UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 000-26099

FARMERS & MERCHANTS BANCORP

(Exact name of registrant as specified in its charter)

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

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

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

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	Not Applicable	Not Applicable

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

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

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of April 30, 2025, the registrant had 727,798 shares of common stock, $0.01 par value per share, outstanding.

FARMERS & MERCHANTS BANCORP

FORM 10-Q

TABLE OF CONTENTS

PART I. - FINANCIAL INFORMATION			Page

	Item 1 - Consolidated Financial Statements (Unaudited)
		Consolidated Balance Sheets	3
		Consolidated Statements of Income	4
		Consolidated Statements of Comprehensive Income	5
		Consolidated Statements of Changes in Shareholders’ Equity	6
		Consolidated Statements of Cash Flows	7
		Notes to Consolidated Financial Statements	8

	Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations		35

	Item 3 - Quantitative and Qualitative Disclosures About Market Risk		56

	Item 4 - Controls and Procedures		58

PART II. - OTHER INFORMATION

	Item 1 – Legal Proceedings		58
	Item 1A – Risk Factors		59
	Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		60
	Item 3 – Defaults Upon Senior Securities		60
	Item 4 – Mine Safety Disclosures		60
	Item 5 – Other Information		60
	Item 6 – Exhibits		61
	Signatures		62

Table of Contents

PART 1. FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

FARMERS & MERCHANTS BANCORP

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except share and per share amounts)	March 31, 2025			December 31, 2024
ASSETS
Cash and due from banks	$	91,496		$	71,058
Interest bearing deposits with banks		515,758			141,505
Total cash and cash equivalents		607,254			212,563
Securities available-for-sale, amortized cost $515,052 and $490,992, respectively		495,433			464,414
Securities held-to-maturity, fair value $614,863 and $610,953, respectively		759,771			769,443
Allowance for credit losses - securities held-to-maturity		(450	)		(450	)
Total investment securities		1,254,754			1,233,407
Non-marketable securities		15,549			15,549
Loans and leases held for investment, net of unearned income		3,584,174			3,678,388
Allowance for credit losses - loans and leases		(75,423	)		(75,283	)
Loans and leases held for investment, net		3,508,751			3,603,105
Bank-owned life insurance		74,688			74,085
Premises and equipment, net		51,242			51,367
Deferred income tax assets and income taxes receivable		32,461			36,729
Accrued interest receivable		23,709			30,152
Goodwill		11,183			11,183
Other intangibles		1,557			1,687
Other real estate owned		873			873
Other assets		98,003			99,496
Total Assets	$	5,680,024		$	5,370,196

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Non-interest bearing	$	1,512,040		$	1,518,267
Interest bearing:
Demand		765,894			882,123
Savings and money market		1,990,132			1,583,202
Certificates of deposit		709,902			715,547
Total interest bearing		3,465,928			3,180,872
Total deposits		4,977,968			4,699,139
Subordinated debentures		10,310			10,310
Interest payable and other liabilities		89,440			87,675
Total Liabilities		5,077,718			4,797,124

COMMITMENTS AND CONTINGENCIES (Note 11)

SHAREHOLDERS’ EQUITY
Preferred shares, no par value, 1,000,000 shares authorized and none issued or outstanding		-			-
Common shares, $0.01 par value, 7,500,000 authorized, 729,913 and 699,798 issued and outstanding at March 31, 2025 and December 31, 2024, respectively		7			7
Additional paid-in capital		2,042			-
Retained earnings		614,729			592,431
Accumulated other comprehensive loss, net of taxes		(14,472	)		(19,366	)
TOTAL SHAREHOLDERS’ EQUITY		602,306			573,072
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	5,680,024		$	5,370,196

See accompanying notes to the unaudited consolidated financial statements.

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FARMERS & MERCHANTS BANCORP

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended March 31,
(Dollars in thousands, except share and per share amounts)	2025		2024
Interest income
Interest and fees on loans and leases	$	54,035	$	55,408
Interest and dividends on investment securities		10,462		6,703
Interest on deposits with others		2,641		4,530
Total interest income		67,138		66,641

Interest expense
Deposits		13,805		14,645
Borrowed funds		-		62
Subordinated debentures		192		221
Total interest expense		13,997		14,928
Net interest income		53,141		51,713
Provision for credit losses		300		-
Net interest income after provision for credit losses		52,841		51,713
Non-interest income
Card processing		1,667		1,629
Net gain on deferred compensation benefits		833		1,158
Service charges on deposit accounts		772		748
Increase in cash surrender value of BOLI		603		595
Other		1,146		945
Total non-interest income		5,021		5,075
Non-interest expense
Salaries and employee benefits		17,144		17,503
Data processing		1,638		1,455
Occupancy		1,302		1,232
Net gain on deferred compensation benefits		833		1,158
Deposit insurance		748		712
Professional services		922		541
Marketing		467		480
Other		2,455		2,440
Total non-interest expense		25,509		25,521
INCOME BEFORE INCOME TAXES		32,353		31,267
Income tax expense		9,344		8,544
NET INCOME	$	23,009	$	22,723

Earnings per common share:
Basic	$	32.88	$	30.56
Diluted	$	32.86	$	30.56

Weighted average number of common shares
Basic		699,736		743,515
Diluted		700,215		743,515

See accompanying notes to the unaudited consolidated financial statements.

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FARMERS & MERCHANTS BANCORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended March 31,
(Dollars in thousands)	2025			2024
Net income	$	23,009		$	22,723
Other comprehensive income
Unrealized gains/(losses) on available-for-sale securities		6,959			(2,600	)
Amortization of unrecognized loss on securities transferred to held-to-maturity		(11	)		(27	)
Net unrealized gains/(losses) on securities		6,948			(2,627	)
Income tax (expense)/benefit		(2,054	)		777
Other comprehensive income/(loss), net of tax		4,894			(1,850	)
Total comprehensive income	$	27,903		$	20,873

See accompanying notes to the unaudited consolidated financial statements.

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FARMERS & MERCHANTS BANCORP

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

	For the three months ended March 31, 2025 and 2024
(Dollars in thousands, except share amounts)	Common Shares			Amount		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive (Loss)/Income			Total
Balance as of December 31, 2023		747,971		$	7	$	36,852		$	525,360		$	(12,464	)	$	549,755
Cumulative change from adoption of ASU 2023-02		-			-		-			40			-			40
Net income		-			-		-			22,723			-			22,723
Other comprehensive loss, net of tax		-			-		-			-			(1,850	)		(1,850	)
Repurchase of common stock		(5,201	)		-		(5,451	)		-			-			(5,451	)
Balance as of March 31, 2024		742,770		$	7	$	31,401		$	548,123		$	(14,314	)	$	565,217

Balance as of December 31, 2024		699,798		$	7	$	-		$	592,431		$	(19,366	)	$	573,072
Net income		-			-		-			23,009			-			23,009
Other comprehensive income, net of tax		-			-		-			-			4,894			4,894
Issuance of restricted stock awards		30,818			-		-			-			-			-
Stock based compensation expense		-			-		2,042			-			-			2,042
Repurchase of common stock		(703	)		-		-			(711	)		-			(711	)
Balance as of March 31, 2025		729,913		$	7	$	2,042		$	614,729		$	(14,472	)	$	602,306

See accompanying notes to the unaudited consolidated financial statements.

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FARMERS & MERCHANTS BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,
(Dollars in thousands)	2025			2024
Cash flows from operating activities:
Net income	$	23,009		$	22,723
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		300			-
Depreciation and amortization		763			698
Net accretion of securities premiums and discounts		(276	)		(320	)
Stock based compensation expense		2,042			-
Increase in cash surrender value of BOLI		(603	)		(595	)
Decrease in deferred income taxes, net		6,959			3,296
Net changes in:
Other assets		3,935			8,502
Other liabilities		3,421			477
Net cash provided by operating activities		39,550			34,781
Cash flows from investing activities:
Net decrease (increase) in loans and leases held for investment		94,058			(41,541	)
Purchase of available-for-sale securities		(33,186	)		(63,764	)
Purchase of held-to-maturity securities		(1,945	)		(1,130	)
Proceeds from sales, maturities, calls and pay downs of available-for-sale securities		9,274			4,318
Proceeds from maturities, calls and pay downs of held-to-maturity securities		11,489			11,743
Purchase of premises and equipment		(673	)		(410	)
Purchase of other investments		(2,047	)		(2,285	)
Proceeds from sale of assets		53			-
Net cash provided by (used in) investing activities		77,023			(93,069	)
Cash flows from financing activities:
Net increase in deposits		278,829			291,494
Federal Home Loan Bank advances		-			100,000
Net cash used in share repurchase of common stock		(711	)		(5,451	)
Net cash provided by financing activities		278,118			386,043
Net change in cash and cash equivalents		394,691			327,755
Cash and cash equivalents, beginning of period		212,563			410,642
Cash and cash equivalents, end of period	$	607,254		$	738,397

Supplemental disclosures of cash flow information:
Cash paid for interest	$	15,109		$	12,852
Income taxes paid	$	1,234		$	-

Supplemental disclosures of non-cash transactions:
Net change in unrealized (losses)/gains on securities available-for-sale	$	(6,959	)	$	2,600

See accompanying notes to the unaudited consolidated financial statements.

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FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Basis of Presentation and Significant Accounting Policies

The accompanying unaudited consolidated financial statements include the accounts of Farmers & Merchants Bancorp (“FMCB” or “Bancorp”), a bank holding company incorporated in the State of Delaware, and its wholly owned subsidiary, Farmers & Merchants Bank of Central California (“F&M Bank” or the “Bank”) (collectively, the “Company”).

These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Certain information and note disclosures have been condensed or omitted pursuant to the rules and regulations of the SEC and the accounting standards for interim financial statements. All significant intercompany transactions and balances have been eliminated.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements. Various elements of the Company’s accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. In particular, management has identified several accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are significant to an understanding of Bank’s financial statements. These policies relate to: (i) the determination of the provision and allowance for credit losses; (ii) the valuation of financial assets and liabilities recorded at fair value; (iii) the valuation of intangibles, such as goodwill and core deposit intangibles (“CDI”); (iv) the valuation of other real estate owned (“OREO”); and (v) the valuation or recognition of deferred tax assets and liabilities. These policies and judgments, estimates and assumptions are described in greater detail in subsequent notes to the Unaudited Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates, in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 14, 2025 and Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates included in this Quarterly Report on Form 10-Q.

The information included in this Form 10-Q should be read in conjunction with our 2024 Form 10-K. Interim results are not necessarily indicative of results for a full year or any other interim period.

Summary of Significant Accounting Policies

Our accounting policies are described in Note 1 – Summary of Significant Accounting Policies, of our audited consolidated financial statements included in our 2024 Form 10-K. As of March 31, 2025, there were no significant changes to accounting policies from those disclosed in our audited consolidated financial statements included in our 2024 Form 10-K.

Use of estimates — The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

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FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 1—Basis of Presentation and Significant Accounting Policies—Continued

Recently Adopted Accounting Standards — The Accounting Standards Codification (“ASC”) is the FASB officially recognized source of authoritative GAAP applicable to all public and non-public non-governmental entities. Periodically, the FASB will issue Accounting Standard Updates (“ASU”) to its ASC. Rules and interpretive releases of the SEC under the authority of the federal securities laws are also sources of authoritative GAAP for the Company as an SEC registrant. All other accounting literature is non-authoritative.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires public business entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold. ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things. The Company adopted this standard with no material impact on the Company’s consolidated financial statements, and the new income tax disclosures will be required beginning with our 2025 Form 10-K.

Accounting Standards Pending Adoption — The following paragraphs provide descriptions of newly issued but not yet effective accounting standards that could have a material effect on the Company’s financial position or results of operations.

In November 2024, the FASB issued ASU No. 2024-03, “Income Statement – Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”), and in January 2025, the FASB issued ASU No. 2025-01, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date” (“ASU 2025-01”). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Both early adoption and retrospective application are permitted. The Company is currently evaluating the impact that the adoption of these standards will have on its consolidated financial statements and disclosures.

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FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 2—Investment Securities

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

	Amortized		Gross Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
As of March 31, 2025
U.S. Government-sponsored securities	$	2,509	$	3	$	15	$	2,497
Mortgage-backed securities⁽¹⁾		490,533		2,225		21,864		470,894
Commercial mortgage-backed obligations⁽¹⁾		1,229		14		-		1,243
Collateralized mortgage obligations⁽¹⁾		5,657		-		95		5,562
Corporate securities		14,814		113		-		14,927
Other		310		-		-		310
Total available-for-sale securities	$	515,052	$	2,355	$	21,974	$	495,433

⁽¹⁾All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

	Amortized		Gross Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
As of December 31, 2024
U.S. Government-sponsored securities	$	2,657	$	4	$	17	$	2,644
Mortgage-backed securities⁽¹⁾		466,302		464		26,908		439,858
Commercial mortgage-backed obligations⁽¹⁾		1,228		-		16		1,212
Collateralized mortgage obligations⁽¹⁾		5,653		-		156		5,497
Corporate securities		14,800		56		-		14,856
Other		352		-		5		347
Total available-for-sale securities	$	490,992	$	524	$	27,102	$	464,414

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

The book values, estimated fair values and unrecognized gains and losses of investments classified as held-to-maturity are as follows:

									Allowance
	Amortized		Gross Unrecognized						for Credit
(Dollars in thousands)	Cost		Gains		Losses		Fair Value		Losses
As of March 31, 2025
Mortgage-backed securities⁽¹⁾	$	617,929	$	6	$	131,406	$	486,529	$	-
Collateralized mortgage obligations⁽¹⁾		66,965		-		12,398		54,567		-
Municipal securities		74,877		644		1,754		73,767		450
Total held-to-maturity securities	$	759,771	$	650	$	145,558	$	614,863	$	450

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

									Allowance
	Amortized		Gross Unrecognized						for Credit
(Dollars in thousands)	Cost		Gains		Losses		Fair Value		Losses
As of December 31, 2024
Mortgage-backed securities⁽¹⁾	$	626,427	$	-	$	143,544	$	482,883	$	-
Collateralized mortgage obligations⁽¹⁾		68,377		-		13,876		54,501		-
Municipal securities		74,639		46		1,116		73,569		450
Total held-to-maturity securities	$	769,443	$	46	$	158,536	$	610,953	$	450

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

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FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 2—Investment Securities—Continued

The allowance for credit losses on held-to-maturity securities is a contra-asset valuation account that is deducted from the amortized cost basis of held-to-maturity securities to present the net amount expected to be collected. Management measures expected credit losses on held-to-maturity securities on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. With regard to residential mortgage-backed securities issued by the U.S. government, or agencies thereof, it is expected that the securities will not be settled at prices less than the amortized cost basis of the securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S. government. Accordingly, no allowance for credit losses has been recorded for these securities. With regard to securities issued by States and political subdivisions and other held-to-maturity securities, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) internal forecasts and (v) whether or not such securities are guaranteed or pre-refunded by the issuers.

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

The following tables show the gross unrealized losses for available-for-sale securities, for which an allowance for credit losses has not been recorded, that have been in an unrealized loss position for less than 12 months or 12 months or more:

					March 31, 2025
	Less Than 12 Months				12 Months or More				Total
(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available-for-Sale Securities
U.S. Government-sponsored securities	$	556	$	-	$	841	$	15	$	1,397	$	15
Mortgage-backed securities⁽¹⁾		249,596		2,354		67,291		19,510		316,887		21,864
Commerical mortgage-backed securities⁽¹⁾		-		-		-		-		-		-
Collateralized mortgage obligations⁽¹⁾		5,129		87		433		8		5,562		95
Corporate securities		-		-		-		-		-		-
Total available-for-sale securities	$	255,281	$	2,441	$	68,565	$	19,533	$	323,846	$	21,974

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

							December 31, 2024
	Less Than 12 Months						12 Months or More						Total
(Dollars in thousands)	Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
Available-for-Sale Securities
U.S. Government-sponsored securities		$	600		$	1		$	888		$	16		$	1,488		$	17
Mortgage-backed securities⁽¹⁾			324,202			5,772			67,319			21,136			391,521			26,908
Commerical mortgage-backed securities⁽¹⁾			1,212			16			-			-			1,212			16
Collateralized mortgage obligations⁽¹⁾			5,043			147			454			9			5,497			156
Corporate securities			347			5			-			-			347			5
Total available-for-sale securities		$	331,404		$	5,941		$	68,661		$	21,161		$	400,065		$	27,102

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

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FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 2—Investment Securities—Continued

As of March 31, 2025, the Company held 185 available-for-sale securities of which 37 securities were in an unrealized loss position for less than twelve months and 110 securities were in an unrealized loss position for twelve months or more without an allowance for credit losses. Because the decline in fair value is attributable to changes in interest rates and not credit quality and because the Company does not have the intent to sell and it is likely that the Company will not be required to sell the securities prior to their anticipated recovery at maturity, it has been determined that there is no expected credit loss on these securities. Management evaluates the available-for-sale securities in an unrealized loss position, relying primarily on industry analyst reports and observations of market conditions and interest rate fluctuations.

The following tables present the activity in the allowance for credit losses for held-to-maturity securities by major type:

	March 31, 2025
(Dollars in thousands)	Municipal securities			Mortgage-backed securities			Collateralized mortgage obligations			Total
Allowance for credit losses - securities
Beginning balance		$	450		$	-		$	-		$	450
Provision for credit losses			-			-			-			-
Ending balance		$	450		$	-		$	-		$	450

	December 31, 2024
(Dollars in thousands)	Municipal securities			Mortgage-backed securities			Collateralized mortgage obligations			Total
Allowance for credit losses - securities
Beginning balance		$	450		$	-		$	-		$	450
Provision for credit losses			-			-			-			-
Ending balance		$	450		$	-		$	-		$	450

The amortized cost and estimated fair values of investment securities at March 31, 2025 by contractual final maturity are shown in the following table:

	Available-for-Sale				Held-to-Maturity
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Securities maturing in:
One year or less	$	394	$	393	$	1,538	$	1,523
After one year through five years		17,430		17,499		24,008		23,500
After five years through ten years		2,502		2,480		18,977		17,669
After ten years		494,726		475,061		715,248		572,171
Total	$	515,052	$	495,433	$	759,771	$	614,863

Table of Contents

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 2—Investment Securities—Continued

The Company monitors the credit quality of those held-to-maturity securities not issued by the U.S. government or one of its agencies or government sponsored entities, through the use of credit ratings. Credit ratings are reviewed and updated quarterly. Nonrated municipal investments consist primarily of bonds issued by political subdivisions such as housing authorities and reclamation districts. Nonrated municipal investments are monitored through financial covenants and review of repayment history. As of March 31, 2025, there were no past due principal or interest payments associated with held-to-maturity municipal securities. There were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity.

The following tables summarize the amortized cost of held-to-maturity municipal securities by credit rating as of the dates indicated:

	Held-to-Maturity
	Amortized Cost
(Dollars in thousands)	AAA/AA/A			BBB/BB/B			Not Rated			Total
March 31, 2025
Municipal securities		$	18,871		$	404		$	55,602	$	74,877
Total		$	18,871		$	404		$	55,602	$	74,877

	Held-to-Maturity
	Amortized Cost
(Dollars in thousands)	AAA/AA/A			BBB/BB/B			Not Rated			Total
December 31, 2024
Municipal securities		$	19,022		$	403		$	55,214	$	74,639
Total		$	19,022		$	403		$	55,214	$	74,639

Proceeds from sales and calls of investment securities were as follows:

(Dollars in thousands)	Gross Proceeds		Gross Gains		Gross Losses
Three months ended March 31, 2025	$	160	$	-	$	-
Three months ended March 31, 2024	$	-	$	-	$	-

Pledged Securities

At March 31, 2025, investment securities carried at $713.7 million were pledged to secure public deposits, Federal Home Loan Bank (“FHLB”) borrowings, and other government agency deposits as required by law. This amount was $712.5 million at December 31, 2024.

Table of Contents

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3—Loans and Leases

Loans and leases as of the dates indicated consisted of the following:

(Dollars in thousands)	March 31, 2025			December 31, 2024
Loans and leases held for investment, net
Real estate:
Commercial	$	1,355,261		$	1,360,841
Agricultural		737,314			751,026
Residential and home equity		396,044			404,399
Construction		185,348			194,903
Total real estate		2,673,967			2,711,169
Commercial & industrial		482,196			504,403
Agricultural		258,704			289,847
Commercial leases		175,384			179,718
Consumer and other		5,260			5,084
Total gross loans and leases		3,595,511			3,690,221
Unearned income		(11,337	)		(11,833	)
Total net loans and leases		3,584,174			3,678,388
Allowance for credit losses		(75,423	)		(75,283	)
Total loans and leases held for investment, net	$	3,508,751		$	3,603,105

At March 31, 2025, the portion of loans that were approved for pledging as collateral on borrowing lines with the FHLB and the Federal Reserve Bank (“FRB”) were $1.3 billion and $1.4 billion, respectively. The borrowing capacity on these loans was $802.7 million from FHLB and $1.1 billion from the FRB at March 31, 2025.

The following tables show an aging analysis of the loan and lease portfolio, net of unearned income, by the time past due for the periods indicated:

	March 31, 2025
(Dollars in thousands)	30-89 Days Past Due		90+ Days Past Due		Non-accrual		Total Past Due and Non-accrual		Current		Total		Non-accrual with no ACL
Loans and leases held for investment, net
Real estate:
Commercial	$	-	$	-	$	-	$	-	$	1,347,906	$	1,347,906	$	-
Agricultural		-		-		-		-		737,314		737,314		-
Residential and home equity		-		-		-		-		396,044		396,044		-
Construction		-		-		-		-		185,348		185,348		-
Total real estate		-		-		-		-		2,666,612		2,666,612		-
Commercial & industrial		-		-		193		193		482,003		482,196		193
Agricultural		-		-		-		-		258,704		258,704		-
Commercial leases		-		-		-		-		171,402		171,402		-
Consumer and other		1		-		-		1		5,259		5,260		-
Total loans and leases, net	$	1	$	-	$	193	$	194	$	3,583,980	$	3,584,174	$	193

Table of Contents

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3—Loans and Leases—Continued

	December 31, 2024
(Dollars in thousands)	30-89 Days Past Due		90+ Days Past Due		Non-accrual		Total Past Due and Non-accrual		Current		Total		Non-accrual with no ACL
Loans and leases held for investment, net
Real estate:
Commercial	$	-	$	-	$	170	$	170	$	1,353,101	$	1,353,271	$	170
Agricultural		-		-		-		-		751,026		751,026		-
Residential and home equity		-		-		-		-		404,399		404,399		-
Construction		-		-		-		-		194,903		194,903		-
Total real estate		-		-		170		170		2,703,429		2,703,599		170
Commercial & industrial		33		-		759		792		503,611		504,403		-
Agricultural		36		-		-		36		289,811		289,847		-
Commercial leases		-		-		-		-		175,455		175,455		-
Consumer and other		5		-		-		5		5,079		5,084		-
Total loans and leases, net	$	74	$	-	$	929	$	1,003	$	3,677,385	$	3,678,388	$	170

When borrowers are experiencing financial difficulty, the Company may agree to modify the contractual terms of a loan to a borrower in order to assist the borrower in repaying principal and interest owed to the Company. The Company’s modifications of loans to borrowers experiencing financial difficulty are generally in the form of term extensions, repayment plans, payment deferrals, forbearance agreements, interest rate reductions, forgiveness of interest and/or fees, or any combination thereof. Commercial loans modified to borrowers experiencing financial difficulty are primarily loans that are substandard or non-accrual, where the maturity date was extended and/or the modified interest rate and payment terms are not commensurate with the current market. Modifications on personal real estate loans are primarily those placed on forbearance plans, repayment plans, or deferral plans where monthly payments are suspended for a period of time or past due amounts are paid off over a certain period of time in the future or set up as a balloon payment at maturity. Modifications to certain credit card and other small consumer loans are often modified under debt counseling programs that can reduce the contractual rate or, in certain instances, forgive certain fees and interest charges. Other consumer loans modified to borrowers experiencing financial difficulty consist of various other workout arrangements with consumer customers.

Table of Contents

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3—Loans and Leases—Continued

The following table presents the amortized cost of loans that were both experiencing financial difficulty and modified, by portfolio segment and type of modification, during the periods presented. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each portfolio segment of financing receivable is also presented below:

	March 31, 2025
	Amortized cost associated with the following modification types:
(Dollars in thousands)	Interest rate reduction		Maturity or term extension		Principal forgiveness		Payment deferral		Multiple modification types¹		Total²		Percentage of total loan segment
Loans and leases held for investment, net
Real estate:
Commercial	$	-	$	-	$	-	$	-	$	-	$	-		0.00	%
Agricultural		-		983		-		1,656		-		2,639		0.36	%
Residential and home equity		-		-		-		-		-		-		0.00	%
Construction		-		-		-		-		-		-		0.00	%
Total real estate		-		983		-		1,656		-		2,639		0.10	%
Commercial & industrial		-		-		-		-		-		-		0.00	%
Agricultural		-		43		-		-		-		43		0.02	%
Commercial leases		-		-		-		-		-		-		0.00	%
Consumer and other		-		-		-		-		-		-		0.00	%
Total	$	-	$	1,026	$	-	$	1,656	$	-	$	2,682		0.07	%

¹ Includes modifications that resulted from a combination of interest rate reduction, maturity or term extension, principal forgiveness, and payment deferral modifications.

² Unfunded lending commitments related to loans modified to borrowers experiencing financial difficulty totaled $0 million at March 31, 2025.

During the three months ended March 31, 2025, the Company modified one agricultural borrower with four agricultural real estate loans and one agricultural production loan. Two of the loans had the contractual term extended by six months and three loans had principal and interest deferrals of six months.

The Company did not enter into any loan modifications with borrowers experiencing financial difficulty during the three months ended March 31, 2024.

The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of the modification efforts. A payment default is defined as a loan having a payment past due 90 days or more after a modification took place. The modified loans presented in the table above were current as of March 31, 2025.

There were no loans that were modified within the last 12 months that had a payment default or were past due during the three months ended March 31, 2025.

The effect of modifications made to borrowers experiencing financial difficulty is already included in the ACL because of the measurement methodologies used to estimate the ACL; therefore, a change to the ACL is generally not recorded upon modification. If principal forgiveness is provided, that portion of the loan will be charged-off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the ACL. An assessment of whether the borrower is experiencing financial difficulty is made on the date of a modification.

Table of Contents

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3—Loans and Leases—Continued

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

Pass — A pass loan or lease is a strong credit with no existing or known potential weaknesses deserving of management’s close attention. This category also includes “Watch” loans, which is a loan with an emerging weakness in either the individual credit or industry that requires additional attention. A credit may also be classified Watch if cash flows have not yet stabilized, such as in the case of a development project.

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

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

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

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

Table of Contents

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3—Loans and Leases—Continued

The following tables present outstanding loan and lease balances held for investment net of unearned income by segment, credit risk rating categories, vintage year by segment of financing receivable, and current period gross charge-offs by year of origination as follows:

	March 31, 2025
	Term Loans and Leases Amortized Cost Basis by Origination Year
(Dollars in thousands)	2025		2024		2023		2022		2021		Prior		Revolving Loans Amortized Cost		Revolving Loans Converted to Term		Total
Net loans and leases held for investment
Real estate:
Commercial
Pass	$	23,588	$	60,623	$	116,823	$	162,923	$	207,575	$	413,700	$	258,034	$	102,046	$	1,345,312
Special mention		-		-		-		1,124		-		-		1,470		-		2,594
Substandard		-		-		-		-		-		-		-		-		-
Total Commercial	$	23,588	$	60,623	$	116,823	$	164,047	$	207,575	$	413,700	$	259,504	$	102,046	$	1,347,906
Commercial
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural
Pass	$	8,016	$	24,345	$	36,213	$	68,712	$	37,903	$	211,607	$	285,604	$	50,707	$	723,107
Special mention		-		-		-		-		-		3,100		11,107		-		14,207
Substandard		-		-		-		-		-		-		-		-		-
Total Agricultural	$	8,016	$	24,345	$	36,213	$	68,712	$	37,903	$	214,707	$	296,711	$	50,707	$	737,314
Agricultural
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Residential and home equity
Pass	$	5,741	$	31,444	$	35,404	$	53,446	$	80,548	$	141,583	$	46,939	$	63	$	395,168
Special mention		-		-		-		-		-		76		-		-		76
Substandard		-		-		-		-		-		598		202		-		800
Total Residential and home equity	$	5,741	$	31,444	$	35,404	$	53,446	$	80,548	$	142,257	$	47,141	$	63	$	396,044
Residential and home equity
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Construction
Pass	$	-	$	5,761	$	-	$	900	$	-	$	1,375	$	177,312	$	-	$	185,348
Special mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Total construction	$	-	$	5,761	$	-	$	900	$	-	$	1,375	$	177,312	$	-	$	185,348
Construction
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Total Real estate	$	37,345	$	122,173	$	188,440	$	287,105	$	326,026	$	772,039	$	780,668	$	152,816	$	2,666,612

Commercial & industrial
Pass	$	3,980	$	24,055	$	37,438	$	19,106	$	15,821	$	8,339	$	326,961	$	40,596	$	476,296
Special mention		-		-		2,280		61		-		357		581		2,402		5,681
Substandard		-		-		-		-		26		-		69		124		219
Total Commercial & industrial	$	3,980	$	24,055	$	39,718	$	19,167	$	15,847	$	8,696	$	327,611	$	43,122	$	482,196
Commercial & industrial
Current-period gross charge-offs	$	-	$	-	$	69	$	98	$	53	$	12	$	-	$	-	$	232

Table of Contents

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3—Loans and Leases—Continued

	March 31, 2025
	Term Loans and Leases Amortized Cost Basis by Origination Year
(Dollars in thousands)	2025		2024		2023		2022		2021		Prior		Revolving Loans Amortized Cost		Revolving Loans Converted to Term		Total
Net loans and leases held for investment
Agricultural
Pass	$	20	$	3,257	$	2,694	$	2,383	$	1,461	$	2,696	$	239,130	$	6,956	$	258,597
Special mention		-		-		-		39		-		-		-		43		82
Substandard		-		-		-		-		-		-		25		-		25
Total Agricultural	$	20	$	3,257	$	2,694	$	2,422	$	1,461	$	2,696	$	239,155	$	6,999	$	258,704
Agricultural
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	34	$	-	$	-	$	-	$	34

Commercial leases
Pass	$	2,125	$	31,296	$	73,204	$	20,930	$	7,206	$	32,583	$	-	$	-	$	167,344
Special mention		-		-		-		4,058		-		-		-		-		4,058
Substandard		-		-		-		-		-		-		-		-		-
Total Commercial leases	$	2,125	$	31,296	$	73,204	$	24,988	$	7,206	$	32,583	$	-	$	-	$	171,402
Commercial leases
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Consumer and other
Pass	$	754	$	838	$	1,077	$	398	$	54	$	1,279	$	705	$	-	$	5,105
Special mention		-		-		-		-		-		-		-		-		-
Substandard		139		-		-		-		-		16		-		-		155
Total Consumer and other	$	893	$	838	$	1,077	$	398	$	54	$	1,295	$	705	$	-	$	5,260
Consumer and other
Current-period gross charge-offs	$	7	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	7
Total net loans and leases
Pass	$	44,224	$	181,619	$	302,853	$	328,798	$	350,568	$	813,162	$	1,334,685	$	200,368	$	3,556,277
Special mention		-		-		2,280		5,282		-		3,533		13,158		2,445		26,698
Substandard		139		-		-		-		26		614		296		124		1,199
Total net loans and leases	$	44,363	$	181,619	$	305,133	$	334,080	$	350,594	$	817,309	$	1,348,139	$	202,937	$	3,584,174
Total current-period gross charge-offs	$	7	$	-	$	69	$	98	$	87	$	12	$	-	$	-	$	273

Table of Contents

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3—Loans and Leases—Continued

	December 31, 2024
	Term Loans and Leases Amortized Cost Basis by Origination Year
(Dollars in thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost		Revolving Loans Converted to Term		Total
Net loans and leases held for investment
Real estate:
Commercial
Pass	$	63,216	$	117,550	$	163,875	$	209,222	$	134,254	$	292,326	$	270,231	$	99,819	$	1,350,493
Special mention		-		-		1,138		-		-		170		1,470		-		2,778
Substandard		-		-		-		-		-		-		-		-		-
Total Commercial	$	63,216	$	117,550	$	165,013	$	209,222	$	134,254	$	292,496	$	271,701	$	99,819	$	1,353,271
Commercial
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural
Pass	$	24,877	$	36,693	$	69,209	$	38,847	$	46,452	$	169,301	$	309,661	$	32,086	$	727,126
Special mention		-		-		-		-		2,099		5,011		16,790		-		23,900
Substandard		-		-		-		-		-		-		-		-		-
Total Agricultural	$	24,877	$	36,693	$	69,209	$	38,847	$	48,551	$	174,312	$	326,451	$	32,086	$	751,026
Agricultural
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Residential and home equity
Pass	$	33,036	$	37,378	$	57,760	$	82,936	$	72,304	$	72,360	$	47,669	$	65	$	403,508
Special mention		-		-		-		-		-		85		-		-		85
Substandard		-		-		-		-		-		603		203		-		806
Total Residential and home equity	$	33,036	$	37,378	$	57,760	$	82,936	$	72,304	$	73,048	$	47,872	$	65	$	404,399
Residential and home equity
Current-period gross charge-offs	$	-	$	29	$	-	$	-	$	-	$	-	$	-	$	-	$	29

Construction
Pass	$	5,774	$	-	$	1,000	$	-	$	-	$	1,375	$	186,754	$	-	$	194,903
Special mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Total construction	$	5,774	$	-	$	1,000	$	-	$	-	$	1,375	$	186,754	$	-	$	194,903
Construction
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Total Real estate	$	126,903	$	191,621	$	292,982	$	331,005	$	255,109	$	541,231	$	832,778	$	131,970	$	2,703,599

Commercial & industrial
Pass	$	23,235	$	39,415	$	20,065	$	16,715	$	3,525	$	6,192	$	363,947	$	24,269	$	497,363
Special mention		-		2,280		67		3		-		381		1,017		2,500		6,248
Substandard		-		107		-		33		-		-		422		230		792
Total Commercial & industrial	$	23,235	$	41,802	$	20,132	$	16,751	$	3,525	$	6,573	$	365,386	$	26,999	$	504,403
Commercial & industrial
Current-period gross charge-offs	$	231	$	176	$	-	$	44	$	100	$	185	$	-	$	-	$	736

Table of Contents

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3—Loans and Leases—Continued

	December 31, 2024
	Term Loans and Leases Amortized Cost Basis by Origination Year
(Dollars in thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost		Revolving Loans Converted to Term		Total
Net loans and leases held for investment
Agricultural
Pass	$	2,831	$	2,820	$	2,584	$	1,708	$	393	$	2,471	$	270,595	$	6,325	$	289,727
Special mention		-		-		41		-		-		-		-		43		84
Substandard		-		-		-		-		-		-		36		-		36
Total Agricultural	$	2,831	$	2,820	$	2,625	$	1,708	$	393	$	2,471	$	270,631	$	6,368	$	289,847
Agricultural
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial leases
Pass	$	31,977	$	74,956	$	21,859	$	8,314	$	8,065	$	26,182	$	-	$	-	$	171,353
Special mention		-		-		4,102		-		-		-		-		-		4,102
Substandard		-		-		-		-		-		-		-		-		-
Total Commercial leases	$	31,977	$	74,956	$	25,961	$	8,314	$	8,065	$	26,182	$	-	$	-	$	175,455
Commercial leases
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Consumer and other
Pass	$	1,049	$	1,195	$	535	$	71	$	13	$	1,349	$	693	$	-	$	4,905
Special mention		-		-		-		-		-		-		-		-		-
Substandard		161		-		-		-		-		18		-		-		179
Total Consumer and other	$	1,210	$	1,195	$	535	$	71	$	13	$	1,367	$	693	$	-	$	5,084
Consumer and other
Current-period gross charge-offs	$	63	$	1	$	-	$	-	$	-	$	29	$	-	$	-	$	93
Total net loans and leases
Pass	$	185,995	$	310,007	$	336,887	$	357,813	$	265,006	$	571,556	$	1,449,550	$	162,564	$	3,639,378
Special mention		-		2,280		5,348		3		2,099		5,647		19,277		2,543		37,197
Substandard		161		107		-		33		-		621		661		230		1,813
Total net loans and leases	$	186,156	$	312,394	$	342,235	$	357,849	$	267,105	$	577,824	$	1,469,488	$	165,337	$	3,678,388
Total current-period gross charge-offs	$	294	$	206	$	-	$	44	$	100	$	214	$	-	$	-	$	858

The Company, in the ordinary course of business, grants loans to the Company’s executive officers and directors, including their families and firms in which they are principal owners. Activity in such loans is summarized as follows:

	March 31,			December 31,
(Dollars in thousands)	2025			2024

Balance at beginning of the period	$	15,626		$	17,035
New loans or advances during year		255			1,871
Effect of changes in composition of related parties		(80	)		-
Repayments		(67	)		(3,280	)
Balance at end of period	$	15,734		$	15,626

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FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3—Loans and Leases—Continued

A loan or lease is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. When management determines that foreclosure is probable, expected credit losses for collateral dependent loans or leases are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. The collateral on the loans and leases is a significant portion of what secures the collateral dependent loans or leases, and significant changes to the fair value of the collateral can impact the allowance for credit losses.

The following table presents the amortized cost basis for collateral dependent loans and leases by type as of December 31, 2024:

	December 31, 2024
(Dollars in thousands)	Real Estate		Vehicles and Equipment		Total
Collateral dependent loans and leases
Real estate:
Commercial	$	170	$	-	$	170
Agricultural		-		-		-
Residential and home equity		-		-		-
Construction		-		-		-
Total real estate		170		-		170
Commercial & industrial		-		759		759
Agricultural		-		-		-
Commercial leases		-		-		-
Consumer and other		-		-		-
Total gross loans and leases	$	170	$	759	$	929

There were no collateral dependent loans or leases at March 31, 2025.

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FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3—Loans and Leases—Continued

Allowance for Credit Losses

The allowance for credit losses (“ACL”) is the combination of the allowance for credit losses for loan and lease losses and the allowance for credit losses for unfunded loan commitments. The ACL for unfunded loan commitments is included within “Interest payable and other liabilities” on the consolidated balance sheets.

The following tables present a summary of the activity in the ACL for loan and lease losses and ACL for unfunded loan commitments for the periods indicated:

	For the Three Months Ended March 31,
	2025								2024
(Dollars in thousands)	ACL for Loans and Leases			ACL for Unfunded Commitments		Allowance for Credit Losses			ACL for Loans and Leases			ACL for Unfunded Commitments		Allowance for Credit Losses
Balance at beginning of period	$	75,283		$	2,690	$	77,973		$	74,965		$	3,690	$	78,655
Provision for credit losses		300			-		300			-			-		-
Charge-offs		(273	)		-		(273	)		(10	)		-		(10	)
Recoveries		113			-		113			63			-		63
Net (charge-offs)/recoveries		(160	)		-		(160	)		53			-		53
Balance at end of period	$	75,423		$	2,690	$	78,113		$	75,018		$	3,690	$	78,708

Changes in the ACL on loans and leases for the periods indicated are as follows:

	Three Months Ended March 31, 2025
(Dollars in thousands)	Balance at beginning of period		Provision for/(recapture of) credit losses			Charge-Offs			Recoveries		Balance at end of period
Allowance for credit losses:
Real estate:
Commercial	$	20,382	$	(69	)	$	-		$	-	$	20,313
Agricultural		23,615		462			-			-		24,077
Residential and home equity		7,340		136			-			3		7,479
Construction		3,055		(407	)		-			-		2,648
Total real estate		54,392		122			-			3		54,517
Commercial & industrial		7,791		178			(232	)		106		7,843
Agricultural		6,725		(274	)		(34	)		-		6,417
Commercial leases		6,153		276			-			-		6,429
Consumer and other		222		(2	)		(7	)		4		217
Total allowance for credit losses	$	75,283	$	300		$	(273	)	$	113	$	75,423

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FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 3—Loans and Leases—Continued

	Year Ended December 31, 2024
(Dollars in thousands)	Balance at beginning of year		Provision for/(recapture of) credit losses			Charge-Offs			Recoveries		Balance at end of year
Allowance for credit losses:
Real estate:
Commercial	$	26,093	$	(5,711	)	$	-		$	-	$	20,382
Agricultural		7,744		15,871			-			-		23,615
Residential and home equity		7,770		(424	)		(29	)		23		7,340
Construction		4,432		(1,377	)		-			-		3,055
Total real estate		46,039		8,359			(29	)		23		54,392
Commercial & industrial		13,380		(4,939	)		(736	)		86		7,791
Agricultural		8,872		(2,163	)		-			16		6,725
Commercial leases		6,537		(384	)		-			-		6,153
Consumer and other		137		127			(93	)		51		222
Total allowance for credit losses	$	74,965	$	1,000		$	(858	)	$	176	$	75,283

Note 4—Deposits

Certificates of deposit greater than and less than or equal to the FDIC insurance limit of $250,000 are summarized as follows:

(Dollars in thousands)	March 31, 2025		December 31, 2024
Certificates of deposit:
Certificates of deposit less than or equal to $250,000	$	323,918	$	330,475
Certificates of deposit greater than $250,000		385,984		385,072
Total certificates of deposit	$	709,902	$	715,547

Scheduled maturities for certificates of deposit are as follows for the years ending December 31:

(Dollars in thousands)	Amount
2025	$	621,710
2026		83,838
2027		3,102
2028		956
2029		220
2030		76
Total certificates of deposit	$	709,902

Overdrawn deposit balances of $138,000 and $156,000 were classified as consumer loans at March 31, 2025 and December 31, 2024, respectively.

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FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 5—Short-term borrowings

As of March 31, 2025 and December 31, 2024, committed lines of credit arrangements totaling $2.1 billion, were available to the Company from the FHLB, FRB, and unaffiliated banks.

The Company is a member of the FHLB of San Francisco and has a committed credit line of $804.1 million, which is secured by $1.3 billion in various real estate loans and investment securities pledged as collateral. Borrowings generally provide for interest at the then current published rate based on the borrowing term. The overnight borrowing rate was 4.57% as of March 31, 2025.

The Company has $1.4 billion in pledged loans with the FRB. As of March 31, 2025, the Company’s overnight borrowing capacity using the primary credit facilities from the Fed account was $1.1 billion. The borrowing rate was 4.50% as of March 31, 2025.

There were no outstanding advances on the above borrowing facilities as of March 31, 2025 or December 31, 2024.

Note 6—Fair Value

The Company uses fair value measurements to record fair value adjustments to certain financial and non-financial assets and liabilities and to determine fair value disclosures. Various financial instruments such as available-for-sale securities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets and liabilities on a non-recurring basis, such as collateral dependent loans and other real estate owned. These non-recurring fair value adjustments typically involve lower of cost or fair value accounting or write-down of individual assets.

Fair Value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, the Company uses various valuation techniques and assumptions when estimating fair value. For accounting disclosure purposes, a three-level valuation hierarchy of fair value measurements has been established. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

•

Level 1 – inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

•

Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and inputs that are observable for the assets or liabilities, either directly or indirectly (such as interest rates, yield curves, and prepayment speeds).

•

Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value. These may be internally developed, using the Company’s best information and assumptions that a market participant would consider.

The carrying amounts and estimated fair values of financial instruments held by the Company are set forth below. Fair value estimates are made at a specific point in time based on relevant market information. They do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for many of the Company’s financial instruments, fair value estimates are based on judgements regarding future expected loss experience, risk characteristics and economic conditions. These estimates are subjective, involve uncertainties, and cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

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FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 6—Fair Value—Continued

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

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

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

The Company does not record all loans and leases at fair value on a recurring basis. However, from time to time, a loan or lease is considered collateral dependent and an allowance for credit losses is established. Once a loan or lease is identified as collateral dependent, management measures specific reserves in accordance FASB ASC Topic 326. The fair value of collateral dependent loans or leases is estimated using one of several methods, including collateral value when the loan is collateral dependent, market value of similar debt, enterprise value, and discounted cash flows. Collateral dependent loans and leases not requiring an allowance represent loans and leases for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans and leases. Collateral dependent loans and leases where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. The fair value of collateral dependent loans is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including sales comparison, cost and the income approach. Adjustments are often made in the appraisal process by the appraisers to take into account differences between the comparable sales and income and other available data. Such adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value. The valuation technique used for Level 3 non-recurring collateral dependent loans is primarily the sales comparison approach less estimated selling costs.

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

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FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 6—Fair Value—Continued

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

March 31, 2025			Fair Value Measurements
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value
Fair valued on a recurring basis:
Available-for-sale securities
U.S. Government-sponsored securities	$	2,497	$	-	$	2,497	$	-	$	2,497
Mortgage-backed securities		470,894		-		470,894		-		470,894
Commercial mortgage-backed securities		1,243		-		1,243		-		1,243
Collateralized mortgage obligations		5,562		-		5,562		-		5,562
Corporate securities		14,927		-		14,927		-		14,927
Other		310		-		310		-		310
Other equity investments	$	35	$	35	$	-	$	-	$	35

Fair valued on a non-recurring basis:
Other real estate owned	$	873	$	-	$	-	$	873	$	873

December 31, 2024			Fair Value Measurements
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value
Fair valued on a recurring basis:
Available-for-sale securities
U.S. Government-sponsored securities	$	2,644	$	-	$	2,644	$	-	$	2,644
Mortgage-backed securities		439,858		-		439,858		-		439,858
Commercial mortgage-backed securities		1,212		-		1,212		-		1,212
Collateralized mortgage obligations		5,497		-		5,497		-		5,497
Corporate securities		14,856		-		14,856		-		14,856
Other		347		-		347		-		347

Fair valued on a non-recurring basis:
Collateral dependent loans	$	929	$	-	$	-	$	929	$	929
Other real estate owned		873		-		-		873		873

Collateral dependent loans

While the overall loan portfolio is not carried at fair value, the Company periodically records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Nonrecurring adjustments also include certain specific reserves for collateral dependent loans when establishing the allowance for credit losses on loans. Such amounts are generally based on the fair value of the underlying collateral supporting the loan. In determining the value of real estate collateral, the Company relies on external and internal appraisals of property values depending on the size and complexity of the real estate collateral. The Company maintains a list of qualified property appraisers who review appraisal reports for reasonableness. In the case of non-real estate collateral, reliance is placed on a variety of sources, including external estimates of value and judgments based on the experience and expertise of internal specialists. Values of all loan collateral are regularly reviewed by credit administration. Unobservable inputs to these measurements, which include estimates and judgments often used in conjunction with appraisals, are not readily quantifiable. These measurements are classified as Level 3.

Table of Contents

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 6—Fair Value—Continued

The following tables summarize the carrying amount and estimated fair values of the Company’s financial assets and liabilities not carried at fair value, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value for the periods indicated.

March 31, 2025			Fair Value Measurement
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value
Financial assets:
Cash and cash equivalents	$	607,254	$	607,254	$	-	$	-	$	607,254
Held-to-maturity securities, net		759,321		-		541,096		73,767		614,863
Non-marketable securities, at cost		15,549		-		15,549		-		15,549
Loans and leases, net		3,508,751		-		-		3,485,526		3,485,526
Derivatives not designated as hedging instruments		131,500		-		131,500		-		131,500

Financial liabilities:
Total deposits	$	4,977,968	$	-	$	4,974,300	$	-	$	4,979,862
Derivatives not designated as hedging instruments		142,017		-		142,017		-		142,017
Subordinated debentures		10,310		-		12,044		-		12,044

December 31, 2024			Fair Value Measurements
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value
Financial assets:
Cash and cash equivalents	$	212,563	$	212,563	$	-	$	-	$	212,563
Held-to-maturity securities, net		768,993		-		537,384		73,569		610,953
Non-marketable securities, at cost		15,549		-		15,549		-		15,549
Loans and leases, net		3,603,105		-		-		3,523,057		3,523,057

Financial liabilities:
Total deposits	$	4,699,139	$	-	$	4,695,388	$	-	$	4,695,388
Subordinated debentures		10,310		-		11,738		-		11,738

Non-marketable securities include FHLB stock, PCBB stock and TIB, National Association stock, which are recorded at cost. Ownership of these stocks is restricted to member banks. Purchases and sales of these securities are at par value with the issuer. The fair value of these investments is equal to the carrying amount.

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FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 7—Earnings Per Share

Basic earnings per common share is computed by dividing net earnings allocated to common shareholders by the weighted average number of common shares outstanding during the applicable period. Diluted earnings per common share is computed using the weighted average number of shares determined for the basic earnings per common share computation plus the dilutive effects of outstanding retricted stock awards using the treasury stock mehtod. Shares are excluded from the computations of diluted earnings per share when their inclusion has an anti-dilutive effect. For the three months ended March 31, 2025, there were no potential common shares that were anti-dilutive.

The following table presents the factors used in the earnings per share computation for the periods indicated:

	Three Months Ended March 31,
(Dollars in thousands, except per share amounts)	2025		2024
Net income	$	23,009	$	22,723

Weighted average common shares outstanding
For basic earnings per common share		699,736		743,515
Dilutive potential common shares		479		-
Shares used in computing diluted earnings per common share		700,215		743,515

Basic earnings per common share	$	32.88	$	30.56
Diluted earnings per common share	$	32.86	$	30.56

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FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 8—Employee Benefit Plans

Executive Retirement Plan

The Company, through the Bank, sponsors an Executive Retirement Plan (“ERP”) for certain executive level employees. The ERP is a non-qualified deferred compensation plan and was developed to supplement the Company’s Profit Sharing Plan, which, as a qualified retirement plan, has a ceiling on benefits as set by the Internal Revenue Service. The ERP is comprised of: (1) a Performance Component which makes contributions based upon long-term cumulative profitability and increase in market value of the Company; (2) a Salary Component which makes contributions based upon participant salary levels; and (3) an Equity Component for which contributions are discretionary and subject to Board of Directors approval. The Company maintains a Rabbi Trust to fund, in part, the ERP. The Rabbi Trust is an irrevocable grantor trust to which the Company may contribute assets for the limited purpose of funding a non-qualified deferred compensation plan. The Company may not use the assets of the Rabbi Trust for any purpose other than meeting its obligations under the ERP; however, the assets of the Rabbi Trust remain subject to the claims of its creditors and are included in the consolidated financial statements. The Company contributes cash to the Rabbi Trust from time to time for the sole purpose of funding the ERP. The Rabbi Trust will use any cash the Company contributes to purchase shares of common stock of the Company, and other financial instruments, on the open market. ERP contributions are invested in a mix of financial instruments; however, the Equity Component contributions are invested primarily in common stock of the Company. Effective November 29, 2024, each component of the ERP was terminated and frozen and no future contributions are permitted to be made. For each existing participant, the account balances will be liquidated and paid out to each participant at a time to be determined, but which will occur sometime between the 12-month anniversary and the 24-month anniversary of the termination of the components of the ERP pursuant to regulations promulgated by the Department of the Treasury.

The Company incurred no expense for the ERP during the three months ended March 31, 2025 due to the freezing of the plans and a net expense of $2.2 million during the three months ended March 31, 2024. The Company’s carrying value of the liability under the ERP was $60.8 million as of March 31, 2025 and $61.4 million as of December 31, 2024, which is included in interest payable and other liabilities on the balance sheet. The Company’s shares of common stock held as investments in the Rabbi Trust of the ERP as of March 31, 2025 and December 31, 2024 totaled 48,892 and 48,877 with an historical cost basis of $31.6 million and $31.8 million, respectively. All amounts have been fully funded into the Rabbi Trust as of March 31, 2025 and December 31, 2024. The consolidated investments held in the Rabbi Trust are recorded at fair value with changes in unrealized gains or losses recorded within non-interest income, and the equal and offsetting charges in the related liability are recorded in non-interest expense in the consolidated statements of income.

Net gains on ERP investments were $0.6 million and $1.0 million at March 31, 2025 and 2024, respectively. Balances in non-qualified deferred compensation plans may be invested in financial instruments whose market value fluctuates based upon trends in interest rates and stock prices.

Senior Management Retention Plan

The Company, through the Bank, sponsors a Senior Management Retention Plan (“SMRP”) for certain senior level employees. The SMRP is a non-qualified deferred compensation plan and was developed to supplement the Company’s Profit Sharing Plan, which, as a qualified retirement plan, has a ceiling on benefits as set by the Internal Revenue Service. All contributions are discretionary and subject to the Board of Directors approval. The Company maintains a Rabbi Trust to fund, in part, the SMRP. The Rabbi Trust is an irrevocable grantor trust to which the Company may contribute assets for the limited purpose of funding a non-qualified deferred compensation plan. The Company may not use the assets of the Rabbi Trust for any purpose other than meeting its obligations under the SMRP; however, the assets of the Rabbi Trust remain subject to the claims of its creditors and are included in the consolidated financial statements. The Company contributes cash to the Rabbi Trust from time to time for the sole purpose of funding the SMRP.

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FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 8—Employee Benefit Plans—Continued

The Rabbi Trust will use any cash the Company contributes to purchase shares of common stock of the Company, and other financial instruments, on the open market. Contributions to the SMRP are invested primarily in common stock of the Company. Effective November 29, 2024, the SMRP was terminated and frozen and no future contributions are permitted to be made. For each existing participant, the account balances will be liquidated and paid out to each participant at a time to be determined, but which will occur sometime between the 12-month anniversary and the 24-month anniversary of the termination of the plan pursuant to regulations promulgated by the Department of the Treasury.

The Company incurred no expense for the SMRP during the three months ended March 31, 2025 due to the freezing of the plans and a net expense of $1.1 million for the three months ended March 31, 2024. The Company’s carrying value of the liability under the SMRP was $20.8 million as of March 31, 2025 and $21.2 million as of December 31, 2024, which is included in interest payable and other liabilities on the balance sheet. The Company’s shares of stock held as investments in the Rabbi Trust of the SMRP as of March 31, 2025 and December 31, 2024 totaled 18,474 and 19,647 shares with an historical cost basis of $14.2 million and $14.6 million, respectively. All amounts have been fully funded into the Rabbi Trust as of March 31, 2025 and December 31, 2024. The consolidated investments held in the Rabbi Trust are recorded at fair value with changes recorded within non-interest income and the equal and offsetting charges in the related liability are recorded in non-interest expense in the consolidated statements of income.

Net gains on SMRP plan investments were $0.2 million at March 31, 2025 and 2024, respectively. Balances in non-qualified deferred compensation plans may be invested in financial instruments whose market value fluctuates based upon trends in interest rates and stock prices.

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FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 9—Stock-Based Compensation

Restricted Stock Award Plan

At the special meeting of shareholders held on November 25, 2024, the Company’s shareholders approved the Farmers & Merchants Bancorp 2025 Restricted Stock Retirement Plan (the “2025 Plan”). The 2025 Plan provides for the issuance of up to 80,000 shares to directors and employees of the Company and its subsidiaries and affiliates. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at issue date. Due to the illiquidity of the stock, the fair value of the stock was determined using a volume weighted average price over a 30-day period as of the grant date, which equaled $1,033.03 per share. The first awards were granted on February 3, 2025 and totaled 30,818 shares. The awards contain a service condition, which requires the employees to provide services during the applicable vesting periods. The awards were comprised of a one-year award for directors and two-year, three-year and four-year awards for employees depending on their roles and responsibilities. The awards vest on a pro-rated basis over the life of the award. Total remaining shares issuable under the 2025 Plan were 49,182 at March 31, 2025. The unvested restricted shares have voting rights and dividend rights; however, the dividends are paid to the holder only if, when and to the extent such unvested restricted shares vest. Dividends on forfeited restricted stock are also forfeited.

The following table summarizes the change in the Company’s nonvested shares for the three months ended March 31, 2025.

	Number of Shares		Weighted Average Fair Value at Grant-Date
Restricted Stock Award
Nonvested shares oustanding, January 1, 2025		-	$	-
Granted		30,818		1,033.03
Vested		-		-
Forfeited		-		-
Nonvested shares outstanding, March 31, 2025		30,818	$	1,033.03

As of March 31, 2025, there was $30.35 million of total unrecognized compensation cost related to nonvested shares granted under the 2025 Plan. The cost is expected to be recognized over a weighted-average period of 2.42 years. No shares vested during the first three months of March 31, 2025.

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FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 10—Derivatives

Derivatives Not Designated as Hedging Instruments

As a customer accommodation, the Company may enter into interest rates swaps with its loan customers. The Company also enters into corresponding offsetting derivatives with third parties. While these derivatives represent economic hedges, they do not qualify as hedges for accounting purposes.

The fair value of these swaps are recorded as components of other assets and other liabilities in the Company’s consolidated balance sheets.

		Three Months Ended March 31,
		2025			2024
(Dollars in thousands)		Notional Amount	Fair Value			Notional Amount	Fair Value
Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans	$	9,097	$	132	$	-	$	-
Total included in other assets			$	132			$	-

Derivatives not designated as hedging instruments:
Interest rate swaps related to customer loans	$	9,097	$	142	$	-	$	-
Total included in other liabilities			$	142			$	-

	Location of Gain or	Three Months Ended March 31,
(Dollars in thousands)	(Loss) Recognized in Income on Derivatives	2025			2024
Derivatives not designated as hedging instruments:
Interest rate swaps related to loan customers	Other (expense) income	$	(10	)	$	-
Total		$	(10	)	$	-

Note 11—Commitments and Contingencies

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

(Dollars in thousands)	March 31, 2025		December 31, 2024

Commitments to extend credit, including unsecured commitments of $20,601 and $20,535 as of March 31, 2025 and December 31, 2024, respectively	$	1,108,393	$	1,006,649
Standby letters of credit, including unsecured commitments of $4,367 and $4,490 as of March 31, 2025 and December 31, 2024, respectively		15,285		15,411

The Company’s exposure to credit loss in the event of nonperformance by the other party with regard to standby letters of credit, undisbursed loan commitments, and financial guarantees is represented by the contractual notional amount of those instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. The Company uses the same credit policies in making commitments and conditional obligations as it does for recorded balance sheet items. The Company may or may not require collateral or other security to support financial instruments with credit risk. Evaluations of each customer’s creditworthiness are performed on a case-by-case basis. The estimated exposure to loss from these commitments is included in the allowance for credit losses for unfunded loan commitments, which amounted to $2.7 million at March 31, 2025 and December 31, 2024.

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FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 11—Commitments and Contingencies—Continued

Standby letters of credit are conditional commitments issued by the Company to guarantee performance of or payment for a customer to a third-party. Outstanding standby letters of credit at March 31, 2025 had maturity dates ranging from 1 to 43 months with a final expiration in some cases up to October 2028. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

The Company has commitments to fund investments in low income housing tax credit investments (“LIHTC”) partnerships and limited liability companies. The Company invests in LIHTC partnerships and solar tax funds that are designed to generate a return primarily through the realization of federal tax credits. The Company accounts for these investments by amortizing the cost of tax credit investments over the life of the investment using a proportional amortization method, and tax credit investment amortization expense is a component of the provision for income taxes. At March 31, 2025 and December 31, 2024, the balance of the investments in LIHTC was $42.5 million and $43.8 million, respectively. These balances are reflected in the other assets line on the consolidated balance sheets. Total unfunded commitments related to the investments in LIHTC totaled $17.3 million and $18.9 million at March 31, 2025 and December 31, 2024, respectively. These balances are reflected in the interest payables and other liabilities line on the consolidated balance sheets. The Company expects to fulfill these commitments through 2040. Additionally, during the three months ended March 31, 2025 and the year ended December 31, 2024, the Company recognized tax credits from its investments in LIHTC of $1.3 million and $4.4 million, respectively.

In the ordinary course of business, the Company becomes involved in litigation arising out of its normal business activities. Management, after consultation with legal counsel, believes that the ultimate liability, if any, resulting from the disposition of such claims would not be material in relation to the financial position of the Company.

The Company may be required to maintain average reserves on deposit with the FRB primarily based on deposits outstanding. Reserve requirements are offset by the Company’s vault cash and deposit balances maintained with the FRB.

Note 12—Subsequent Events

In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after March 31, 2025 up through the date the Company issued the financial statements. During this period, there were no subsequent events that required recognition or disclosure.

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is intended to provide a comprehensive review of the Company’s operating results and financial condition. The information contained in this section should be read in conjunction with the Unaudited Consolidated Financial Statements and the accompanying Notes to Unaudited Consolidated Financial Statements in this Quarterly Report on Form 10-Q included in “Part I. Item 1. Financial Statements.”

FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10–Q may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act, as amended, and Section 21E of the Securities Exchange Act. These forward-looking statements reflect our current views and are not historical facts. These statements may include statements regarding projected performance for periods following the date of this report. These statements can generally be identified by use of phrases such as “believe,” “expect,” “will,” “seek,” “should,” “anticipate,” “estimate,” “intend,” “plan,” “target,” “project,” “commit” or other words of similar import. Similarly, statements that describe our future financial condition, results of operations, objectives, strategies, plans, goals or future performance and business are also forward-looking statements. Statements that project future financial conditions, results of operations, and shareholder value are not guarantees of performance and many of the factors that will determine these results and values are beyond our ability to control or predict. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve known and unknown risks, uncertainties and other factors, including, but not limited to, those described in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and other parts of this report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (“Form 10-K”), and our actual results may differ materially from those anticipated in these forward-looking statements. The following is a non-exclusive list of factors which could cause actual results to differ materially from forward-looking statements in this Quarterly Report on Form 10-Q:

■	changes in general economic conditions, either nationally, in California, or in our local markets;

■	inflation, changes in interest rates, securities market volatility and monetary fluctuations;

■	increases in competitive pressures among financial institutions and businesses offering similar products and services;

■	impacts of tariff policies by U.S. and foreign governments;

■	risks associated with negative events in the banking industry, and any legislative and/or bank regulatory actions, that could potentially impact earnings, liquidity and/or the availability of capital or which could increase the cost of our deposit insurance by the FDIC;

■	higher defaults in our loan and lease portfolio than we expect;

■	changes in management’s estimate of the adequacy of the allowance for credit losses;

■	risks associated with our growth and expansion strategy and related costs;

■	increased lending risks associated with our high concentration of real estate loans or agricultural loans;

■	legislative or regulatory changes or changes in accounting principles, policies or guidelines;

■	technological changes;

■	operational risks, including processing, information systems, cybersecurity, vendor problems, business interruption, and fraud;

■	regulatory or judicial proceedings; and

■	other factors and risks including those described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report and the Company’s 2024 Form 10-K.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected, projected, intended, committed or believed. Please take into account that forward-looking statements speak only as of the date of this Form 10-Q (or documents incorporated by reference, if applicable).

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The Company does not undertake any obligation to publicly correct or update any forward-looking statements if it later becomes aware that actual results are likely to differ materially from those expressed in such forward-looking statements, except as required by law.

Overview

Farmers & Merchants Bancorp (the “Company” or “FMCB”) is a Delaware registered bank holding company organized in 1999. As a registered bank holding company, FMCB is subject to regulation, supervision, and examination by the Federal Reserve and by the California Department of Financial Protection and Innovation (“DFPI”). The Company’s principal business is to serve as a holding company for Farmers & Merchants Bank of Central California (the “Bank” or “F&M Bank”) and for other banking or banking-related subsidiaries, which the Company may establish or acquire. Over 108 years ago, August 1, 1916, marked the first day of business for Farmers & Merchants Bank. The Bank was incorporated under the laws of the State of California and licensed as a state-chartered bank. The Bank’s first venture out of Lodi occurred when the Galt office opened in 1948. Since then, the Bank has opened full-service branches in Linden, Manteca, Riverbank, Modesto, Sacramento, Elk Grove, Turlock, Hilmar, Stockton, Merced, Walnut Creek, Concord, Walnut Grove, Oakland, Napa, and Danville. As a legal entity separate and distinct from its subsidiary, the Company’s principal source of funds is, and will continue to be, dividends paid by and other funds received from the Bank. Legal limitations are imposed on the amount of dividends that may be paid and loans that may be made by the Bank to the Company.

The Company’s outstanding common stock as of March 31, 2025, consisted of 729,913 shares of common stock, $0.01 par value. No shares of preferred stock were issued or outstanding as of March 31, 2025. The common stock of the Company is not widely held or listed on any exchange. However, trades are reported on the OTCQX under the symbol “FMCB.”

The primary source of funding for the Company’s growth has been the generation of deposits, which the Company raises through its existing branch locations, newly opened branch locations, or through acquisitions. Loan growth over the years is the result of organic growth generated by the Company’s seasoned relationship managers and supporting associates who provide outstanding service and responsiveness to the Company’s clients.

The Company’s results of operations are largely dependent on net interest income. Net interest income is the difference between interest income earned on interest earning assets, which are comprised of loans and leases, investment securities, short-term investments and interest bearing deposits at other banks, and the interest the Company pays on interest bearing liabilities, which are primarily deposits, and, to a lesser extent, other borrowings. Management strives to match the re-pricing characteristics of the interest earning assets and interest bearing liabilities to protect net interest income from changes in market interest rates and changes in the shape of the yield curve.

The Company measures its performance by calculating the net interest margin, return on average assets, return on average equity and the efficiency ratio. Net interest margin is calculated by dividing net interest income, which is the difference between interest income on interest earning assets and interest expense on interest bearing liabilities, by average interest earning assets. Net interest income is the Company’s largest source of revenue. Interest rate fluctuations, as well as changes in the amount and type of earning assets and liabilities, combine to affect net interest income. The return on average assets is calculated by dividing the Company’s net income by its total average assets and the return on average equity is calculated by dividing the Company’s net income by its shareholders’ equity. The efficiency ratio is calculated by dividing non-interest expense by the sum of net interest income and non-interest income.

Critical Accounting Policies and Estimates

Our accounting policies are fundamental to understanding management’s discussion and analysis of results of operations and financial condition. We identify critical policies and estimates as those that require management to make particularly difficult, subjective, and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. Our critical accounting policy relates to the allowance for credit losses on loans and leases held for investment. Further details are described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2024 Form 10-K.

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Impact of Recently Issued Accounting Standards

See Note 1. “Basis of Presentation and Significant Accounting Policies” to the Unaudited Consolidated Financial Statements in “Item 1. Financial Information” in this Quarterly Report on Form 10-Q.

Non-GAAP Measurements

We use certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. The methodology for determining these non-GAAP measures may differ among companies. We used the following non-GAAP measures in this Form 10-Q:

•

Tangible common equity ratio and tangible book value per common share: Given that the use of these measures is prevalent among banking regulators, investors, and analysts, we disclose them in addition to the related GAAP measures of return on average equity and book value per common share. The reconciliations of these non-GAAP measurements to the GAAP measurements are presented in the following tables for and as of the periods presented.

Tangible Common Equity Ratio and	March 31,			December 31,			March 31,
Tangible Book Value Per Common Share	2025			2024			2024
(Dollars in thousands, except per share data)
Shareholders' equity	$	602,306		$	573,072		$	565,217
Less: Intangible assets		12,740			12,870			13,282
Tangible common equity	$	589,566		$	560,202		$	551,935

Total assets	$	5,680,024		$	5,370,196		$	5,714,573
Less: Intangible assets		12,740			12,870			13,282
Tangible assets	$	5,667,284		$	5,357,326		$	5,701,291

Tangible common equity ratio⁽¹⁾		10.40	%		10.46	%		9.68	%
Book value per common share⁽²⁾	$	825.18		$	818.91		$	760.96
Tangible book value per common share⁽³⁾	$	807.72		$	800.52		$	743.08
Common shares outstanding		729,913			699,798			742,770

⁽¹⁾ Tangible common equity divided by tangible assets.

⁽²⁾ Total common equity divided by common shares outstanding.

⁽³⁾ Tangible common equity divided by common shares outstanding.

Results of Operations

The following discussion and analysis is intended to provide a better understanding of the Company’s performance during each of the three-month periods ended March 31, 2025 and 2024 and the material changes in financial condition, operating income, and expense of the Company and its subsidiaries as shown in the accompanying unaudited consolidated financial statements. Information related to the comparison of the results of operations for the years ended December 31, 2024, and 2023 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2024 Form 10-K.

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Factors that determine the level of net income include the volume of earning assets and interest bearing liabilities, yields earned and rates paid, fee income, non-interest expense, the level of non-performing loans and other non-earning assets, and the amount of non-interest bearing liabilities supporting earning assets. Non-interest income includes card processing fees, service charges on deposit accounts, bank-owned life insurance income, gains/losses on the sale of investment securities, and gains/losses on deferred compensation plan investments. Non-interest expense consists primarily of salaries and employee benefits, cost of deferred compensation benefits, occupancy, data processing, deposit insurance, marketing, professional services, and other expenses.

Earnings Performance

The following table presents performance metrics for the periods indicated:

	Three Months Ended
	March 31,			December 31,			March 31,
(Dollars in thousands, except per share amounts)	2025			2024			2024
Earnings Summary:
Interest income	$	67,138		$	66,870		$	66,641
Interest expense		13,997			14,681			14,928
Net interest income		53,141			52,189			51,713
Provision for credit losses		300			-			-
Non-interest income		5,021			4,578			5,075
Non-interest expense		25,509			26,434			25,521
Income before taxes		32,353			30,333			31,267
Income tax expense		9,344			8,487			8,544
Net Income	$	23,009		$	21,846		$	22,723

Per Common Share Data:
Basic earnings per common share	$	32.88		$	29.89		$	30.56
Diluted earnings per common share	$	32.86		$	29.89		$	30.56
Book value per common share	$	825.18		$	818.91		$	760.96
Tangible book value per common share⁽¹⁾	$	807.72		$	800.52		$	743.08

Performance Ratios:
Return on average assets		1.70	%		1.62	%		1.71	%
Return on average equity		15.65	%		15.30	%		16.33	%
Net interest margin (tax equivalent)		4.20	%		4.09	%		4.14	%
Yield on average loans and leases (tax equivalent)		6.07	%		5.98	%		6.09	%
Cost of average total deposits		1.17	%		1.23	%		1.27	%
Efficiency ratio		43.86	%		46.57	%		44.94	%
Loan-to-deposit ratio		72.23	%		78.53	%		74.73	%
Percentage of checking deposits to total deposits		45.76	%		51.08	%		49.39	%

Capital Ratios - Bancorp:
Common equity tier 1 capital to risk-weighted assets		13.75	%		13.04	%		12.73	%
Tier 1 capital to risk-weighted assets		13.97	%		13.26	%		12.95	%
Risk-based capital to risk-weighted assets		15.23	%		14.52	%		14.21	%
Tier 1 leverage capital ratio		11.32	%		10.95	%		10.83	%
Tangible common equity ratio⁽¹⁾		10.40	%		10.46	%		9.68	%

⁽¹⁾ See “Non-GAAP Measurements”

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Average Balance and Yields

The following table sets forth a summary of average balances with corresponding interest income and interest expense as well as average yield, cost and net interest margin information for the periods presented. Average balances are derived from daily balances.

	Three Months Ended March 31,
	2025							2024
(Dollars in thousands)	Average Balance			Interest Income / Expense		Average Yield / Rate		Average Balance			Interest Income / Expense		Average Yield / Rate
ASSETS
Interest earnings deposits in other banks and federal funds sold	$	241,277		$	2,641	4.44	%	$	332,575		$	4,530	5.48	%
Investment securities:⁽¹⁾
Taxable securities		1,212,632			9,464	3.17	%		969,234			5,708	2.37	%
Non-taxable securities⁽²⁾		66,528			785	4.72	%		63,079			762	4.83	%
Total investment securities		1,279,160			10,249	3.25	%		1,032,313			6,470	2.52	%
Loans:⁽³⁾
Real estate:
Commercial		1,346,456			17,806	5.36	%		1,322,337			17,622	5.36	%
Agricultural		739,339			10,985	6.03	%		725,078			10,322	5.73	%
Residential and home equity		398,410			4,831	4.92	%		401,578			4,792	4.80	%
Construction		184,867			3,022	6.63	%		225,430			3,898	6.95	%
Total real estate		2,669,072			36,644	5.57	%		2,674,423			36,634	5.51	%
Commercial & industrial		493,797			8,870	7.28	%		499,071			9,261	7.46	%
Agricultural		268,350			5,264	7.96	%		313,653			6,479	8.31	%
Commercial leases		174,314			3,172	7.38	%		168,526			2,946	7.03	%
Consumer and other		5,055			85	6.82	%		5,619			88	6.30	%
Total loans and leases		3,610,588			54,035	6.07	%		3,661,292			55,408	6.09	%
Non-marketable securities		15,549			368	9.60	%		15,549			388	10.04	%
Total interest earning assets		5,146,574			67,293	5.30	%		5,041,729			66,796	5.33	%
Allowance for credit losses		(75,821	)						(75,448	)
Non-interest earning assets		346,762							339,939
Total average assets	$	5,417,515						$	5,306,220

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing deposits:
Demand	$	842,785		541		0.26	%	$	914,618		888		0.39	%
Savings and money market accounts		1,679,076		7,333		1.77	%		1,618,678		7,186		1.79	%
Certificates of deposit greater than $250,000		386,650		3,518		3.69	%		375,967		3,837		4.10	%
Certificates of deposit equal to or less than $250,000		327,596		2,413		2.99	%		340,778		2,734		3.23	%
Total interest bearing deposits		3,236,107		13,805		1.73	%		3,250,041		14,645		1.81	%
Short-term borrowings		3		-		0.00	%		5,497		62		4.54	%
Subordinated debentures		10,310		192		7.55	%		10,310		221		8.62	%
Total interest bearing liabilities		3,246,420		13,997		1.75	%		3,265,848		14,928		1.84	%
Non-interest bearing deposits		1,493,663							1,403,384
Total funding		4,740,083		13,997		1.20	%		4,669,232		14,928		1.29	%
Other non-interest bearing liabilities		89,255							80,276
Shareholders' equity		588,177							556,712
Total average liabilities and shareholders' equity	$	5,417,515						$	5,306,220

Net interest income and margin⁽⁴⁾			$	53,296		4.20	%			$	51,868		4.14	%
Interest rate spread						3.55	%						3.49	%
Tax equivalent adjustment				(155	)						(155	)
Net interest income			$	53,141		4.19	%			$	51,713		4.13	%

⁽¹⁾Excludes average unrealized losses of $23.6 million and $18.5 million for the three months ended March 31, 2025, and 2024, respectively, which are included in non-interest earning assets.

⁽²⁾Yield and interest income are calculated on a fully taxable equivalent basis using the current statutory federal tax rate of 21%.

⁽³⁾Loan interest income includes loan fees of $1.7 million and $1.4 million for the three months ended March 31, 2025 and 2024, respectively.

⁽⁴⁾Net interest margin is computed by dividing net interest income by average interest earning assets.

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Interest bearing deposits with banks and FRB balances are earning assets available to the Company. Average interest bearing deposits with banks consisted primarily of FRB deposits. Balances with the FRB earned an average interest rate of 4.44% and 5.48% for the three months ended March 31, 2025 and 2024, respectively. The decrease was primarily the result of the Federal Reserve decreasing rates by 100 basis points from September 2024 to December 2024. Average interest bearing deposits with banks was $241.3 million and $332.6 million for the three months ended March 31, 2025 and 2024, respectively. Interest income on interest bearing deposits with banks was $2.6 million and $4.5 million for the three months ended March 31, 2025 and 2024, respectively.

The investment portfolio is also a component of the Company’s earning assets. Historically, the Company invested primarily in: (1) mortgage-backed securities issued by government-sponsored entities; (2) debt securities issued by the U.S. Treasury, government agencies and government-sponsored entities; and (3) investment grade bank-qualified municipal bonds. However, at certain times the Company has selectively added investment grade corporate securities (floating rate and fixed rate with maturities less than 7 years) to the portfolio in order to obtain yields that exceed government agency securities of equivalent maturity. Since the risk factor for these types of investments is generally lower than that of loans and leases, the yield earned on investments is generally less than that of loans and leases.

Average total investment securities were $1.3 billion and $1.0 billion for the three months ended March 31, 2025 and 2024, respectively. The average yield on total investment securities was 3.25% and 2.52% for the three months ended March 31, 2025 and 2024, respectively. The increase in the yield reflects the increase in yields on purchases in 2024 and during the three months ended March 31, 2025.

Average loans and leases held for investment were $3.61 billion and $3.66 billion for the three months ended March 31, 2025 and 2024, respectively. The average yield on the loan and lease portfolio was 6.07% and 6.09% for the three months ended March 31, 2025 and 2024, respectively. The slight decrease in the loan yield reflects the decrease in market interest rates over the last year.

Average interest bearing deposits were $3.24 billion and $3.25 billion for the three months ended March 31, 2025 and 2024, respectively. The average rate paid on interest bearing deposits was 1.73% and 1.81% for the three months ended March 31, 2025 and 2024, respectively. Total interest expense on interest bearing deposits was $13.8 million and $14.6 million for the three months ended March 31, 2025 and 2024, respectively, with the decrease driven by decreases in short-term market interest rates from September 2024 to December 2024. The average rate paid on total funding costs was 1.20% and 1.29% for the three months ended March 31, 2025 and 2024, respectively.

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Rate/Volume Analysis

The following table shows the change in interest income and interest expense and the amount of change attributable to variances in volume, rates and the combination of volume and rates based on the relative changes of volume and rates. For purposes of this table, the change in interest due to both volume and rate has been allocated to change due to volume and rate in proportion to the relationship of absolute dollar amounts of change in each.

	Three Months Ended March 31, 2025 compared with 2024
	Increase (Decrease) Due to:
(Dollars in thousands)	Volume			Rate			Net
Interest income:
Interest earnings deposits in other banks and federal funds sold	$	(1,117	)	$	(772	)	$	(1,889	)
Investment securities:
Taxable securities		1,606			2,150			3,756
Non-taxable securities		115			(92	)		23
Total investment securities		1,721			2,058			3,779
Loans:
Real estate:
Commercial		178			6			184
Agricultural		181			482			663
Residential and home equity		(221	)		260			39
Construction		(695	)		(181	)		(876	)
Total real estate		(557	)		567			10
Commercial & industrial		(120	)		(271	)		(391	)
Agricultural		(939	)		(276	)		(1,215	)
Commercial leases		92			134			226
Consumer and other		(34	)		31			(3	)
Total loans and leases		(1,558	)		185			(1,373	)
Non-marketable securities		-			(20	)		(20	)
Total interest income		(954	)		1,451			497

Interest expense:
Interest bearing deposits:
Demand		(66	)		(281	)		(347	)
Savings and money market accounts		503			(356	)		147
Certificates of deposit greater than $250,000		614			(933	)		(319	)
Certificates of deposit equal to or less than $250,000		(110	)		(211	)		(321	)
Total interest bearing deposits		941			(1,781	)		(840	)

Short-term borrowings		(62	)		-			(62	)
Subordinated debentures		-			(29	)		(29	)
Total interest expense		879			(1,810	)		(931	)
Net interest income	$	(1,833	)	$	3,261		$	1,428

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Comparison of Results of Operations for the Three Months Ended March 31, 2025 and 2024

	Three Months Ended
	March 31,				$ Better /			$ Better /
(Dollars in thousands)	2025		2024		(Worse)			(Worse)
Selected Income Statement Information:
Interest income	$	67,138	$	66,641	$	497			0.75	%
Interest expense		13,997		14,928		931			6.24	%
Net interest income		53,141		51,713		1,428			2.76	%
Provision for credit losses		300		-		(300	)		N/A
Net interest income after provision for credit losses		52,841		51,713		1,128			2.18	%
Non-interest income		5,021		5,075		(54	)		(1.06	%)
Non-interest expense		25,509		25,521		12			0.05	%
Income before income tax expense		32,353		31,267		1,086			3.47	%
Income tax expense		9,344		8,544		(800	)		(9.36	%)
Net income	$	23,009	$	22,723	$	286			1.26	%

For the three months ended March 31, 2025 and 2024, net income was $23.0 million compared with $22.7 million, respectively. The increase in net income was primarily the result of higher net interest income of $1.4 million. This increase was offset by an increase in income tax expense of $0.8 million during the three months ended March 31, 2025, compared to the same period in the prior year, and a $0.3 million provision for credit losses during the first quarter of 2025 compared to no provision in 2024.

Net Interest Income and Net Interest Margin

For the three months ended March 31, 2025 and 2024, net interest income was $53.1 million compared with $51.7 million, respectively. The increase in net interest income is primarily the result of the net interest margin (tax equivalent basis) increasing 6 basis points to 4.20% compared with 4.14% for the same period a year earlier. The increase in the net interest margin was primarily the result of the increase in investment income of $3.8 million and a decrease in deposit costs of $0.8 million due to the interest rate environment as the federal funds rate decreased 100 basis points from September through December of 2024. The investment securities yield during the first quarter of 2025 increased 73 basis points from 2.52% to 3.25% compared to the first quarter of 2024. The loan yield decreased 2 basis points from 6.09% to 6.07% compared to the first quarter of 2024. The deposit yield decreased 8 basis points from 1.81% to 1.73% and outpaced the decrease in loan yield over the same period a year earlier.

Provision for Credit Losses

The provision for credit losses in each period is a charge against earnings in that period. The provision is the amount required to maintain the allowance for credit losses at a level that, in management’s judgment, is adequate to absorb expected credit losses over the life of the loans and leases, unfunded loan commitments and HTM securities portfolios.

Based on the Company’s evaluation of the credit quality of the loan and lease portfolio and the calculations of the allowance for credit losses under the current expected credit losses (“CECL”) methodology, the Company recorded a $0.3 million provision for credit losses during the first three months of 2025 compared to no provision during the first three months of 2024. Net charge-offs for the three months ended March 31, 2025 were $161,000 compared to net recoveries of $53,000 for the same period a year earlier.

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Non-interest Income

	Three Months Ended
	March 31,				$ Better /			$ Better /
(Dollars in thousands)	2025		2024		(Worse)			(Worse)
Non-interest income:
Card processing	$	1,667	$	1,629	$	38			2.33	%
Net gain on deferred compensation benefits		833		1,158		(325	)		(28.07	%)
Service charges on deposit accounts		772		748		24			3.21	%
Increase in cash surrender value of BOLI		603		595		8			1.34	%
Other		1,146		945		201			21.27	%
Total non-interest income	$	5,021	$	5,075	$	(54	)		(1.06	%)

Non-interest income decreased $54,000, or 1.1%, to $5.0 million for the three months ended March 31, 2025, compared with $5.1 million for the same period a year earlier. The year-over-year decrease in non-interest income was primarily due to a $0.3 million decrease in the net gain on deferred compensation benefits partially offset by a $0.2 million increase in other non-interest income.

The Company recorded net gains on deferred compensation plan investments of $0.8 million for the three months ended March 31, 2025, compared with net gains of $1.2 million for the same period a year earlier. See Note 10, “Employee Benefit Plans,” located in Item 8. “Financial Statements and Supplementary Data” in the Company’s 2024 Form 10-K for a description of these plans. Balances in non-qualified deferred compensation plans may be invested in financial instruments whose market value fluctuates based upon trends in interest rates and stock prices. Although GAAP requires these investment gains/losses to be recorded in non-interest income, an offsetting entry is also required to be made to non-interest expense resulting in no net-effect on the Company’s net income.

Non-interest Expense

	Three Months Ended
	March 31,				$ Better /			$ Better /
(Dollars in thousands)	2025		2024		(Worse)			(Worse)
Non-interest expense:
Salaries and employee benefits	$	17,144	$	17,503	$	359			2.05	%
Data processing		1,638		1,455		(183	)		(12.58	%)
Occupancy		1,302		1,232		(70	)		(5.68	%)
Net gain on deferred compensation benefits		833		1,158		325			28.07	%
Deposit insurance		748		712		(36	)		(5.06	%)
Professional services		922		541		(381	)		(70.43	%)
Marketing		467		480		13			2.71	%
Other		2,455		2,440		(15	)		(0.61	%)
Total non-interest expense	$	25,509	$	25,521	$	12			0.05	%

Non-interest expense decreased $12,000, or 0.05%, to $25.5 million for the three months ended March 31, 2025, compared with $25.5 million for the same period a year ago. This year-over-year decrease was primarily comprised of a $0.4 million decrease in salaries and employee benefits and a $0.3 million decrease in the net gain on deferred compensation plan investments. These decreases were partially offset by a $0.4 million increase in professional services and a $0.2 million increase in data processing expenses.

Net gains on deferred compensation plan obligations were $0.8 million for the three months ended March 31, 2025, compared with net gains on deferred compensation plan investments of $1.2 million for the same period a year ago. See Note 10 “Employee Benefit Plans,” located in “Item 8. Financial Statements and Supplementary Data” in the Company’s 2024 Form 10-K for a description of these plans. Balances in non-qualified deferred compensation plans may be invested in financial instruments whose market value fluctuates based upon trends in interest rates and stock prices. Although GAAP requires these gains on obligations to be recorded in non-interest expense, an offsetting entry is also required to be made to non-interest income resulting in no net-effect on the Company’s net income.

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Income Tax Expense

For the three months ended March 31, 2025, income tax expense was $9.3 million compared to $8.5 million for the same period a year earlier. For the three months ended March 31, 2025, the Company’s effective tax rate was 28.88% compared to 27.33% for the same period a year earlier. The Company’s effective tax rate can fluctuate from quarter to quarter due primarily to changes in the mix of taxable and tax-exempt earning assets. The effective rates were lower than the combined Federal and State statutory rate of 30% primarily due to credits associated with low income housing tax credit investments (“LIHTC”); and tax-exempt interest income on municipal securities and loans.

Balance Sheet Analysis

Total assets were $5.7 billion at March 31, 2025, compared with $5.4 billion at December 31, 2024, an increase of $309.8 million, or 5.77%. Total cash and cash equivalents increased $394.7 million from $212.6 million as of December 31, 2024 to $607.3 million as of March 31, 2025. Gross loans and leases held for investment were $3.6 billion at March 31, 2025, compared with $3.7 billion at December 31, 2024, a decrease of $94.2 million, or 2.56%. Total deposits were $5.0 billion at March 31, 2025, compared with $4.70 billion at December 31, 2024, an increase of $278.8 million, or 5.93%. Our loan to deposit ratio was 72.23% and 78.53% as of March 31, 2025 and December 31, 2024, respectively.

Cash and Cash Equivalents

The Company’s cash and cash equivalents consist of interest bearing deposits with banks and overnight investments in Federal Reserve balances. Interest bearing deposits with banks consisted primarily of FRB deposits. Since balances at the FRB are effectively risk free, the Company elected to maintain its excess cash at the FRB. Interest bearing deposits with banks totaled $515.8 million at March 31, 2025 and $141.5 million at December 31, 2024. The increase was primarily due to steps taken to manage on-balance sheet liquidity which included $250.0 million in brokered deposits purchased in late March 2025 with a maturity in June 2025. The Company’s total cash and cash equivalents as of March 31, 2025 represented 10.7% of the Company’s total assets as compared to 4.0% of total assets as of December 31, 2024.

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Investment Securities

The Company’s net investment portfolio increased by $21.3 million, or 1.73%, to $1.3 billion at March 31, 2025, compared to $1.2 billion at December 31, 2024. During the first quarter of 2025, the Company purchased $33.2 million of investment securities with an average yield of 5.83%. The Company uses its investment portfolio to manage interest rate and liquidity risks. The Company's total investment portfolio as of March 31, 2025 represents 22.10% of the Company’s total assets as compared to 22.98% of total assets at December 31, 2024.

Available-for-sale securities are carried at fair value and held-to-maturity securities are carried at amortized cost under GAAP. The carrying value of our portfolio of investment securities for the dates indicated are as follows:

(Dollars in thousands)	March 31, 2025		December 31, 2024
Available-for-sale securities
U.S. Government-sponsored securities	$	2,497	$	2,644
Mortgage-backed securities⁽¹⁾		470,894		439,858
Commercial mortgage-backed securities⁽¹⁾		1,243		1,212
Collateralized mortgage obligations⁽¹⁾		5,562		5,497
Corporate securities		14,927		14,856
Other		310		347
Total available-for-sale securities	$	495,433	$	464,414

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

	March 31,			December 31,
(Dollars in thousands)	2025			2024
Held-to-maturity securities
Mortgage-backed securities⁽¹⁾	$	617,929		$	626,427
Collateralized mortgage obligations⁽¹⁾		66,965			68,377
Municipal securities		74,877			74,639
Total held-to-maturity securities	$	759,771		$	769,443
Allowance for credit losses		(450	)		(450	)
Total held-to-maturity securities	$	759,321		$	768,993

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

The following tables show the carrying value for final contractual maturities of investment securities and the weighted average yields of such securities, including the benefit of tax-exempt securities:

	As of March 31, 2025
	Within One Year					After One but Within Five Years					After Five but Within Ten Years				After Ten Years				Total
(Dollars in thousands)	Amount		Yield			Amount		Yield			Amount		Yield		Amount		Yield		Amount		Yield
Securities available-for-sale
U.S. Government-sponsored securities	$	-		0.00	%	$	31		5.14	%	$	306	6.02	%	$	2,160	5.38	%	$	2,497	5.46	%
Mortgage-backed securities⁽¹⁾		83		2.65	%		2,541		2.55	%		2,174	4.55	%		466,096	4.78	%		470,894	4.76	%
Commercial mortgage-backed securities ⁽¹⁾		-		0.00	%		-		0.00	%		-	0.00	%		1,243	5.85	%		1,243	5.85	%
Collateralized mortgage obligations⁽¹⁾		-		0.00	%		-		0.00	%		-	0.00	%		5,562	5.86	%		5,562	5.86	%
Corporate securities		-		0.00	%		14,927		5.21	%		-	0.00	%		-	0.00	%		14,927	5.21	%
Other		310		3.58	%		-		0.00	%		-	0.00	%		-	0.00	%		310	3.58	%
Total securities available-for-sale	$	393		3.38	%	$	17,499		4.81	%	$	2,480	4.70	%	$	475,061	4.80	%	$	495,433	4.79	%

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

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	As of March 31, 2025
	Within One Year				After One but Within Five Years				After Five but Within Ten Years					After Ten Years					Total
(Dollars in thousands)	Amount		Yield		Amount		Yield		Amount		Yield			Amount		Yield			Amount		Yield
Securities held-to-maturity
Mortgage-backed securities⁽¹⁾	$	-	0.00	%	$	3,103	0.83	%	$	7,327		1.65	%	$	607,499		1.89	%	$	617,929	1.88	%
Collateralized mortgage obligations⁽¹⁾		-	0.00	%		-	0.00	%		-		0.00	%		66,965		1.75	%		66,965	1.75	%
Municipal securities		1,538	2.07	%		20,905	1.13	%		11,650		2.00	%		40,784		1.43	%		74,877	2.01	%
Total securities held-to-maturity	$	1,538	2.07	%	$	24,008	2.83	%	$	18,977		1.86	%	$	715,248		1.85	%	$	759,771	1.88	%

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

	As of December 31, 2024
	Within One Year				After One but Within Five Years					After Five but Within Ten Years				After Ten Years				Total
(Dollars in thousands)	Amount		Yield		Amount		Yield			Amount		Yield		Amount		Yield		Amount		Yield
Securities available-for-sale
U.S. Government-sponsored securities	$	2	3.00	%	$	33		5.64	%	$	279	6.15	%	$	2,330	5.89	%	$	2,644		5.92	%
Mortgage-backed securities⁽¹⁾		74	2.83	%		3,074		2.57	%		1,949	3.92	%		434,761	4.70	%		439,858		4.70	%
Commercial mortgage-backed securities ⁽¹⁾		-	0.00	%		-		0.00	%		-	0.00	%		1,212	6.01	%		1,212		6.01	%
Collateralized mortgage obligations⁽¹⁾		-	0.00	%		-		0.00	%		-	0.00	%		5,497	6.01	%		5,497		6.01	%
Corporate securities		-	0.00	%		14,856		5.63	%		-	0.00	%		-	0.00	%		14,856		5.63	%
Other		347	3.72	%		-		0.00	%		-	0.00	%		-	0.00	%		347		3.72	%
Total securities available-for-sale	$	423	3.56	%	$	17,963		5.10	%	$	2,228	4.20	%	$	443,800	4.72	%	$	464,414		4.75	%

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

	As of December 31, 2024
	Within One Year				After One but Within Five Years					After Five but Within Ten Years				After Ten Years				Total
(Dollars in thousands)	Amount		Yield		Amount		Yield			Amount		Yield		Amount		Yield		Amount		Yield
Securities held-to-maturity
Mortgage-backed securities⁽¹⁾	$	-	0.00	%	$	3,426		0.82	%	$	7,756	1.66	%	$	615,245	1.89	%	$	626,427	1.88	%
Collateralized mortgage obligations⁽¹⁾		-	0.00	%		-		0.00	%		-	0.00	%		68,377	1.75	%		68,377	1.75	%
Municipal securities		1,180	2.62	%		18,365		3.64	%		6,733	3.95	%		48,361	2.60	%		74,639	3.93	%
Total securities held-to-maturity	$	1,180	2.62	%	$	21,791		3.19	%	$	14,489	2.72	%	$	731,983	1.92	%	$	769,443	2.07	%

⁽¹⁾ All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S. Government.

Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. Expected maturities of mortgage-backed and CMO securities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without penalties. The Company evaluates securities for expected credit losses at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.

Loans and Leases

Loans and leases can be categorized by borrowing purpose and use of funds. For detailed descriptions of the various loan types offered by the Company see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2024 Form 10-K.

The Company's loan and lease portfolio at March 31, 2025 totaled $3.6 billion, a decrease of $94.2 million, or 2.56%, from December 31, 2024, due to lower loan production.

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The following table sets forth the distribution of the loan and lease portfolio by type and percent at the dates indicated:

	March 31, 2025					December 31, 2024
(Dollars in thousands)	Dollars		Percent of Total			Dollars		Percent of Total
Gross loans and leases
Real estate:
Commercial	$	1,355,261		37.69	%	$	1,360,841		36.88	%
Agricultural		737,314		20.51	%		751,026		20.35	%
Residential and home equity		396,044		11.02	%		404,399		10.96	%
Construction		185,348		5.15	%		194,903		5.28	%
Total real estate		2,673,967		74.37	%		2,711,169		73.47	%
Commercial & industrial		482,196		13.41	%		504,403		13.67	%
Agricultural		258,704		7.19	%		289,847		7.85	%
Commercial leases		175,384		4.88	%		179,718		4.87	%
Consumer and other		5,260		0.15	%		5,084		0.14	%
Total gross loans and leases	$	3,595,511		100.0	%	$	3,690,221		100.00	%

The following table shows the maturity distribution and interest rate sensitivity of the loan and lease portfolio of the Company at March 31, 2025.

	Loan Contractual Maturity
(Dollars in thousands)	One Year or Less		After One But Within Five Years		After Five Years But Within Fifteen Years		After Fifteen Years		Total
Gross loan and leases:
Real estate:
Commercial	$	90,248	$	477,521	$	753,772	$	33,720	$	1,355,261
Agricultural		50,431		182,872		471,528		32,483		737,314
Residential and home equity		36		4,315		114,738		276,955		396,044
Construction		169,109		16,239		-		-		185,348
Total real estate		309,824		680,947		1,340,038		343,158		2,673,967
Commercial & industrial		193,694		190,433		95,783		2,286		482,196
Agricultural		168,373		78,015		12,316		-		258,704
Commercial leases		3,460		68,518		103,406		-		175,384
Consumer and other		779		3,961		61		459		5,260
Total gross loans and leases	$	676,130	$	1,021,874	$	1,551,604	$	345,903	$	3,595,511
Rate structure for loans and leases
Fixed rate	$	221,305	$	700,741	$	971,101	$	195,012	$	2,088,159
Adjustable rate		454,825		321,133		580,503		150,891		1,507,352
Total gross loans and leases	$	676,130	$	1,021,874	$	1,551,604	$	345,903	$	3,595,511

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The following table summarizes the loans for which the accrual of interest has been discontinued and OREO (as hereinafter defined) at the dates indicated:

	March 31,			December 31,
(Dollars in thousands)	2025			2024
Non-performing assets:
Non-accrual loans and leases
Real estate:
Commercial	$	-		$	170
Agricultural		-			-
Residential and home equity		-			-
Construction		-			-
Total real estate		-			170
Commercial & industrial		193			759
Agricultural		-			-
Commercial leases		-			-
Consumer and other		-			-
Total non-performing loans and leases		193			929
Other real estate owned ("OREO")		873			873
Total non-performing assets	$	1,066		$	1,802

Selected ratios:
Non-performing loans to total loans and leases		0.01	%		0.03	%
Non-performing assets to total assets		0.02	%		0.03	%

Non-Accrual Loans and Leases – Accrual of interest on loans and leases is generally discontinued when a loan or lease becomes contractually past due by 90 days or more with respect to interest or principal. When loans and leases are 90 days past due, but in management's judgment are well secured and in the process of collection, they may not be classified as non-accrual. When a loan or lease is placed on non-accrual status, all interest previously accrued but not collected is reversed. Income on such loans and leases is then recognized only to the extent that cash is received and where the future collection of principal is probable. The Company had $193,000 in non-accrual loans at March 31, 2025 and $929,000 in non-accrual loans at December 31, 2024.

Although management believes that non-performing loans and leases are generally well-secured and that potential losses are provided for in the Company’s allowance for credit losses, there can be no assurance that future deterioration in economic conditions and/or collateral values will not result in future credit losses. See Note 3. “Loans and Leases”, located in “Item 1. Financial Statements” in this Quarterly Report on Form 10-Q for an allocation of the allowance classified to collateral dependent loans and leases.

Other Real Estate Owned – OREO represents real property taken either through foreclosure or through a deed in lieu thereof from the borrower. The Company records all OREO properties at amounts equal to or less than the fair market value of the properties based on current independent appraisals reduced by estimated selling costs. The Company reported $873,000 of foreclosed OREO at March 31, 2025, and at December 31, 2024.

Loan Modifications to Borrowers Experiencing Financial Difficulties – In the normal course of business, the Company may execute loan modifications to borrowers experiencing financial difficulties. Some of these modifications include: term extension, principal forgiveness, rate reduction, other-than-insignificant payment delay, or any combination of those. ASU 2022-02 requires certain disclosure of loans and leases that have been modified within the past 12 months and the effects that those modifications had on the modified loans and leases. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses and because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Company modifies loans by providing principal forgiveness that is deemed to be uncollectable; therefore, the portion of the loan forgiven is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.

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The Company modified five loans, with one borrower, in the aggregate amount of $2.7 million, during the first three months of March 31, 2025. These loans were current as of March 31, 2025.

The Company modified six loans, with two borrowers, in the aggregate amount of $13.2 million, during the year ended December 31, 2024. These loans were current as of December 31, 2024.

Allowance for Credit Losses—Loans and Leases

The Company maintains an allowance for credit losses (“ACL”) under ASC Topic 326, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“CECL”). The allowance is established through a provision for credit losses, which is charged to expense. Additions to the allowance are expected to maintain the adequacy of the total allowance after credit losses and loan and lease growth. Credit exposures determined to be uncollectible are charged against the allowance. Cash received on previously charged off amounts is recorded as a recovery to the allowance. The overall allowance consists of two primary components: specific reserves related to individually evaluated loans and leases and general reserves comprised of both quantitative and qualitative factors for current expected credit losses related to loans and leases that are not individually evaluated. The Company uses the Weighted Average Remaining Maturity (“WARM”) methodology to calculate the ACL, as this method is deemed the most appropriate given the Company’s size and complexity. See Note 1 “Summary of Significant Accounting Policies - Allowance for Credit Losses – Loans and Leases” in our 2024 Form 10-K.

The allowance for credit losses is the combination of the allowance for credit losses on loan and lease losses and the allowance for credit losses on unfunded loan commitments. The ACL for unfunded loan commitments is included within “Interest payable and other liabilities” on the consolidated balance sheets.

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The following table sets forth the activity in our ACL on loans and leases held for investment and unfunded loan commitments for the periods indicated:

	Three Months Ended March 31,
(Dollars in thousands)	2025			2024
Allowance for credit losses:
Balance at beginning of year	$	77,973		$	74,965
Provision for credit losses:
Allowance for credit losses- loans and leases		300			-
Allowance for credit losses- unfunded loan commitments		-			-
Total provision for credit losses		300			-
Charge-offs:
Real estate:
Commercial		-			-
Agricultural		-			-
Residential and home equity		-			-
Construction		-			-
Total real estate		-			-
Commercial & industrial		(232	)		-
Agricultural		(34	)		-
Commercial leases		-			-
Consumer and other		(7	)		(10	)
Total charge-offs		(273	)		(10	)
Recoveries:
Real estate:
Commercial		-			-
Agricultural		-			-
Residential and home equity		3			8
Construction		-			-
Total real estate		3			8
Commercial & industrial		106			18
Agricultural		-			-
Commercial leases		-			-
Consumer and other		4			37
Total recoveries		113			63
Net (charge-offs) / recoveries		(160	)		53
Balance at end of period	$	78,113		$	75,018

Allowance for credit losses - loans and leases		75,423			75,018
Allowance for credit losses - unfunded loan commitments		2,690			3,690
Total allowance for credit losses	$	77,973		$	78,708

Selected financial information:
Net loans and leases held for investment	$	3,584,174		$	3,696,295
Average loans and leases		3,610,588			3,661,292
Non-performing loans and leases		193			3,550
Allowance for credit losses to non-performing loans and leases		N/M	⁽¹⁾		N/M	⁽¹⁾
Net (charge-offs) / recoveries to average loans and leases		(0.004	%)		0.001	%
Provision for credit losses to average loans and leases		0.01	%		0.00	%
Allowance for loan and lease losses to loans and leases held for investment		2.10	%		2.02	%

⁽¹⁾ Not meaningful

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The following table indicates management’s allocation of the ACL for loans and leases by loan type as of each of the following dates:

	March 31, 2025								December 31, 2024
(Dollars in thousands)	Dollars		Percent of Each Loan Type to Total Loans			Percent of ACL to Each Loan Type			Dollars		Percent of Each Loan Type to Total Loans			Percent of ACL to Each Loan Type
Allowance for credit losses:
Real estate:
Commercial	$	20,313		37.69	%		1.50	%	$	20,382		36.88	%		1.50	%
Agricultural		24,077		20.51	%		3.27	%		23,615		20.35	%		3.14	%
Residential and home equity		7,479		11.02	%		1.89	%		7,340		10.96	%		1.82	%
Construction		2,648		5.15	%		1.43	%		3,055		5.28	%		1.57	%
Total real estate		54,517		74.37	%		2.04	%		54,392		73.47	%		2.01	%
Commercial & industrial		7,843		13.41	%		1.63	%		7,791		13.67	%		1.54	%
Agricultural		6,417		7.19	%		2.48	%		6,725		7.85	%		2.32	%
Commercial leases		6,429		4.88	%		3.67	%		6,153		4.87	%		3.42	%
Consumer and other		217		0.15	%		4.13	%		222		0.14	%		4.37	%
Total allowance for credit losses	$	75,423		100.00	%		2.10	%	$	75,283		100.00	%		2.04	%

Deposits

Total deposits were $5.0 billion and $4.7 billion as of March 31, 2025 and December 31, 2024, respectively, an increase of $278.8 million or 5.93%. The increase in deposits was primarily due to $250.0 million in brokered deposits which were purchased in late March 2025 for purposes of balance sheet management and mature in June 2025. Excluding brokered deposits, total deposits increased by $28.8 million, or 0.61%, compared to December 31, 2024 due to an increase in savings and money market accounts.

Non-interest bearing demand deposits were $1.51 billion as of March 31, 2025 and $1.52 billion at December 31, 2024. Non-interest bearing deposits were 30.37% of total deposits as of March 31, 2025 and 32.31% of total deposits as of December 31, 2024. Interest bearing deposits were $3.5 billion and $3.2 billion at March 31, 2025 and December 31, 2024, respectively. Interest bearing deposits are comprised of interest bearing transaction accounts, money market accounts, regular savings accounts, and certificates of deposit. Interest bearing deposits are comprised of interest bearing transaction accounts, money market accounts, regular savings accounts, and certificates of deposit. Interest bearing transaction accounts decreased $116.2 million, or 13.18%, to $765.9 million at March 31, 2025, compared with $882.1 million at December 31, 2024. Savings and money market accounts increased $406.9 million, or 25.7%, to $2.0 billion at March 31, 2025, compared with $1.6 billion at December 31, 2024 due in part to the $250.0 million in brokered deposits. Certificates of deposit accounts decreased $5.6 million, or 0.79%, to $709.9 million at March 31, 2025, compared with $715.5 million at December 31, 2024.

The following table shows the average amount and average rate paid on the categories of deposits for each of the periods presented:

	Three Months Ended March 31,
	2025							2024
(Dollars in thousands)	Average Balance		Interest Expense		Average Rate			Average Balance		Interest Expense		Average Rate
Total deposits:
Interest bearing deposits:
Demand	$	842,785	$	541		0.26	%	$	914,618	$	888		0.39	%
Savings and money market		1,679,076		7,333		1.77	%		1,618,678		7,186		1.79	%
Certificates of deposit greater than $250,000		386,650		3,518		3.69	%		375,967		3,837		4.10	%
Certificates of deposit equal to or less than $250,000		327,596		2,413		2.99	%		340,778		2,734		3.23	%
Total interest bearing deposits		3,236,107		13,805		1.73	%		3,250,041		14,645		1.81	%
Non-interest bearing deposits		1,493,663							1,403,384
Total deposits	$	4,729,770	$	13,805		1.18	%	$	4,653,425	$	14,645		1.27	%

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Deposits are gathered from individuals and businesses in our market areas. The interest rates paid are competitively priced for each particular deposit product and structured to meet our funding requirements. The Company reduced interest rates during the last four months of 2024 after the Federal Reserve cut interest rates by 100 basis points between September and December. The average cost of total deposits, including non-interest bearing deposits, decreased to 1.17% for the three months ended March 31, 2025, compared with 1.27% for the same period a year ago and 1.23% for the three months ended December 31, 2024.

The following table shows deposits with a balance greater than $250,000 at March 31, 2025 and December 31, 2024:

	March 31,		December 31,
(Dollars in thousands)	2025		2024
Non-maturity deposits greater than $250,000	$	2,490,677	$	2,486,450
Certificates of deposit greater than $250,000, by maturity:
Less than 3 months		172,851		153,662
3 months to 6 months		137,260		146,341
6 months to 12 months		72,029		81,643
More than 12 months		3,844		3,427
Total certificates of deposit greater than $250,000	$	385,984	$	385,073
Total deposits greater than $250,000	$	2,876,661	$	2,871,523

Refer to the Year-To-Date Average Balance and Yield Schedule located in this "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" for information on separate deposit categories.

The Bank participates in a program wherein the State of California places time deposits with the Bank at the Bank’s option. As of March 31, 2025 and December 31, 2024, the Bank had $3.0 million of such deposits.

Total estimated uninsured deposits based on our regulatory reporting amounted to $2.3 billion at March 31, 2025 and December 31, 2024, respectively.

Federal Home Loan Bank Advances and Federal Reserve Bank Borrowings

Lines of Credit with the Federal Home Loan Bank and FRB are other key sources of funds to support earning assets and liquidity. These sources of funds are also used to manage the Company’s interest rate risk exposure and, as opportunities arise, to borrow and invest the proceeds at a positive spread through the investment portfolio. There were no FHLB advances at March 31, 2025 or December 31, 2024. There were no Federal Funds purchased or advances from the FRB at March 31, 2025 or December 31, 2024.

Long-Term Subordinated Debentures

On December 17, 2003, the Company raised $10.0 million through the sale of subordinated debentures to an off-balance-sheet trust and its sale of trust-preferred securities. See Note 9. “Long-Term Subordinated Debentures” located in “Item 8. Financial Statements and Supplementary Data” in our 2024 Form 10-K. Although this amount is reflected as subordinated debt on the Company’s balance sheet, under current regulatory guidelines, our Trust Preferred Securities continue to qualify as regulatory capital.

These securities accrue interest at a variable rate based upon 3-month SOFR plus 2.85%. Interest rates reset quarterly (the next reset is June 17, 2025), and the rate was 7.41% as of March 31, 2025 and 7.46% at December 31, 2024. The average rate paid for these securities was 7.55% for the first three months of 2025 and 8.62% for the first three months of 2024. Additionally, if the Company decided to defer interest on the subordinated debentures, the Company would be prohibited by the terms of the debentures, from paying cash dividends on the Company’s common stock.

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Capital Resources

The Company relies primarily on capital generated through the retention of earnings to satisfy its capital requirements. The Company engages in an ongoing assessment of its capital needs in order to support business growth and to insure depositor protection. Shareholders’ Equity totaled $602.3 million at March 31, 2025, an increase of $29.2 million, or 5.1%, from $573.1 million at December 31, 2024 due primarily to net income of $23.0 million during the first quarter of 2025.

The Company and the Bank are subject to various regulatory capital adequacy guidelines as outlined under Part 324 of the FDIC Rules and Regulations. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Company and the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company and the Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

As of March 31, 2025, the Company was in compliance with all of these capital requirements and there were no restrictions on the Company’s business activity. As of March 31, 2025 the Bank met the requirements to be categorized as “well-capitalized” under the FDIC regulatory framework for prompt corrective action. To be categorized as “well-capitalized,” the Bank must maintain minimum Total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following tables as of March 31, 2025 and December 31, 2024.

The Company’s and Bank’s actual and required capital amounts and ratios are as follows:

	March 31, 2025
	Actual				Required for Capital Adequacy Purposes				Minimum to be Categorized as "Well Capitalized" Under Prompt Corrective Action Regulation
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Bancorp:
CET1 capital to risk-weighted assets	$	604,003	13.75	%	$	197,740	4.50	%		N/A	N/A
Tier 1 capital to risk-weighted assets		614,003	13.97	%		263,654	6.00	%		N/A	N/A
Risk-based capital to risk-weighted assets		669,223	15.23	%		351,538	8.00	%		N/A	N/A
Tier 1 leverage capital ratio		614,003	11.32	%		217,057	4.00	%		N/A	N/A

Bank:
CET1 capital to risk-weighted assets	$	615,577	14.01	%	$	197,736	4.50	%	$	285,618	6.50	%
Tier 1 capital to risk-weighted assets		615,577	14.01	%		263,647	6.00	%		351,530	8.00	%
Risk-based capital to risk-weighted assets		670,795	15.27	%		351,530	8.00	%		439,412	10.00	%
Tier 1 leverage capital ratio		615,577	11.35	%		217,010	4.00	%		271,263	5.00	%

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	December 31, 2024
	Actual					Required for Capital Adequacy Purposes					Minimum to be Categorized as "Well Capitalized" Under Prompt Corrective Action Regulation
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Bancorp:
CET1 capital to risk-weighted assets	$	579,602		13.04	%	$	200,046		4.50	%		N/A		N/A
Tier 1 capital to risk-weighted assets		589,602		13.26	%		266,728		6.00	%		N/A		N/A
Risk-based capital to risk-weighted assets		645,453		14.52	%		355,637		8.00	%		N/A		N/A
Tier 1 leverage capital ratio		589,602		10.95	%		215,379		4.00	%		N/A		N/A

Bank:
CET1 capital to risk-weighted assets	$	591,072		13.30	%	$	200,038		4.50	%	$	288,944		6.50	%
Tier 1 capital to risk-weighted assets		591,072		13.30	%		266,718		6.00	%		355,624		8.00	%
Risk-based capital to risk-weighted assets		646,920		14.55	%		355,624		8.00	%		444,530		10.00	%
Tier 1 leverage capital ratio		591,072		10.99	%		215,213		4.00	%		269,016		5.00	%

On September 10, 2024, the Board of Directors authorized a new share repurchase program (the “Repurchase Plan”) in which the Company may repurchase up to $55.0 million of the Company’s common stock, which represented approximately 9% of outstanding shareholders’ equity at the time of approval. The Repurchase Plan extends through December 31, 2026.

Repurchases by the Company under the Repurchase Plan may be made from time to time at market prices through open market purchases, trading plans established in accordance with SEC rules, or privately negotiated transactions. In August 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted. Among other things, the IRA imposes an excise tax equal to 1% of the fair market value of any stock repurchased by covered corporations during a taxable year, subject to certain limits and provisions.

During the first three months of 2025, the Company repurchased 703 shares under the Repurchase Plan, for a total of $711,000, inclusive of the excise tax. As of March 31, 2025, there remains $19.2 million authorized for repurchases under the Repurchase Plan.

Off-Balance-Sheet Arrangements

Off-balance-sheet arrangements are any contractual arrangement to which an unconsolidated entity is a party, under which the Company has: (1) any obligation under a guarantee contract; (2) a retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity, or market risk support to that entity for such assets; (3) any obligation under certain derivative instruments; or (4) any obligation under a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk, or credit risk support to the Company, or engages in leasing, hedging, or research and development services with the Company.

The following table sets forth our off-balance-sheet lending commitments as of March 31, 2025:

			Amount of Commitment Expiration per Period
(Dollars in thousands)	Total Committed Amount		Less than One Year		One to Three Years		Three to Five Years		After Five Years
Off-balance sheet commitments
Commitments to extend credit	$	1,108,393	$	462,090	$	449,213	$	35,036	$	162,054
Standby letters of credit		15,285		11,441		2,344		500		1,000
Total off-balance sheet commitments	$	1,123,678	$	473,531	$	451,557	$	35,536	$	163,054

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The Company's exposure to credit loss in the event of nonperformance by the other party with regard to standby letters of credit, undisbursed loan commitments, and financial guarantees is represented by the contractual notional amount of those instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. The Company uses the same credit policies in making commitments and conditional obligations as it does for recorded balance sheet items. The Company may or may not require collateral or other security to support financial instruments with credit risk. Evaluations of each customer's creditworthiness are performed on a case-by-case basis. Additionally, the Company maintains an allowance for credit losses for unfunded loan commitments, which amounted to $2.7 million at March 31, 2025 and December 31, 2024.

Standby letters of credit are conditional commitments issued by the Company to guarantee performance of or payment for a customer to a third-party. Outstanding standby letters of credit at March 31, 2025 had maturity dates ranging from 1 to 43 months with final expiration in some cases up to October 2028. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

Liquidity

The ability to have readily available funds sufficient to repay maturing and non-maturing liabilities is of primary importance to depositors, creditors and regulators. In an effort to satisfy our liquidity needs, we actively manage our assets and liabilities. We have access to immediate liquid resources in the form of cash, which totaled $607.3 million, or 10.7% of total assets, as of March 31, 2025. The majority of cash is on deposit with the FRB and amounted to $515.8 million. Potential sources of liquidity also include our ability to sell or pledge our available-for-sale securities portfolio, our held-to-maturity portfolio which can be pledged for borrowing purposes, our ability to sell loans in the secondary market, and our ability to borrow from the FRB and FHLB. Our diversified deposit portfolio has historically provided us with a long-term source of stable low cost funding. Maturities and payments on outstanding loans and investment securities also provide a steady flow of funds. Our liquidity, represented by cash borrowing lines, federal funds and available-for-sale securities, is a result of our operating, investing and financing activities and related cash flows. In order to ensure funds are available at all times, we devote resources to projecting the amount of funds that will be required and we maintain relationships with a diversified client base. Liquidity requirements can also be met through short-term borrowings or the disposition of short-term assets. We actively monitor our liquidity on a daily basis and manage our liquidity and overall balance sheet positions through both our management and Board level Asset and Liability Management committees (“ALCO”), which meet regularly during the year.

We had the following borrowing lines available at March 31, 2025:

	March 31, 2025
(Dollars in thousands)	Total Credit Line Limit		Outstanding Amount		Remaining Credit Line Available		Value of Collateral Pledged
Additional liquidity sources:
Federal Reserve Bank BIC	$	1,147,128	$	-	$	1,147,128	$	1,430,356
Federal Home Loan Bank		804,123		-		804,123		1,035,676
US Bank Fed Funds		65,000		-		65,000		-
PCBB Fed Funds		50,000		-		50,000		-
FHLB Fed Funds		18,000		-		18,000		-
Total additional liquidity sources	$	2,084,251	$	-	$	2,084,251	$	2,466,032

We continued our focus on maintaining a strong liquidity position throughout the first three months of 2025, and we believe our liquid assets and short-term borrowing credit lines are adequate to meet our cash flow needs for loan and lease funding and deposit cash withdrawals for the foreseeable future. As of March 31, 2025, we had internal sources of liquidity comprised of $607.3 million in cash and $485.6 million unencumbered investment securities, which represented in the aggregate 19.0% of total assets. We also had $2.1 billion in external sources of liquidity as outlined in the table above, bringing our total available liquidity to $3.2 billion. Our pledged collateral on short-term borrowing lines is comprised of $2.4 billion in loans and $1.5 million in investment securities held at market value. We have the option of either borrowing on our credit lines or selling these investment securities for cash flow needs.

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On a long-term basis, we can, as needed, meet our liquidity needs by changing the relative distribution of our asset portfolios by reducing our investment or loan and lease volumes, or selling or encumbering assets. Further, we can increase liquidity by soliciting higher levels of deposit accounts through promotional activities and/or borrowing from our correspondent banks as well as the Federal Reserve and FHLB. At the current time, our long-term liquidity needs primarily relate to funds required to support loan and lease originations and commitments and deposit withdrawals.

We believe we can meet all of these needs from existing liquidity sources. Our liquidity is comprised of three primary classifications: cash flows from or used in operating activities; cash flows from or used in investing activities; and cash flows from or used in financing activities. Net cash provided by or used in operating activities has consisted primarily of net income adjusted for certain non-cash income and expense items such as the credit loss provision, investment and other amortization and depreciation. Our net cash provided by operating activities for the first three months of 2025 was $39.6 million, driven by net income of $23.0 million.

Our primary investing activities are the origination of loans and leases and purchases and sales of investment securities. Net cash provided by investing activities was $77.0 million during the first three months of 2025, driven by a net decrease in loans and leases of $94.1 million and activity in our investment portfolio, including purchases of $33.2 million in available-for-sale securities offset by proceeds from the sale, maturities, calls, and pay downs of investment securities of $20.8 million. As of March 31, 2025, we had unfunded loan commitments of $1.1 billion and unfunded letters of credit of $15.3 million. At March 31, 2025 we believe that we had sufficient sources of funds available to meet current loan commitments.

Net cash provided by financing activities totaled $278.1 million in the first three months of 2025, driven by an increase in deposits of $278.8 million offset slightly by the repurchase of $0.7 million in common stock.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

The Company’s assessment of market risk at March 31, 2025 indicates there have been no material changes in the quantitative and qualitative disclosures from those made in the Company’s 2024 Form 10-K.

Market risk is the risk of loss in a financial instrument arising from adverse changes in market prices and rates, foreign currency exchange rates, commodity prices and equity prices. Our market risk arises primarily from interest rate risk inherent in our lending and deposit taking activities. Management actively monitors and manages our interest rate risk exposure. We do not have any market-risk sensitive instruments entered into for trading purposes. In monitoring interest rate risk we continually analyze and manage our earning assets and funding liabilities based on their payment streams and interest rates, the timing of their maturities and/or prepayments, and their sensitivity to actual or potential changes in market interest rates.

Management uses various asset/liability strategies to manage the re-pricing characteristics of our assets and liabilities designed to ensure that exposure to interest rate fluctuations is limited within our guidelines of acceptable levels of risk-taking. Hedging strategies, including the terms and pricing of loans and deposits, and managing the deployment of our securities, are considered to reduce mismatches in interest rate re-pricing opportunities of portfolio assets and their funding sources.

Since our earnings are primarily dependent on our ability to generate net interest income, we focus on actively monitoring and managing the effects of adverse changes in interest rates on our net interest income. Our Asset Liability Management Committee, which is comprised of members of the Board of Directors and Executive Officers, manages market risk. ALCO monitors interest rate risk by analyzing the potential impact on net interest income from potential changes in interest rates, and considers the impact of alternative strategies or changes in balance sheet structure. ALCO manages our balance sheet in part to maintain the potential impact of changes in interest rates on net interest income within acceptable ranges despite changes in interest rates. ALCO and management utilize a third party to assist with asset liability management including the use of simulation models.

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Our exposure to interest rate risk is reviewed on at least a quarterly basis by ALCO. Interest rate risk exposure is measured using interest rate sensitivity analysis to determine our change in net interest income in the event of hypothetical changes in interest rates. If potential changes to net interest income resulting from hypothetical interest rate changes are not within risk tolerances determined by ALCO, and approved by the full Board of Directors, Management may make adjustments to the Company’s asset and liability mix to bring interest rate risk levels within the Board approved limits.

Net Interest Income Simulation. In order to measure interest rate risk, we use a simulation model to project changes in net interest income that result from forecasted changes in interest rates. This analysis calculates the difference between net interest income forecasted using a rising and a falling interest rate scenario and a net interest income forecast using a base market interest rate derived from the current Treasury yield curve. The income simulation model includes various assumptions regarding the re-pricing relationships for each of our products. Many of our assets are floating rate loans, which are assumed to re-price immediately, and to the same extent as the change in market rates according to their contracted index.

Some loans and investment vehicles include the opportunity of prepayment (embedded options), and accordingly the simulation model uses various proprietary models to estimate these prepayments and assumes the reinvestment of the proceeds at current yields. Our non-term deposit products generally re-price more slowly, usually changing less than the change in market rates and at our discretion.

This analysis indicates the impact of changes in net interest income for the given set of rate changes and assumptions. It assumes the balance sheet size remains static throughout the simulation horizon by replacing existing cash flows/amortization into similar products at current rates to try and capture the ongoing activity of the balance sheet without forecasting any level of growth. It does not account for all factors that affect this analysis, including changes by management to mitigate the effect of interest rate changes or secondary impacts such as changes to our credit risk profile as interest rates change.

Furthermore, loan prepayment-rate estimates and spread relationships change regularly. Interest rate changes create changes in actual loan prepayment rates that will differ from the market estimates incorporated in this analysis. Changes that vary significantly from the assumptions may have significant effects on our net interest income.

For the rising and falling interest rate scenarios, the base market interest rate forecast was increased or decreased, on an instantaneous and sustained basis, by 100, 200 and 300 basis points. We then evaluate the simulation results using two approaches: Net Interest Income at Risk (“NII at Risk”) and Economic Value of Equity (“EVE”). Under NII at Risk, the impact on net interest income from the changes in interest rates on interest earning assets and interest bearing liabilities is modeled using various assumptions of assets and liabilities. EVE measures the period-end present value of assets minus the present value of liabilities. Management uses this value to measure the changes in the economic value of the Company under various interest rate scenarios.

Based on our quarterly simulations, our net interest margin exposure related to these hypothetical changes in market interest rates was within the current guidelines established by ALCO. Our simulation model highlights the fact that our balance sheet is asset sensitive, which means that our net interest income rises in a rising interest rate environment as rates earned on our interest bearing assets reprice higher and at a faster pace than rates paid on our interest bearing liabilities.

The ratio of variable to fixed-rate loans in our loan portfolio, the ratio of short-term (maturing at a given time within 12 months) to long-term loans, and the ratio of our demand, money market and savings deposits to CDs (and their time periods), are the primary factors affecting the sensitivity of our net interest income to changes in market interest rates. Our short-term loans are typically priced at prime plus a margin, and our long-term loans are typically priced based on a specific term of the Treasury Curve for comparable maturities, plus a margin. The composition of our rate-sensitive assets or liabilities is subject to change and could result in a more unbalanced position that would cause market rate changes to have a greater impact on our net interest margin. As of March 31, 2025, our loan and lease portfolio was comprised of 58.08% fixed rate and 41.92% variable rate loans. The vast majority of our variable loans also contain interest rate floors which are designed to mitigate the impact of decreases in interest rates as index rates drop.

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The following table present the projected change in the Company’s net interest income over the next twelve months and the economic value of equity at March 31, 2025, that would occur upon an immediate change in interest rates based on the models discussed above, but without giving effect to any steps that management might take to counteract such change:

	Estimated Change in Net Interest Income (NII) (as a % of NII)			Estimated Change in Economic Value of Equity (EVE) (as a % of EVE)
March 31, 2025
+300 bps		0.4	%		(9.3	%)
+200 bps		(0.1	%)		(6.5	%)
+100 bps		(0.1	%)		(2.5	%)
0 bps		-			-
-100 bps		(0.1	%)		0.3	%
-200 bps		(1.1	%)		(2.2	%)
-300 bps		(2.5	%)		(7.0	%)

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the disclosure controls and procedures (as required by Exchange Act Rules 240.13a-15(b) and 15d-14(a)). Based on that evaluation, the CEO and CFO have concluded that as of the end of the period covered by this Report, the disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed by the Company in reports that are filed or submitted under the Exchange Act are recorded, processed, summarized and timely reported as provided in the SEC’s rules and forms.

Changes in Internal Controls

There have been no material changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2025, to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

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

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Item 1A.

Risk Factors

We are subject to various risks and uncertainties, which could materially affect our business, results of operations, financial condition, future results, and the trading price of our common stock. You should read carefully the following information together with the information appearing in Part I, Item 1A, “Risk Factors” in our 2024 Form 10-K. The following information supplements and, to the extent inconsistent, supersedes some of the information appearing in the “Risk Factors” section of our 2024 Form 10-K. These risk factors, as well as our condensed consolidated financial statements and notes thereto and the other information appearing in this Report, should be reviewed carefully for important information regarding risks that affect us.

Changes in or uncertainty around U.S. and foreign government policies, including the imposition of or further increases in tariffs and changes to existing trade agreements, could have a material adverse effect on the Bank’s customers, which, in turn, could adversely affect our business, financial condition and results of operations. In February 2025, the new Trump Administration announced that it would be imposing increases in tariffs on goods imported to the U.S. from Canada, Mexico, and China, and, in April 2025, the Administration announced the imposition of increased tariffs on goods imported to the U.S. from other countries. As a consequence, other countries, in retaliation to the U.S.’s announced tariff measures, announced the imposition of increased levels of tariffs on goods exported to such countries by companies in the U.S. The Administration subsequently announced a delay of 90 days in the implementation of those increased tariffs for most other countries, leaving in place, however, a 10% baseline tariff that went into effect on April 5 and that applies to nearly all imports from all countries. These tariffs could be of particular concern to U.S. companies operating in the agricultural sector who export agricultural goods to other countries. The Company’s customers include a number of agricultural businesses, which could be affected, but to what extent remains uncertain.

As a result of these changes to U.S. and foreign government trade policies, there may be changes to existing trade agreements, greater restrictions on free trade generally, the imposition of or significant further increases in tariffs on goods imported into the U.S., and adverse responses by foreign governments to U.S. trade policies, among other possible changes. While the Administration has announced a delay in the implementation of those increased tariffs for most countries, the 10% baseline tariff that applies to nearly all imports from all countries remains in effect, and it remains unclear what the Administration or foreign governments will or will not do with respect to tariffs or trade agreements and policies. The extent and duration of any tariffs, and the resulting impact on global, national and state economic conditions generally, and on our customers’ businesses in particular, are uncertain and depend on various factors, such as negotiations between the U.S. and other countries, the responses of such countries, and exemptions or exclusions that may be granted. A significant trade disruption or the establishment or further increase of any tariffs, trade protection measures or restrictions could result in lost sales, adversely impacting our banking customers and their businesses, including our agricultural business customers. Impacts to the general economic conditions, such as a heighted risk of a recession caused by lower GDP, higher unemployment and/or changes in the interest rate environment, could adversely impact our business. In addition, international trade disputes, including those related to tariffs, could result in inflationary pressures and/or adversely impact global supply chains, which could increase the costs of doing business for our banking customers. Changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the countries where our banking customers currently sell products, including agricultural products, and any resulting negative sentiments towards the U.S. and U.S. businesses as a result of such changes, could also have a material adverse effect on our banking customers’ business, financial condition, results of operations and cash flows. If these events negatively affect our banking clients, or general economic conditions nationally, in California, or in our local markets, our business, financial condition and results of operations could be adversely affected.

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Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The following table reports information regarding repurchases of our common stock during the three months ended March 31, 2025:

Period	Total number of shares purchased		Average price paid per share⁽¹⁾		Total number of shares purchased as part of publicly announced plans or programs		Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (In thousands)

January 1, 2025 to January 31, 2025		-	$	-		-	$	19,909
February 1, 2025 to February 28, 2025		-		-		-		19,909
March 1, 2025 to March 31, 2025		703		1,001.00		703		19,205
Total 1st Quarter 2025		703	$	1,001.00		703	$	19,205

⁽¹⁾The aggregate purchase price and weighted average price per share does not include the effect of excise tax expense incurred on net stock repurchases. For the three months ended March 31, 2025, excise tax expense totaled $7,000.

On September 10, 2024 the Board of Directors authorized a new share repurchase program (the “Repurchase Plan”) in which the Company may repurchase up to $55.0 million of the Company’s common stock, which represented approximately 9% of outstanding shareholders’ equity at the time of approval. The Repurchase Plan extends through December 31, 2026.

Item 3.

Defaults Upon Senior Securities

Not Applicable

Item 4.

Mine Safety Disclosures

Not Applicable

Item 5.

Other Information

During the three months ended March 31, 2025, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6.

Exhibits

Exhibit Number	Description

31(a)	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(b)	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Unaudited Consolidated Balance Sheets, (ii) the Unaudited Consolidated Statements of Income, (iii) the Unaudited Consolidated Statements of Comprehensive Income, (iv) the Unaudited Consolidated Statements of Changes in Shareholders’ Equity, (v) the Unaudited Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements. The XBRL instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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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

Date: May 12, 2025	/s/ Kent A. Steinwert
	Kent A. Steinwert
	Director, Chairman, President and Chief Executive Officer (Principal Executive Officer)


Date: May 12, 2025	/s/ Bart R. Olson
	Bart R. Olson
	Executive Vice President and Chief Financial Officer (Principal Financial Officer)