On January 1, 2019, the Company acquired Limberlost Bancshares, Inc. (“Limberlost”), the bank holding company for Bank of Geneva, a community bank based in Geneva, Indiana. Bank of Geneva operated six full-service offices in the northeast Indiana communities of Geneva, Berne, Decatur, Monroe, Portland and Monroeville. Shareholders of Limberlost received 1,830 shares of FMAO common stock and $8,465.00 in cash for each share. Limberlost had 1,000 shares outstanding on January 1, 2019. The share price of Farmers & Merchants Bancorp, Inc. (FMAO) stock on January 1, 2019 was $38.49. Total consideration for the acquisition was approximately $78.9 million consisting of $8.5 million in cash and $70.4 million in stock. As a result of the acquisition, the Company will have an opportunity to increase its deposit base and reduce transaction costs. The Company also expects to reduce costs through economies of scale.

Under the acquisition method of accounting, the total purchase was allocated to net tangible and intangible assets based on their current estimated fair values on the date of acquisition. Of the total purchase price of $78.9 million, $3.9 million has been allocated to core deposit intangible included in other assets and is being amortized over seven years on a straight line basis. Goodwill of $43.3 million resulting from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and Bank of Geneva. Of that total amount, none of the purchase price is deductible for tax purposes. The following table summarizes the consideration paid for Bank of Geneva and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

Fair Value of Consideration Transferred
	(In Thousands)
Cash	$	8,465
Common Shares (1,830,000 shares)		70,437
Total	$	78,902

Recognized amounts of identifiable assets acquired and liabilities assumed

Assets
Cash and cash equivalents	$	6,376
Securities - available-for-sale		17,494
Other securities, at cost		2,347
Loans, net		257,183
Premises and equipment		2,538
Goodwill		43,266
Other assets		7,176
Total Assets Purchased	$	336,380

Liabilities
Deposits
Noninterest bearing	$	37,822
Interest bearing		168,312
Total deposits		206,134
Federal Home Loan Bank (FHLB) advances		48,196
Accrued expenses and other liabilities		3,148
Total Liabilities Assumed	$	257,478

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

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

The carrying amount of those loans is included in loans, net on the balance sheet as of December 31, 2019 and March 31, 2020. The amounts of loans at December 31, 2019 and March 31, 2020 are as follows:

	2019
	(In Thousands)
Balance - January 1, 2019
Commercial	$	4,094
Consumer RE		231
Consumer		71
Carrying amount, net of fair value adjustment of $2,118	$	2,278

Balance - December 31, 2019
Commercial	$	106
Consumer RE		-
Consumer		-
Carrying amount, net of fair value adjustment of $62	$	44

Balance - March 31, 2020
Commercial	$	-
Consumer RE		-
Consumer		-
Carrying amount, net of fair value adjustment of $0	$	-

Loans acquired during 2019 for which it was probable at acquisition that all contractually required payments would not be collected are as follows:

	(In Thousands)
Contractually required payments receivable at acquisition
Commercial	$	4,215
Consumer RE		261
Consumer		94
Total required payments receivable	$	4,570

Cash flows expected to be collected at acquisition	$	2,788

Basis in acquired loans at acquisition	$	4,396

The balance of the fair value adjustment for loans acquired and accounted for under this guidance (ASC 310-30) was $62 thousand at December 31, 2019, zero at March 31, 2020 and $2.118 million on January 1, 2019.

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

	Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
	(In Thousands)			(In Thousands)
Beginning Balance	$	2,021		$	2,544
Additions		1			1
Accretion		(106	)		(109	)
Reclassification from nonaccretable difference		62			-
Disposals		-			-
Ending Balance	$	1,978		$	2,436

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

As mentioned previously, the acquisition of Bank of Geneva resulted in the recognition of $3.9 million in core deposit intangible assets which are being amortized over its remaining life of 7 years on a straight line basis.

The amortization expense for the three months ended March 31, 2019 was $182 thousand. Of the $721 thousand to be expensed in 2020, $182 thousand has been expensed for the three months ended March 31, 2020. Annual amortization of core deposit intangible assets is as follows:

	(In Thousands)		(In Thousands)		(In Thousands)
	Custar		Geneva		Total
2020	$	161	$	560	$	721
2021		-		560		560
2022		-		560		560
2023		-		560		560
2024		-		560		560
2025		-		560		560
	$	161	$	3,360	$	3,521