On October 1, 2022, the Company acquired Peoples-Sidney Financial Corporation (PPSF), the bank holding company for Peoples Federal Savings and Loan Bank, a community bank with three full-service offices in Sidney, Anna and Jackson Center, Ohio in addition to a separate drive-thru location in Sidney, Ohio. PPSF shareholders had the opportunity to elect to receive either 0.6597 shares of FMAO stock or $24.00 per share in cash for each PPSF share owned, subject to a requirement under the Merger Agreement that the minimum number of PPSF shares exchanged for Farmers & Merchants Bancorp, Inc. (FMAO) shares in the merger was no less than 758,566. Fractional shares of

FMAO common stock were not issued in respect of fractional interests arising from the merger but were paid in cash pursuant to the merger agreement. PPSF had 1,167,025 shares outstanding on October 1, 2022. The share price of FMAO stock on October 1, 2022 was $26.87. Total consideration for the acquisition was approximately $23.2 million consisting of which $9.8 million was in cash and $13.4 million in stock. As a result of the acquisition, the Company increased its deposit base in Sidney and the greater Shelby County and reduced transaction costs. The Company has reduced costs through economies of scale.

In 2022, the Company incurred additional third-party acquisition-related costs of $2.4 million. These expenses were comprised primarily of data processing costs of $1.1 million, consulting fees of $543 thousand, employee benefits of $127 thousand and other general and administrative expense of $501 thousand in the Company’s consolidated statement of income for the year ended December 31, 2022.

In 2023, the Company has incurred additional third-party acquisition-related costs of $200 thousand. These expenses are comprised of employee benefits of $137 thousand, data processing costs of $13 thousand, consulting fees of $5 thousand and other general and administrative expense of $45 thousand in the Company’s consolidated statement of income for the year ended December 31, 2023.

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, which resulted from the acquisition, consists largely of the synergies and economies of scale expected from combining the operations of the Company and Peoples Federal Savings and Loan Bank. Of that total amount, none of the purchase price was deductible for tax purposes. The following table summarizes the consideration paid for Peoples Federal Savings and Loan Bank and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.


Fair Value of Consideration Transferred
	(In Thousands)
Cash	$	9,806
Common Shares (500,426 shares)		13,446
Treasury stock repurchased (125 shares)		(3	)
Total	$	23,249

Recognized amounts of identifiable assets acquired and liabilities assumed

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

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

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

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

The fair value for certificates of deposit incorporated a valuation amount of $662 thousand which was 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:


	2024			2023
	(In Thousands)			(In Thousands)
Beginning Balance	$	566		$	798
Additions		-			6
Accretion		(231	)		(232	)
Reclassification from nonaccretable difference		-			-
Disposals		-			(6	)
Ending Balance	$	335		$	566

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.

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, which resulted 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 was deductible for tax purposes.

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


	2024			2023
	(In Thousands)			(In Thousands)
Beginning Balance	$	2,795		$	4,236
Additions		-			39
Accretion		(1,342	)		(1,480	)
Reclassification from nonaccretable difference		-			-
Disposals		-			-
Ending Balance	$	1,453		$	2,795

On April 30, 2021, the Company acquired Ossian Financial Services, Inc., (OSFI), the bank holding company for Ossian State Bank, a community bank based in Ossian, Indiana. Ossian State Bank operated two full-service offices in the northeast Indiana communities of Ossian and Bluffton. Shareholders of OSFI received $67.71 in cash for each share. OSFI had 295,388 shares outstanding on April 30, 2021. Total consideration for the acquisition was approximately $20.0 million in cash.

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 thousand has been allocated to core deposit intangible included in other assets and is being amortized over seven years on a straight line basis. Goodwill of $7.9 million, which resulted from the acquisition, consists largely of the synergies and economies of scale expected from combining the operations of the Company and Ossian State Bank and is deductible for tax purposes over 15 years.

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


	2024			2023
	(In Thousands)			(In Thousands)
Beginning Balance	$	294		$	470
Additions		-			-
Accretion		(175	)		(176	)
Reclassification from nonaccretable difference		-			-
Disposals		(12	)		-
Ending Balance	$	107		$	294

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


	2024			2023
	(In Thousands)			(In Thousands)
Beginning Balance	$	363		$	785
Additions		1			11
Accretion		(364	)		(433	)
Reclassification from nonaccretable difference		-			-
Disposals		-			-
Ending Balance	$	-		$	363

The results of operations of Peoples Federal Savings and Loan Bank have been included in the Company’s consolidated financial statements since the acquisition date of October 1, 2022. The following table presents supplemental unaudited pro-forma information for the year ended December 31, 2022 as if the acquisition occurred on January 1, 2022. The pro-forma is not necessarily indicative of the results that would have occurred had the acquisition been consummated as of this date, nor is it intended to be a projection of future results.


	2022
Summary of Operations
Net Interest Income - Before Provision for Credit Losses and Unfunded*	$	90,754
Provision for Credit Losses and Unfunded*		4,513
Net Interest Income After Provision for Credit Losses and Unfunded*		86,241
Noninterest Income		14,100
Noninterest Expense		58,105
Income Before Income Taxes		42,236
Income Taxes		8,141
Net Income	$	34,095
Basic and Diluted Earnings Per Share	$	2.51

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

The 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 thousand in core deposits assets, the acquisition of Perpetual Federal Savings Bank resulted in the recognition of $668 thousand in core deposits and the acquisition of Peoples Federal Savings and Loan resulted in the recognition of $6.0 million in core deposits which are all being amortized over the remaining economic useful life of 7 years on a straight line basis. Core deposit intangible is included in other assets on the Company's consolidated balance sheets.

The amortization expense for the years ended December 31, 2024, 2023 and 2022 was $1.7, $1.7 and $1.0 million, respectively.

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


	Geneva		Ossian		Perpetual		Peoples		Total
	(In Thousands)
2025	$	560	$	140	$	95	$	861	$	1,656
2026		-		140		95		861		1,096
2027		-		140		95		861		1,096
2028		-		47		73		861		981
2029		-		-		-		646		646
Total	$	560	$	467	$	358	$	4,090	$	5,475

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. 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 customer list intangible amortization expense for the years ended December 31, 2024, 2023 and 2022 was $123 thousand for each of the three years presented. Future amortization expense of customer list intangible is as follows: