On October 1, 2022, the Company acquired Peoples-Sidney Financial Corporation (PPSF), the bank holding company for Peoples Federal Savings and Loan Association, a community bank with three full-service offices in Sidney, Anna and Jackson Center, Ohio, in addition to a separate drive-thru location in Sidney, Ohio. PPSF shareholders had the opportunity to elect to receive either 0.6597 shares of FMAO stock or $24.00 per share in cash for each PPSF share owned, subject to a requirement under the Merger Agreement that the minimum number of PPSF shares exchanged for Farmers & Merchants Bancorp, Inc. (FMAO) shares in the merger was no less than 758,566. Fractional shares of FMAO common stock were not issued in respect of fractional interests arising from the merger but were paid in cash pursuant to the merger agreement. PPSF had 1,167,025 shares outstanding on October 1, 2022. The share price of FMAO stock on October 1, 2022 was $26.87. Total consideration for the acquisition was approximately $23.2 million of which $9.8 million was in cash and $13.4 million in stock. As a result of the acquisition, the Company increased its deposit base in Sidney and the greater Shelby County and reduced transaction costs. The Company also expects to continue 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 $23.2 million, $6.0 million has been allocated to core deposit intangible included in other assets and is being amortized over seven years on a straight line basis. Goodwill of $5.9 million, resulting from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and Peoples Federal Savings and Loan Association. Of that total amount, none of the purchase price is deductible for tax purposes. The following table summarizes the consideration paid for Peoples Federal Savings and Loan Association and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.


Fair Value of Consideration Transferred
	(In Thousands)
Cash	$	9,806
Common Shares		13,446
Treasury stock repurchased (125 shares)		(3	)
Total	$	23,249

Recognized amounts of identifiable assets acquired and liabilities assumed

Assets
Cash and cash equivalents	$	18,881
Other securities, at cost		1,271
Loans, net		101,755
Premises and equipment		1,906
Goodwill		5,924
Other assets		12,081
Total Assets Purchased	$	141,818

Liabilities
Deposits
Noninterest bearing	$	7,139
Interest bearing		104,719
Total deposits		111,858
Federal Home Loan Bank (FHLB) advances		896
Accrued expenses and other liabilities		5,815
Total Liabilities Assumed	$	118,569

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

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

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

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


	Three Months Ended June 30, 2023			Three Months Ended June 30, 2022		Six Months Ended June 30, 2023			Six Months Ended June 30, 2022
	(In Thousands)			(In Thousands)		(In Thousands)			(In Thousands)
Beginning Balance	$	741		$	-	$	798		$	-
Additions		3			-		4			-
Accretion		(58	)		-		(116	)		-
Reclassification from nonaccretable difference		-			-		-			-
Disposals		(6	)		-		(6	)		-
Ending Balance	$	680		$	-	$	680		$	-

On October 1, 2021, the Company acquired Perpetual Federal Savings Bank, (PFSB), a community bank with one full-service office in Urbana, Ohio. Shareholders of PFSB elected to receive either 1.7766 shares of FMAO stock or $41.20 per share in cash for each PFSB share owned, subject to adjustment based upon 1,833,999 shares of FMAO to be issued in the merger. PFSB had 2,470,032 shares outstanding on October 1, 2021. The share price of Farmers & Merchants Bancorp, Inc. (FMAO) stock on October 1, 2021 was $22.40. Total consideration for the acquisition was approximately $100.3 million consisting of $59.2 million in cash and $41.1 million in stock. As a result of the acquisition, the Company has had an opportunity to increase its deposit base and reduce transaction costs. The Company has reduced 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 $100.3 million, $668 thousand has been allocated to core deposit intangible included in other assets and is being amortized over seven years on a straight line basis. Goodwill of $25.2 million, resulting from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and Perpetual Federal Savings Bank. Of that total amount, none of the purchase price is deductible for tax purposes. The following table summarizes the consideration paid for Perpetual Federal Savings Bank and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.


Fair Value of Consideration Transferred
	(In Thousands)
Cash	$	59,234
Common Shares		41,078
Total	$	100,312

Recognized amounts of identifiable assets acquired and liabilities assumed

Assets
Cash and cash equivalents	$	44,975
Federal funds sold		1,672
Interest-bearing time deposits		6,250
Other securities, at cost		2,794
Loans, net		334,661
Premises and equipment		615
Goodwill		25,220
Other assets		3,975
Total Assets Purchased	$	420,162

Liabilities
Deposits
Noninterest bearing	$	2,018
Interest bearing		309,090
Total deposits		311,108
Federal Home Loan Bank (FHLB) advances		6,218
Accrued expenses and other liabilities		2,524
Total Liabilities Assumed	$	319,850

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

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

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

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


	Three Months Ended June 30, 2023			Three Months Ended June 30, 2022			Six Months Ended June 30, 2023			Six Months Ended June 30, 2022
	(In Thousands)			(In Thousands)			(In Thousands)			(In Thousands)
Beginning Balance	$	3,906		$	5,004		$	4,236		$	5,262
Additions		11			33			25			97
Accretion		(345	)		(327	)		(689	)		(649	)
Reclassification from nonaccretable difference		-			-			-			-
Disposals		-			-			-			-
Ending Balance	$	3,572		$	4,710		$	3,572		$	4,710

On April 30, 2021, the Company acquired Ossian Financial Services, Inc., (OFSI), the bank holding company for Ossian State Bank, a community bank based in Ossian, Indiana. Ossian State Bank operated two full-service offices in the northeast Indiana communities of Ossian and Bluffton. Shareholders of OFSI received $67.71 in cash for each share. OFSI had 295,388 shares outstanding on April 30, 2021. Total consideration for the acquisition was approximately $20.0 million in cash. As a result of the acquisition, the Company has increased its deposit base and reduced transaction costs. The Company has reduced 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 $20.0 million, $980.2 thousand has been allocated to core deposit intangible included in other assets and will be amortized over seven years on a straight line basis. Goodwill of $7.9 million which resulted from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and Ossian State Bank and is deductible for tax purposes over 15 years. The following table summarizes the consideration paid for Ossian State Bank and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.


Fair Value of Consideration Transferred
	(In Thousands)
Cash	$	20,001
Total	$	20,001

Recognized amounts of identifiable assets acquired and liabilities assumed

Assets
Cash and cash equivalents	$	20,229
Interest-bearing time deposits		20,226
Securities - available-for-sale		30,243
Other securities, at cost		281
Loans, net		52,403
Premises and equipment		494
Goodwill		7,874
Other assets		5,308
Total Assets Purchased	$	137,058

Liabilities
Deposits
Noninterest bearing	$	34,509
Interest bearing		81,535
Total deposits		116,044
Accrued expenses and other liabilities		1,013
Total Liabilities Assumed	$	117,057

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

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

The fair value for certificates of deposit incorporated a valuation amount of $59 thousand which was accreted over 1.4 years.

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


	Three Months Ended June 30, 2023			Three Months Ended June 30, 2022			Six Months Ended June 30, 2023			Six Months Ended June 30, 2022
	(In Thousands)			(In Thousands)			(In Thousands)			(In Thousands)
Beginning Balance	$	426		$	601		$	470		$	645
Additions		-			-			-			-
Accretion		(44	)		(44	)		(88	)		(88	)
Reclassification from nonaccretable difference		-			-			-			-
Disposals		-			-			-			-
Ending Balance	$	382		$	557		$	382		$	557

The results of operations of Ossian State Bank, Perpetual Federal Savings Bank and Peoples Federal Savings and Loan Bank have been included in the Company’s consolidated financial statements since the acquisition dates of April 30, 2021, October 1, 2021 and October 1, 2022, respectively. The following schedule includes pro-forma results for the three and six months ended June 30, 2023 and 2022 as if the Peoples Federal Savings and Loan Bank acquisition had occurred as of the beginning of the comparable prior reporting period. The acquisitions of Ossian State Bank and Perpetual Federal Savings Bank are already included as they had occurred prior to that period.


	(in thousands of dollars, except per share data)				(in thousands of dollars, except per share data)
	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Summary of Operations
Net Interest Income - Before Provision for Credit Losses	$	20,118	$	23,097	$	41,800	$	44,063
Provision for Credit Losses		14		1,628		831		2,121
Net Interest Income After Provision for Credit Losses		20,104		21,469		40,969		41,942
Noninterest Income		4,272		3,438		8,449		7,921
Noninterest Expense		16,756		14,344		33,653		28,839
Income Before Income Taxes		7,620		10,563		15,765		21,024
Income Taxes		1,549		2,071		3,151		4,093
Net Income	$	6,071	$	8,492	$	12,614	$	16,931
Basic and Diluted Earnings Per Share	$	0.45	$	0.63	$	0.93	$	1.25

The pro-forma information includes adjustments for interest income on loans, amortization of intangibles arising from the transactions, interest expense on deposits acquired, premises expense for the branches acquired and the related income tax effects. The pro-forma information for the three and six months ended June 30, 2023 includes approximately $342 and $709 thousand, net of tax, respectively, of operating revenue from Peoples Federal Savings and Loan Bank since January 1, 2023.

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

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 has had an opportunity to increase its deposit base and reduce transaction costs. The Company has also reduced 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.

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


	Three Months Ended June 30, 2023			Three Months Ended June 30, 2022			Six Months Ended June 30, 2023			Six Months Ended June 30, 2022
	(In Thousands)			(In Thousands)			(In Thousands)			(In Thousands)
Beginning Balance	$	681		$	1,097		$	785		$	1,198
Additions		2			3			5			8
Accretion		(108	)		(106	)		(215	)		(212	)
Reclassification from nonaccretable difference		-			-			-			-
Disposals		-			-			-			-
Ending Balance	$	575		$	994		$	575		$	994

As mentioned previously, the acquisition of Bank of Geneva resulted in the recognition of $3.9 million in core deposit intangible assets, the acquisition of Ossian State Bank resulted in the recognition of $980.2 thousand in core deposit intangible assets, the acquisition of Perpetual Federal Savings Bank resulted in the recognition of $668.0 thousand in core deposit intangible assets and the acquisition of Peoples Federal Savings and Loan resulted in the recognition of $6.0 million in core deposit intangible assets which are all being amortized over its remaining economic useful life of 7 years on a straight line basis. Core deposit intangible is included in other assets on the Condensed Consolidated Balance Sheets.

The amortization expense of the core deposit intangible for the six months ended June 30, 2022 was $398 thousand. Of the approximately $1.7 million to be expensed in 2023, $828 thousand has been expensed for the six months ended June 30, 2023. Annual amortization of core deposit intangible assets is as follows:


	(In Thousands)
	Geneva		Ossian		Perpetual		Peoples		Total
2023	$	560	$	140	$	95	$	861	$	1,656
2024		560		140		95		861		1,656
2025		560		140		95		861		1,656
2026		-		140		95		861		1,096
2027		-		140		95		861		1,096
Thereafter		-		47		74		1,506		1,627
	$	1,680	$	747	$	549	$	5,811		8,787

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

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

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

The amortization expense of the customer list intangible for the six months ended June 30, 2022 was $61 thousand. Of the $123 thousand to be expensed in 2023, $61 thousand has been expensed for the six months ended June 30, 2023. Annual amortization expense of customer list intangible is as follows:


	(In Thousands)
	Adams County Financial Resources
2023	$	123
2024		123
2025		123
2026		123
2027		47
Thereafter		-
	$	539