 21	$ 23

XML

Loans - Schedule of Impaired Loans (Detail) - USD ($) $ in Thousands	3 Months Ended			12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015	Dec. 31, 2015
Receivables [Abstract]
Impaired loans without a valuation allowance	$ 1,042	$ 1,257	$ 624	$ 1,257
Impaired loans with a valuation allowance	1,169	879	1,619	879
Total impaired loans	2,211	2,136	2,243	2,136
Valuation allowance related to impaired loans	426	330	428	330
Total non-accrual loans	2,003	2,041	2,424	2,041
Total loans past-due ninety days or more and still accruing	0	0	0	0
Average investment in impaired loans	$ 2,130	$ 2,207	$ 1,958	$ 2,509

XML

Loans (Impaired Loans) - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired loans classified as troubled debt restructured	$ 1,100	$ 1,100	$ 1,300
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	120 days
Delinquent period for charging down commercial and agricultural credits	120 days
Foreclosed residential real estate property	$ 1,061	$ 1,175
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Foreclosed residential real estate property	456
Residential real estate properties foreclosure proceedings	$ 568

XML

Loans - Impaired Loans Classified as Troubled Debt Restructured (Detail) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($) Contract	Mar. 31, 2015 USD ($) Contract
Commercial and Industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts Modified in the Last 3 Months | Contract		1
Pre-Modification Outstanding Recorded Investment		$ 28
Post-Modification Outstanding Recorded Investment		$ 24
Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts Modified in the Last 3 Months | Contract		1
Pre-Modification Outstanding Recorded Investment		$ 528
Post-Modification Outstanding Recorded Investment		$ 430
Consumer Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts Modified in the Last 3 Months | Contract	1
Pre-Modification Outstanding Recorded Investment	$ 138
Post-Modification Outstanding Recorded Investment	$ 138

XML

Loans - Loans Individually Evaluated for Impairment by Portfolio Class of Loans (Detail) - USD ($) $ in Thousands	3 Months Ended			12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015	Dec. 31, 2015
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	$ 1,042	$ 1,257	$ 624	$ 1,257
With a specific allowance recorded, Related Allowance	426	330	428	330
With a specific allowance recorded, Recorded Investment	1,169	879	1,619	879
Related Allowance	426	330	428	330
Recorded Investment	2,211	2,136	2,243	2,136
Related Allowance	426	330	428	330
Average Recorded Investment	2,130	$ 2,207	1,958	$ 2,509
Agricultural Real Estate [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	162		157
With no related allowance recorded, Unpaid Principal Balance	162		157
With a specific allowance recorded, Related Allowance	57
With no related allowance recorded, Average Recorded Investment	162		173
With a specific allowance recorded, Recorded Investment	57
With a specific allowance recorded, Unpaid Principal Balance	57
Related Allowance	57
With a specific allowance recorded, Average Recorded Investment	38
With a specific allowance recorded, Interest Income Recognized	1
Recorded Investment	219
Unpaid Principal Balance	219
Related Allowance	57
Average Recorded Investment	200
Interest Income Recognized	1
Agricultural [Member]
Financing Receivable, Impaired [Line Items]
With a specific allowance recorded, Related Allowance			24
With a specific allowance recorded, Recorded Investment			24
With a specific allowance recorded, Unpaid Principal Balance			24
Related Allowance			24
With a specific allowance recorded, Average Recorded Investment			24
Recorded Investment			24
Unpaid Principal Balance			24
Related Allowance			24
Average Recorded Investment			24
Consumer Real Estate [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	365
With no related allowance recorded, Unpaid Principal Balance	365
With a specific allowance recorded, Related Allowance	104		35
With no related allowance recorded, Average Recorded Investment	156
With no related allowance recorded, Interest Income Recognized	3
With no related allowance recorded, Interest Income Recognized Cash Basis	3
With a specific allowance recorded, Recorded Investment	509		96
With a specific allowance recorded, Unpaid Principal Balance	628		96
Related Allowance	104		35
With a specific allowance recorded, Average Recorded Investment	307		96
With a specific allowance recorded, Interest Income Recognized	1		3
With a specific allowance recorded, Interest Income Recognized Cash Basis			3
Recorded Investment	874		253
Unpaid Principal Balance	993		253
Related Allowance	104		35
Average Recorded Investment	463		269
Interest Income Recognized	4		3
Interest Income Recognized Cash Basis	3		3
Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment	515
With no related allowance recorded, Unpaid Principal Balance	515
With a specific allowance recorded, Related Allowance	152		131
With no related allowance recorded, Average Recorded Investment	409
With no related allowance recorded, Interest Income Recognized	8
With no related allowance recorded, Interest Income Recognized Cash Basis	7
With a specific allowance recorded, Recorded Investment	422		1,139
With a specific allowance recorded, Unpaid Principal Balance	422		1,139
Related Allowance	152		131
With a specific allowance recorded, Average Recorded Investment	422		852
Recorded Investment	937		1,139
Unpaid Principal Balance	937		1,139
Related Allowance	152		131
Average Recorded Investment	831		852
Interest Income Recognized	8
Interest Income Recognized Cash Basis	7
Consumer [Member]
Financing Receivable, Impaired [Line Items]
With no related allowance recorded, Recorded Investment			467
With no related allowance recorded, Unpaid Principal Balance			467
With no related allowance recorded, Average Recorded Investment			469
With no related allowance recorded, Interest Income Recognized			7
With a specific allowance recorded, Average Recorded Investment			7
Average Recorded Investment			7
Commercial and Industrial [Member]
Financing Receivable, Impaired [Line Items]
With a specific allowance recorded, Related Allowance	113		238
With no related allowance recorded, Average Recorded Investment	454
With no related allowance recorded, Interest Income Recognized	6
With a specific allowance recorded, Recorded Investment	181		360
With a specific allowance recorded, Unpaid Principal Balance	239		360
Related Allowance	113		238
With a specific allowance recorded, Average Recorded Investment	182		337
Recorded Investment	181		827
Unpaid Principal Balance	239		827
Related Allowance	113		238
Average Recorded Investment	636		806
Interest Income Recognized	$ 6		$ 7

XML

Loans - Summary of Activities in Allowance for Credit Losses (Detail) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015	Dec. 31, 2014
Allowance for Loan & Lease Losses
Balance at beginning of year	$ 6,057	$ 5,905	$ 5,905
Provision for loan loss	277	114	625
Loans charged off	(84)	(92)	(1,030)
Recoveries	35	50	557
Allowance for Loan & Lease Losses	6,285		6,057
Allowance for Unfunded Loan Commitments & Letters of Credit	220		208
Total Allowance for Credit Losses	$ 6,505	$ 6,179	$ 6,265	$ 6,112

XML

Loans - Analysis of Allowance for Credit Losses (Detail) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$ 6,265	$ 6,112	$ 6,112
Charge Offs	(84)	(92)	(1,030)
Recoveries	35	50	557
Provision (Credit)	277	114
Other Non-interest expense related to unfunded	12	(5)
Ending Balance	6,505	6,179	6,265
Ending balance: individually evaluated for impairment	426	428
Ending balance: collectively evaluated for impairment	6,079	5,751
Ending balance: loans acquired with deteriorated credit quality	1	1
FINANCING RECEIVABLES:
Ending balance	707,660	614,709	685,878
Ending balance: individually evaluated for impairment	2,211	2,243
Ending balance: collectively evaluated for impairment	705,449	612,466
Agricultural Real Estate [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	211	184	184
Provision (Credit)	61	3
Ending Balance	272	187	211
Ending balance: individually evaluated for impairment	57
Ending balance: collectively evaluated for impairment	215	187
FINANCING RECEIVABLES:
Ending balance	59,479	51,396	58,463
Ending balance: individually evaluated for impairment	219
Ending balance: collectively evaluated for impairment	59,260	51,396
Agricultural [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	582	547	547
Recoveries	4	1
Provision (Credit)	(38)	(24)
Ending Balance	548	524	582
Ending balance: individually evaluated for impairment		24
Ending balance: collectively evaluated for impairment	548	500
FINANCING RECEIVABLES:
Ending balance	78,021	71,571	82,762
Ending balance: individually evaluated for impairment		24
Ending balance: collectively evaluated for impairment	78,021	71,547
Commercial And Industrial and Industrial Development Bonds [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	1,229	1,421	1,421
Charge Offs	(20)
Recoveries	3	5
Provision (Credit)	39	(7)
Ending Balance	1,251	1,419	1,229
Ending balance: individually evaluated for impairment	113	238
Ending balance: collectively evaluated for impairment	1,138	1,181
FINANCING RECEIVABLES:
Ending balance	109,386	99,895	106,689
Ending balance: individually evaluated for impairment	181	827
Ending balance: collectively evaluated for impairment	109,205	99,068
Unfunded Loan Commitment & Letters of Credit [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	208	207	207
Other Non-interest expense related to unfunded	12	(5)
Ending Balance	220	202	208
Ending balance: collectively evaluated for impairment	220	202
Receivables Acquired with Deteriorated Credit Quality [Member]
FINANCING RECEIVABLES:
Ending balance: loans acquired with deteriorated credit quality	502	520
Consumer Real Estate [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	338	537	537
Recoveries	2	2
Provision (Credit)	117	(42)
Ending Balance	457	497	338
Ending balance: individually evaluated for impairment	104	35
Ending balance: collectively evaluated for impairment	353	462
Ending balance: loans acquired with deteriorated credit quality	1	1
FINANCING RECEIVABLES:
Ending balance	88,097	97,019	87,947
Ending balance: individually evaluated for impairment	874	253
Ending balance: collectively evaluated for impairment	87,223	96,766
Consumer Real Estate [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
FINANCING RECEIVABLES:
Ending balance: loans acquired with deteriorated credit quality	502	520
Commercial Real Estate [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	2,516	2,367	2,367
Charge Offs	(3)
Recoveries	1	1
Provision (Credit)	164	(156)
Ending Balance	2,678	2,212	2,516
Ending balance: individually evaluated for impairment	152	131
Ending balance: collectively evaluated for impairment	2,526	2,081
FINANCING RECEIVABLES:
Ending balance	344,661	271,201	322,230
Ending balance: individually evaluated for impairment	937	1,139
Ending balance: collectively evaluated for impairment	343,724	270,062
Consumer [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	337	323	323
Charge Offs	(61)	(92)
Recoveries	25	41
Provision (Credit)	34	12
Ending Balance	335	284	337
Ending balance: collectively evaluated for impairment	335	284
FINANCING RECEIVABLES:
Ending balance	28,016	23,627	27,787
Ending balance: collectively evaluated for impairment	28,016	23,627
Unallocated [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	844	526	526
Provision (Credit)	(100)	328
Ending Balance	744	854	$ 844
Ending balance: collectively evaluated for impairment	$ 744	$ 854

XML

Earnings Per Share - Calculation of Basic Earnings Per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Earnings Per Share [Abstract]
Net income	$ 2,481	$ 2,351
Less: distributed earnings allocated to participating securities	(8)	(7)
Less: undistributed earnings allocated to participating securities	(13)	(10)
Net earnings available to common shareholders	$ 2,460	$ 2,334
Weighted average common shares outstanding including participating securities	4,609,226	4,623,322
Less: average unvested restricted shares	(38,670)	(32,923)
Weighted average common shares outstanding	4,570,556	4,590,399
Basic earnings and diluted per share	$ 0.54	$ 0.51

XML

Fair Value of Financial Instruments - Additional Information (Detail) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest-bearing deposits maturing date	90 days
Fair value of collateral dependent impaired loans categorized as Level 3	$ 2,211,000	$ 2,136,000	$ 2,243,000
Specific allocation for collateral dependent impaired loans	426,000	330,000	$ 428,000
Asset impairment charges	0	0
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair value of collateral dependent impaired loans categorized as Level 3	$ 700,000	$ 500,000

XML

Fair Value of Financial Instruments - Estimated Fair Values and Related Carrying or Notional Amounts (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015	Dec. 31, 2014
Financial Assets:
Cash and Cash Equivalents	$ 25,908	$ 22,018	$ 45,101	$ 24,295
Interest-bearing time deposits	1,960
Securities - available-for-sale	226,512	235,115
Other Securities	3,717	3,717
Loans, net	701,375	679,821
Financial Liabilities:
Non-interest bearing Deposits	163,769	171,112
Time Deposits	184,722	184,285
Total deposits	798,132	771,339
Fed Funds purchased and Securities sold under agreement to repurchase	69,390	78,815
Federal Home Loan Bank advances	10,000	10,000
Carrying Amount [Member]
Financial Assets:
Cash and Cash Equivalents	25,908	22,018
Interest-bearing time deposits	1,960
Securities - available-for-sale	226,512	235,115
Other Securities	3,717	3,717
Loans, net	701,375	679,821
Interest receivable	4,112	3,589
Financial Liabilities:
Interest bearing Deposits	449,641	415,942
Non-interest bearing Deposits	163,769	171,112
Time Deposits	184,722	184,285
Total deposits	798,132	771,339
Fed Funds purchased and Securities sold under agreement to repurchase	69,390	78,815
Federal Home Loan Bank advances	10,000	10,000
Interest payable	222	185
Fair Value [Member]
Financial Assets:
Cash and Cash Equivalents	25,908	22,018
Interest-bearing time deposits	1,960
Securities - available-for-sale	226,512	235,115
Other Securities	3,717	3,717
Loans, net	704,996	683,332
Interest receivable	4,112	3,589
Financial Liabilities:
Interest bearing Deposits	449,641	415,942
Non-interest bearing Deposits	163,769	171,112
Time Deposits	184,843	184,308
Total deposits	798,253	771,362
Fed Funds purchased and Securities sold under agreement to repurchase	69,390	78,815
Federal Home Loan Bank advances	9,822	9,986
Interest payable	222	185
Level 1 [Member]
Financial Assets:
Cash and Cash Equivalents	25,908	22,018
Securities - available-for-sale	33,721	38,505
Level 2 [Member]
Financial Assets:
Interest-bearing time deposits	1,960
Securities - available-for-sale	185,676	189,258
Financial Liabilities:
Non-interest bearing Deposits	163,769	171,112
Total deposits	163,769	171,112
Level 3 [Member]
Financial Assets:
Securities - available-for-sale	7,115	7,352
Other Securities	3,717	3,717
Loans, net	704,996	683,332
Interest receivable	4,112	3,589
Financial Liabilities:
Interest bearing Deposits	449,641	415,942
Time Deposits	184,843	184,308
Total deposits	634,484	600,250
Fed Funds purchased and Securities sold under agreement to repurchase	69,390	78,815
Federal Home Loan Bank advances	9,822	9,986
Interest payable	$ 222	$ 185

XML

Fair Value of Financial Instruments - Financial Assets Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Mar. 31, 2015	Dec. 31, 2014
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	$ 226,512	$ 235,115
U.S. Treasury [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	33,721	38,505
U.S. Government Agencies [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	102,814	98,220
Mortgage-backed Securities [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	25,147	26,324
State and Local Governments [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	64,830	72,066
Level 1 [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	33,721	38,505
Level 1 [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	33,721	38,505
Level 1 [Member] | U.S. Treasury [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	33,721	38,505
Level 2 [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	185,676	189,258
Level 2 [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	185,676	189,258
Level 2 [Member] | U.S. Government Agencies [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	102,814	98,220
Level 2 [Member] | Mortgage-backed Securities [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	25,147	26,324
Level 2 [Member] | State and Local Governments [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	57,715	64,714
Level 3 [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	7,115	7,352
Level 3 [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	7,115	7,352
Level 3 [Member] | State and Local Governments [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	7,115	7,352	$ 7,837	$ 7,931
Level 3 [Member] | State and Local Governments [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	$ 7,115	$ 7,352

XML

Fair Value of Financial Instruments - Changes in the Level 3 Fair Value Category of Unobservable Inputs (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	$ 235,115
Ending Balance	226,512
State and Local Governments [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	72,066
Ending Balance	64,830
Level 3 [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	7,352
Ending Balance	7,115
Level 3 [Member] | State and Local Governments [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	7,352	$ 7,931
Change in Market Value	33	106
Payments & Maturities	(270)	(200)
Ending Balance	7,115	7,837
Level 3 [Member] | State and Local Governments [Member] | Tax - Exempt [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	5,904	6,638
Change in Market Value		(3)
Payments & Maturities	(270)	(200)
Ending Balance	5,634	6,435
Level 3 [Member] | State and Local Governments [Member] | Taxable [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	1,448	1,293
Change in Market Value	33	109
Ending Balance	$ 1,481	$ 1,402

XML

Fair Value of Financial Instruments - Quantitative Information about Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements (Detail) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
State and Local Governments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 7,115	$ 7,352
Collateral Dependent Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 743	549
Other Real Estate Owned - Commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value		$ 216
U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Valuation Technique	Discounted cash flow
Unobservable Inputs	Credit strength of underlying project or entity / Discount rate
Collateral Dependent Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Valuation Technique	Collateral based measurements
Unobservable Inputs	Discount to reflect current market conditions and ultimate collectability
Other Real Estate Owned - Commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Valuation Technique	Appraisals
Unobservable Inputs	Discount to reflect current market
Minimum [Member] | State and Local Governments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average	0.00%	0.00%
Minimum [Member] | Collateral Dependent Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average	0.00%	0.00%
Minimum [Member] | Other Real Estate Owned - Commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average	0.00%	0.00%
Maximum [Member] | State and Local Governments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average	5.00%	5.00%
Maximum [Member] | Collateral Dependent Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average	50.00%	50.00%
Maximum [Member] | Other Real Estate Owned - Commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average	20.00%	20.00%

XML

Fair Value of Financial Instruments - Collateral Dependent Impaired Loans and Other Real Estate (Detail) - Fair Value on Nonrecurring Basis [Member] - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
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	$ 743	$ 549
Other Real Estate Owned - Commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total		216
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	743	765
Level 3 [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	$ 743	549
Level 3 [Member] | Other Real Estate Owned - Commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total		$ 216

XML

Federal Funds Purchased and Securities Sold Under Agreements to Repurchase - Additional Information (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Fees And Commissions Income [Abstract]
Federal funds purchased	$ 9,000	$ 22,000
Securities sold under agreements to repurchase	$ 60,000	$ 57,000

XML

Federal Funds Purchased and Securities Sold Under Agreements to Repurchase - Schedule of Remaining Contractual Maturity in Repurchase Agreements (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Assets Sold under Agreements to Repurchase [Line Items]
Federal funds purchased	$ 9,000	$ 22,000
Repurchase agreements, Remaining contractual maturity of the agreements	60,000	57,000
Total	69,390	78,815
US Treasury & Agency Securities [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Repurchase agreements, Remaining contractual maturity of the agreements	60,390	56,815
Overnight & Continuous [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Federal funds purchased	9,000	22,000
Total	49,181	61,691
Overnight & Continuous [Member] | US Treasury & Agency Securities [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Repurchase agreements, Remaining contractual maturity of the agreements	40,181	39,691
Greater Than 90 Days [Member]
Assets Sold under Agreements to Repurchase [Line Items]
Total	20,209	17,124
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	$ 20,209	$ 17,124