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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ 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.

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. ☐

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

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

	(in thousands of dollars)						(in thousands of dollars)
	September 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
	(Unaudited)						(Unaudited)
Assets
Cash and due from banks	$	103,188		$	37,492		$	49,844		$	50,137
Federal funds sold		11,404			873			40,993			1,159
Total cash and cash equivalents		114,592			38,365			90,837			51,296
Interest-bearing time deposits		4,554			4,019			4,869			4,309
Securities - available-for-sale		190,465			168,447			204,121			222,293
Other securities, at cost		5,789			3,679			5,810			5,810
Loans held for sale		606			495			2,153			4,248
Loans, net		1,151,937			839,599			1,239,108			1,211,771
Premises and equipment		25,990			22,615			26,120			26,283
Construction in progress								-			68
Goodwill		47,340			4,074			47,340			47,340
Mortgage servicing rights		2,556			2,385			2,672			2,629
Other real estate owned		351			600			185			214
Bank owned life insurance		15,151			14,884			15,313			15,235
Other assets		15,549			17,001			16,597			15,834
Total Assets	$	1,574,880		$	1,116,163		$	1,655,125		$	1,607,330
Liabilities and Stockholders' Equity
Liabilities
Deposits
Noninterest-bearing	$	261,719		$	215,422		$	261,786		$	265,156
Interest-bearing
NOW accounts		430,646			298,254			463,734			423,655
Savings		310,667			227,701			341,256			322,973
Time		274,996			187,413			281,931			276,563
Total deposits		1,278,028			928,790			1,348,707			1,288,347
Federal funds purchased and securities sold under agreements to repurchase		30,056			32,181			30,585			48,073
Federal Home Loan Bank (FHLB) advances		24,669			-			24,788			24,806
Dividend payable		1,657			1,379			1,768			1,768
Accrued expenses and other liabilities		13,062			10,526			12,820			14,078
Total liabilities		1,347,472			972,876			1,418,668			1,377,072
Commitments and Contingencies
Stockholders' Equity
Common stock - No par value 20,000,000 shares authorized; issued and outstanding 12,230,000 shares 9/30/19, 10,400,000 shares 12/31/18		81,264			10,823
Treasury stock - 1,092,986 shares 9/30/19, 1,114,739 shares 12/31/18		(12,453	)		(12,409	)
Common stock - No par value 20,000,000 shares authorized; issued and outstanding 12,230,000 shares 3/31/20 and 12/31/19								81,844			81,535
Treasury stock - 1,100,579 shares 3/31/20, 1,093,065 shares 12/31/19								(12,636	)		(12,456	)
Retained earnings		157,126			147,887			162,416			160,081
Accumulated other comprehensive income (loss)		1,471			(3,014	)
Accumulated other comprehensive income								4,833			1,098
Total stockholders' equity		227,408			143,287			236,457			230,258
Total Liabilities and Stockholders' Equity	$	1,574,880		$	1,116,163		$	1,655,125		$	1,607,330

Note: The December 31, ~~2018,~~2019, Condensed Consolidated Balance Sheet has been derived from the audited Consolidated Balance Sheet as of that date.

	(in thousands of dollars, except per share data)					(in thousands of dollars, except per share data)					(in thousands of dollars, except per share data)
	Three Months Ended					Nine Months Ended					Three Months Ended
	September 30, 2019		September 30, 2018			September 30, 2019			September 30, 2018		March 31, 2020		March 31, 2019
Interest Income
Loans, including fees	$	15,202	$	10,725		$	46,605		$	31,348	$	15,883	$	14,680
Debt securities:
U.S. Treasury and government agencies		972		613			2,501			1,848		1,146		713
Municipalities		190		275			612			845		262		211
Dividends		69		56			233			164		45		88
Federal funds sold		120		(8	)		319			2		6		37
Other		459		92			887			219		122		133
Total interest income		17,012		11,753			51,157			34,426		17,464		15,862
Interest Expense
Deposits		3,654		1,611			9,606			4,319		2,901		2,613
Federal funds purchased and securities sold under agreements to repurchase		201		134			527			376		244		185
Borrowed funds		257		20			813			60		266		287
Total interest expense		4,112		1,765			10,946			4,755		3,411		3,085
Net Interest Income - Before Provision for Loan Losses		12,900		9,988			40,211			29,671		14,053		12,777
Provision for Loan Losses		247		47			410			219		1,430		30
Net Interest Income After Provision For Loan Losses		12,653		9,941			39,801			29,452		12,623		12,747
Noninterest Income
Customer service fees		1,722		1,392			4,994			4,323		1,586		1,578
Other service charges and fees		1,179		1,097			3,311			3,149		1,039		1,041
Net gain on sale of loans		260		184			558			617		227		102
Net gain (loss) on sale of available-for-sale securities		-		10			(26	)		10		270		(26	)
Total noninterest income		3,161		2,683			8,837			8,099		3,122		2,695
Noninterest Expense
Salaries and wages		4,158		3,391			12,300			9,926		4,223		4,312
Employee benefits		1,331		1,029			4,148			3,013		1,677		1,594
Net occupancy expense		630		478			1,911			1,306		564		667
Furniture and equipment		720		588			2,179			1,660		758		696
Data processing		482		364			2,157			1,000		442		1,299
Franchise taxes		248		243			735			710		368		258
ATM expense		416		327			1,281			972		414		447
Advertising		587		236			1,229			669		303		260
Net loss on sale of other assets owned		22		1			65			17		1		15
FDIC assessment		-		81			194			249		72		96
Mortgage servicing rights amortization		149		84			329			264		132		75
Consulting fees		196		179			404			467		139		113
Other general and administrative		1,667		1,125			4,897			3,151		1,602		1,679
Total noninterest expense		10,606		8,126			31,829			23,404		10,695		11,511
Income Before Income Taxes		5,208		4,498			16,809			14,147		5,050		3,931
Income Taxes		933		623			3,130			2,391		945		707
Net Income	$	4,275	$	3,875		$	13,679		$	11,756	$	4,105	$	3,224
Basic and Diluted Earnings Per Share	$	0.38	$	0.42		$	1.23		$	1.27	$	0.37	$	0.29
Dividends Declared	$	0.15	$	0.14		$	0.45		$	0.41	$	0.16	$	0.15

(in thousands of dollars)

(in thousands of dollars)

Three Months Ended

Nine Months Ended

September 30, 2019

September 30, 2018

September 30, 2019

September 30, 2018

Net Income

$
4,275

$
3,875

$
13,679

$
11,756

Other Comprehensive Income (Loss) (Net of Tax):

Net unrealized gain (loss) on available-for-sale
   securities

841

(617
)

5,651

(3,432
)
Reclassification adjustment for (gain) loss on sale of
   available-for-sale securities

-

(10
)

26

(10
)
Net unrealized gain (loss) on available-for-sale
   securities

841

(627
)

5,677

(3,442
)
Tax expense (benefit)

176

(132
)

1,192

(723
)
Other comprehensive income (loss)

665

(495
)

4,485

(2,719
)
Comprehensive Income

$
4,940

$
3,380

$
18,164

$
9,037

	(in thousands of dollars)
	Three Months Ended
	March 31, 2020			March 31, 2019
Net Income	$	4,105		$	3,224
Other Comprehensive Income (Net of Tax):
Net unrealized gain on available-for-sale securities		4,998			1,749
Reclassification adjustment for (gain) loss on sale of available-for-sale securities		(270	)		26
Net unrealized gain on available-for-sale securities		4,728			1,775
Tax expense		993			373
Other comprehensive income		3,735			1,402
Comprehensive Income	$	7,840		$	4,626

Accumulated

Shares of

Other

Total

Common

Common

Treasury

Retained

Comprehensive

Stockholders'

Stock

Stock

Stock

Earnings

Income (Loss)

Equity

Balance - January 1, 2018

9,265,880

$
11,546

$
(12,160
)

$
136,547

$
(1,826
)

$
134,107

Net income

3,767

3,767

Other comprehensive loss

(1,952
)

(1,952
)
Adoption of ASU 2018-02

360

(360
)

-

Issuance of 100 shares of restricted stock

100

(16
)

2

2

(12
)
Stock-based compensation expense

160

160

Cash dividends declared - $0.13 per share

(1,193
)

(1,193
)
Balance - March 31, 2018

9,265,980

11,690

(12,158
)

139,483

(4,138
)

134,877

Net income

4,114

4,114

Other comprehensive loss

(272
)

(272
)
Forfeiture of 600 shares of restricted stock

(600
)

(2
)

(28
)

17

(13
)
Stock-based compensation expense

154

154

Cash dividends declared - $0.14 per share

(1,284
)

(1,284
)
Balance - June 30, 2018

9,265,380

11,842

(12,186
)

142,330

(4,410
)

137,576

Net income

3,875

3,875

Other comprehensive loss

(495
)

(495
)
Purchase of Treasury stock

(10,999
)

(490
)

(490
)
Issuance of 32,900 shares of restricted stock
(Net of Forfeitures - 2,020)

30,880

(1,436
)

267

1,154

(15
)
Stock-based compensation expense

183

183

Cash dividends declared - $0.14 per share

(1,287
)

(1,287
)
Balance - September 30, 2018

9,285,261

$
10,589

$
(12,409
)

$
146,072

$
(4,905
)

$
139,347

												Accumulated
	Shares of											Other		Total
	Common			Common		Treasury			Retained			Comprehensive		Stockholders'
	Stock			Stock		Stock			Earnings			Income		Equity
Balance - January 1, 2020		11,136,935		$	81,535	$	(12,456	)	$	160,081		$	1,098	$	230,258
Net income										4,105					4,105
Other comprehensive income													3,735		3,735
Purchase of treasury stock		(7,064	)				(170	)							(170	)
Forfeiture of 450 shares of restricted stock		(450	)		27		(10	)		(2	)				15
Stock-based compensation expense					282										282
Cash dividends declared - $0.16 per share										(1,768	)				(1,768	)
Balance - March 31, 2020		11,129,421		$	81,844	$	(12,636	)	$	162,416		$	4,833	$	236,457

													Accumulated																	Accumulated
	Shares of												Other			Total			Shares of											Other			Total
	Common			Common			Treasury			Retained			Comprehensive			Stockholders'			Common			Common		Treasury			Retained			Comprehensive			Stockholders'
	Stock			Stock			Stock			Earnings			Income (Loss)			Equity			Stock			Stock		Stock			Earnings			Income (Loss)			Equity
Balance - January 1, 2019		9,285,261		$	10,823		$	(12,409	)	$	147,887		$	(3,014	)	$	143,287			9,285,261		$	10,823	$	(12,409	)	$	147,887		$	(3,014	)	$	143,287
Net income											3,224						3,224											3,224						3,224
Other comprehensive income														1,402			1,402														1,402			1,402
Issuance of 1,830,000 shares of common stock in acquisition		1,830,000			70,437												70,437			1,830,000			70,437											70,437
Purchase of Treasury stock		(6,558	)					(213	)								(213	)
Issuance of 400 shares of restricted stock (Net of Forfeitures - 2,040)		(1,640	)		66			(58	)		9						17
Purchase of treasury stock																				(6,558	)				(213	)								(213	)
Issuance of 400 shares of restricted stock (Net of forfeitures - 2,040)																				(1,640	)		66		(58	)		9						17
Stock-based compensation expense					434												434						434											434
Cash dividends declared - $0.15 per share											(1,654	)					(1,654	)										(1,654	)					(1,654	)
Balance - March 31, 2019		11,107,063			81,760			(12,680	)		149,466			(1,612	)		216,934			11,107,063		$	81,760	$	(12,680	)	$	149,466		$	(1,612	)	$	216,934
Net income											6,180						6,180
Other comprehensive income														2,418			2,418
Forfeiture of 880 shares of restricted stock		(880	)		38			(27	)		2						13
Stock-based compensation expense					157												157
Cash dividends declared - $0.15 per share											(1,655	)					(1,655	)
Balance - June 30, 2019		11,106,183			81,955			(12,707	)		153,993			806			224,047
Net income											4,275						4,275
Other comprehensive income														665			665
Purchase of Treasury stock		(6,569	)					(165	)								(165	)
Issuance of 37,700 shares of restricted stock (Net of Forfeitures - 300)		37,400			(925	)		419			515						9
Stock-based compensation expense					234												234
Cash dividends declared - $0.15 per share											(1,657	)					(1,657	)
Balance - September 30, 2019		11,137,014		$	81,264		$	(12,453	)	$	157,126		$	1,471		$	227,408

	(in thousands of dollars)						(in thousands of dollars)
	Nine Months Ended						Three Months Ended
	September 30, 2019			September 30, 2018			March 31, 2020			March 31, 2019
Cash Flows from Operating Activities
Net income	$	13,679		$	11,756		$	4,105		$	3,224
Adjustments to reconcile net income to net cash from operating activities:
Depreciation		1,980			1,406			655			656
Amortization of available-for-sale securities, net		579			743			250			170
Amortization of servicing rights		329			264			132			75
Amortization of core deposit intangible		546			126			182			182
Net amortization (accretion) of fair value adjustments		(1,530	)		5
Net amortization of fair value adjustments								157			155
Stock-based compensation expense		825			497			282			434
Deferred income taxes		(200	)		-			(3	)		-
Provision for loan loss		410			219			1,430			30
Gain on sale of loans held for sale		(558	)		(617	)		(227	)		(102	)
Originations of loans held for sale		(50,428	)		(40,814	)		(17,302	)		(8,340	)
Proceeds from sale of loans held for sale		48,543			39,435			18,690			7,764
Loss on sale of other assets owned		65			17			1			15
(Gain) loss on sales of securities available-for-sale		26			(10	)		(270	)		26
Change in other assets and other liabilities, net		5,750			(3,450	)		(3,431	)		3,516
Net cash provided by operating activities		20,016			9,577			4,651			7,805
Cash Flows from Investing Activities
Activity in available-for-sale securities:
Maturities, prepayments and calls		34,384			11,753			21,646			1,703
Sales		11,100			6,781			11,843			11,100
Purchases		(44,936	)		(9,416	)		(10,569	)		35
Activity in other securities, at cost:
Sales		237			-			-			237
Change in interest-bearing time deposits		(535	)		(1	)		(560	)		(490	)
Proceeds from sale of other assets owned		371			9			28			75
Additions to premises and equipment		(2,805	)		(1,803	)		(420	)		(706	)
Loan originations and principal collections, net		(51,240	)		(14,536	)		(27,773	)		5,301
Acquisition of Limberlost, net of cash received		(2,089	)		-			-			(2,089	)
Net cash used in investing activities		(55,513	)		(7,213	)
Net cash provided by (used in) investing activities								(5,805	)		15,166
Cash Flows from Financing Activities
Net change in deposits		142,853			9,519			60,276			52,416
Net change in federal funds purchased and securities sold under agreements to repurchase		(2,125	)		(12,469	)		(17,488	)		(6,660	)
Repayment of FHLB advances		(23,938	)		-			(155	)		(23,651	)
Purchase of treasury stock		(378	)		(490	)		(170	)		(213	)
Cash dividends paid on common stock		(4,688	)		(3,670	)		(1,768	)		(1,379	)
Net cash provided by (used in) financing activities		111,724			(7,110	)
Net Increase (Decrease) in Cash and Cash Equivalents		76,227			(4,746	)
Net cash provided by financing activities								40,695			20,513
Net Increase in Cash and Cash Equivalents								39,541			43,484
Cash and Cash Equivalents - Beginning of year		38,365			34,467			51,296			38,365
Cash and Cash Equivalents - End of period	$	114,592		$	29,721		$	90,837		$	81,849

	(in thousands of dollars)				(in thousands of dollars)
	Nine Months Ended				Three Months Ended
	September 30, 2019		September 30, 2018		March 31, 2020		March 31, 2019
Supplemental Information
Cash paid during the year for:
Interest	$	9,962	$	4,706	$	3,217	$	2,655
Income taxes		2,345		2,407	$	-	$	-
Noncash investing activities:
Transfer of loans to other real estate owned		187		68	$	-	$	-
The Company purchased all of the capital stock of Limberlost for $78,902 on January 1, 2019. In conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired		336,380		-	$	-	$	336,380
Less: common stock issued		70,437		-		-		70,437
Cash paid for the capital stock		8,465		-		-		8,465
Liabilities assumed		257,478		-	$	-	$	257,478

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10Q and Rule 10-01 of Regulation S-X; accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 are not necessarily indicative of the results that are expected for the year ended December 31, ~~2019.~~2020. The condensed consolidated balance sheet of the Company as of December 31, ~~2018,~~2019, has been derived from the audited consolidated balance sheet of the Company as of that date. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

The Company recognizes revenues as they are earned based on contractual terms, as transactions occur, or as services are provided and collectability is reasonably assured. The Company’s principal source of revenue is interest income from loans and investment securities. The Company also earns noninterest income from various banking and financial services offered primarily through Farmers & Merchants State Bank. Interest income is primarily recognized on an accrual basis according to nondiscretionary formulas written in contracts, such as loan agreements or investment security contracts. The Company also earns noninterest income from various banking and financial services provided to business and consumer clients such as deposit account, debit card, and mortgage banking services. Revenue is recorded for noninterest income based on the contractual terms for the service or transaction performed.

Certain amounts in the ~~2018~~2019 condensed consolidated financial statements have been reclassified to conform with the ~~2019~~2020 presentation. These reclassifications had no effect on income.

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.

In 2018, the Company incurred $742.1 thousand of third-party acquisition-related costs. The largest portion of the expenses recognized in 2018 related to consulting fees of $340 thousand, other general and administration expenses of $331.5 thousand and data processing expenses of $58.6 thousand. These three categories of expense accounted for 98.4% of the total acquisition expenses impacting the 2018 financial statements of the Company.

In 2019, the Company has incurred additional third-party acquisition-related costs of $1.27 million. These expenses are comprised of data processing of $867.6 thousand, employee benefits of $156.6 thousand, ATM expense of $31.4 thousand, consulting fees of $19.3 thousand and other general and administrative expense of $195.4 thousand in the Company’s consolidated statement of income for the nine months ended September 30, 2019.

Under the acquisition method of accounting, the total purchase iswas 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 ~~will be~~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.

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

The fair value of the assets acquired includes loans with a fair value of $257.2 million. The gross principal and contractual interest due under the contracts is $359.2 million, of which $4.7 million is expected to be uncollectible. The loans have a weighted average life of 70 months.

The fair value of building and land included in premises and equipment was written down by $1.2 million and will be amortized based on the remaining life of each building. The combined average remaining life is 16.75 years.

The fair value for certificates of deposit incorporates a valuation amount of $0.5 million which will be amortized over 1.5 years. The fair value of Federal Home Loan Bank (FHLB) advances includes a valuation amount of $1.3 million which will be amortized over 2.3 years.

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.

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

The carrying amount of those loans is included in loans, net on the balance sheet ~~at September 30, 2019.~~as of December 31, 2019 and March 31, 2020. The amounts of loans at ~~September 30,~~December 31, 2019 and March 31, 2020 are as follows:

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

Balance - September 30, 2019
Balance - December 31, 2019
Commercial	$	110	$	106
Consumer RE		55		-
Consumer		-		-
Carrying amount, net of fair value adjustment of $63	$	102
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:

During the second quarter, two commercial purchased credit-impaired loans were paid off in full after the customer was able to secure financing at another financial institution. The associated credit loss of $1.985 million has been included in loan interest income in the Company’s consolidated statement of income for the nine months ended September 30, 2019. The balance of the fair value adjustment for loans acquired and accounted for under this guidance (ASC 310-30) was ~~$63~~$62 thousand at ~~September 30,~~December 31, 2019, zero at March 31, 2020 and $2.118 million on January 1, ~~2019, respectively.~~2019.

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

	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019			Three Months Ended March 31, 2020			Three Months Ended March 31, 2019
	(In Thousands)			(In Thousands)			(In Thousands)			(In Thousands)
Beginning Balance	$	2,329		$	2,544		$	2,021		$	2,544
Additions		-			6			1			1
Accretion		(112	)		(2,316	)		(106	)		(109	)
Reclassification from nonaccretable difference		34			2,019			62			-
Disposals		(6	)		(8	)		-			-
Ending Balance	$	2,245		$	2,245		$	1,978		$	2,436

The results of operations of Bank of Geneva have been included in the Company’s consolidated financial statements since the acquisition date of January 1, 2019. The following schedule includes pro-forma results for the three and nine months ended September 30, 2019 and 2018 as if the Bank of Geneva acquisitions had occurred as of the beginning of the comparable prior reporting period.

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

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 pro-forma information for the quarter ended September 30, 2019 includes approximately $5.5 million, net of tax, of operating revenue from Bank of Geneva since acquisition.

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 acquisition been consummated as of that time, nor is it intended to be a projection of future results.

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 ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 was ~~$126~~$182 thousand. Of the ~~$727~~$721 thousand to be expensed in ~~2019, $546~~2020, $182 thousand has been expensed for the ~~nine~~three months ended ~~September 30, 2019. Future~~March 31, 2020. Annual amortization of core deposit intangible assets is as follows:

	(In Thousands)		(In Thousands)		(In Thousands)		(In Thousands)		(In Thousands)		(In Thousands)
	Custar		Geneva		Total		Custar		Geneva		Total
2019	$	167	$	560	$	727
2020		161		560		721	$	161	$	560	$	721
2021		-		560		560		-		560		560
2022		-		560		560		-		560		560
2023		-		560		560		-		560		560
2024		-		560		560		-		560		560
2025		-		560		560		-		560		560
	$	328	$	3,920	$	4,248	$	161	$	3,360	$	3,521

Mortgage-backed securities, as shown in the following tables, are all government sponsored enterprises. The amortized cost and fair value of securities, with gross unrealized gains and losses at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, are as follows:

	(In Thousands)									(In Thousands)
	September 30, 2019									March 31, 2020
	Amortized		Gross Unrealized		Gross Unrealized			Fair		Amortized		Gross Unrealized		Gross Unrealized			Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
Available-for-Sale:
U.S. Treasury	$	14,029	$	10	$	(30	)	$	14,009	$	10,016	$	57	$	-		$	10,073
U.S. Government agencies		79,130		948		(35	)		80,043		47,869		1,880		-			49,749
Mortgage-backed securities		57,180		446		(165	)		57,461		97,726		2,968		-			100,694
State and local governments		38,265		697		(10	)		38,952		42,393		1,215		(3	)		43,605
Total available-for-sale securities	$	188,604	$	2,101	$	(240	)	$	190,465	$	198,004	$	6,120	$	(3	)	$	204,121

	(In Thousands)									(In Thousands)
	December 31, 2018									December 31, 2019
	Amortized		Gross Unrealized		Gross Unrealized			Fair		Amortized		Gross Unrealized		Gross Unrealized			Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
Available-for-Sale:
U.S. Treasury	$	23,078	$	6	$	(254	)	$	22,830	$	10,023	$	10	$	(12	)	$	10,021
U.S. Government agencies		71,235		2		(1,910	)		69,327		61,882		584		(21	)		62,445
Mortgage-backed securities		37,342		62		(1,142	)		36,262		94,998		426		(227	)		95,197
State and local governments		40,608		225		(805	)		40,028		54,001		749		(120	)		54,630
Total available-for-sale securities	$	172,263	$	295	$	(4,111	)	$	168,447	$	220,904	$	1,769	$	(380	)	$	222,293

Investment securities will at times depreciate to an unrealized loss position. The Company utilizes the following criteria to assess whether impairment is other than temporary. No one item by itself will necessarily signal that a security should be recognized as an other than temporary impairment.

If the impairment is judged to be other than temporary, the cost basis of the individual security shall be written down to fair value, thereby establishing a new cost basis. The new cost basis shall not be changed for subsequent recoveries in fair value. The amount of the write down shall be included in current earnings as a realized loss. The recovery in fair value, if any, shall be recognized in earnings when the security is sold. The table below is presented by category of security and length of time in a continuous loss position. The Company currently does not hold any securities with other than temporary impairment.

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

Information pertaining to securities with gross unrealized losses at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

	(In Thousands)															(In Thousands)
	September 30, 2019															March 31, 2020
	Less Than Twelve Months					Twelve Months & Over					Total					Less Than Twelve Months					Twelve Months & Over					Total
	Gross Unrealized			Fair		Gross Unrealized			Fair		Gross Unrealized			Fair		Gross Unrealized			Fair		Gross Unrealized			Fair		Gross Unrealized			Fair
	Losses			Value		Losses			Value		Losses			Value		Losses			Value		Losses			Value		Losses			Value
U.S. Treasury	$	-		$	-	$	(30	)	$	12,015	$	(30	)	$	12,015	$	-		$	-	$	-		$	-	$	-		$	-
U.S. Government agencies		-			-		(35	)		13,720		(35	)		13,720		-			-		-			-		-			-
Mortgage-backed securities		(48	)		8,099		(117	)		16,811		(165	)		24,910		-			-		-			-		-			-
State and local governments		(9	)		2,425		(1	)		1,100		(10	)		3,525		(1	)		513		(2	)		2,044		(3	)		2,557
Total available-for-sale securities	$	(57	)	$	10,524	$	(183	)	$	43,646	$	(240	)	$	54,170	$	(1	)	$	513	$	(2	)	$	2,044	$	(3	)	$	2,557

	(In Thousands)															(In Thousands)
	December 31, 2018															December 31, 2019
	Less Than Twelve Months					Twelve Months & Over					Total					Less Than Twelve Months					Twelve Months & Over					Total
	Gross Unrealized			Fair		Gross Unrealized			Fair		Gross Unrealized			Fair		Gross Unrealized			Fair		Gross Unrealized			Fair		Gross Unrealized			Fair
	Losses			Value		Losses			Value		Losses			Value		Losses			Value		Losses			Value		Losses			Value
U.S. Treasury	$	-		$	-	$	(254	)	$	20,861	$	(254	)	$	20,861	$	-		$	-	$	(12	)	$	5,030	$	(12	)	$	5,030
U.S. Government agencies		-			-		(1,910	)		64,727		(1,910	)		64,727		(16	)		10,549		(5	)		10,745		(21	)		21,294
Mortgage-backed securities		(4	)		697		(1,138	)		30,347		(1,142	)		31,044		(102	)		27,696		(125	)		11,332		(227	)		39,028
State and local governments		(22	)		3,254		(783	)		29,413		(805	)		32,667		(120	)		16,845		-			-		(120	)		16,845
Total available-for-sale securities	$	(26	)	$	3,951	$	(4,085	)	$	145,348	$	(4,111	)	$	149,299	$	(238	)	$	55,090	$	(142	)	$	27,107	$	(380	)	$	82,197

Unrealized losses on securities have not been recognized into income because the issuers’ bonds are of high credit quality, values have only been impacted by rate changes, and the Company has the intent and ability to hold the securities for the foreseeable future. Additionally, the decline in value is primarily due to changes in interest rates since the securities were purchased. The fair value is expected to recover as the bonds approach the maturity date.

Below are the gross realized gains and losses for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~September 30, 2018.~~March 31, 2019.

	Three Months					Nine Months						Three Months
	(In Thousands)					(In Thousands)						(In Thousands)
	2019		2018			2019			2018			2020		2019
Gross realized gains	$	-	$	51		$	16		$	51		$	270	$	16
Gross realized losses		-		(41	)		(42	)		(41	)		-		(42	)
Net realized losses	$	-	$	10		$	(26	)	$	10
Tax expense related to net realized losses	$	-	$	2		$	(5	)	$	2
Net realized gains (losses)												$	270	$	(26	)
Tax expense (benefit) related to net realized gains (losses)												$	57	$	(5	)

The net realized losses on sales and related tax expense is a reclassification out of accumulated other comprehensive income (loss). The net realized ~~loss~~gains (losses) is included in net ~~loss~~gains (losses) on sale of available-for-sale securities and the related tax expense (benefit) is included in income taxes in the condensed consolidated statements of income and comprehensive income.

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

The amortized cost and fair value of debt securities at ~~September 30, 2019,~~March 31, 2020, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	(In Thousands)				(In Thousands)
	Amortized				Amortized
	Cost		Fair Value		Cost		Fair Value
One year or less	$	30,708	$	30,702	$	16,663	$	16,766
After one year through five years		52,474		52,597		19,720		20,130
After five years through ten years		46,971		48,433		59,816		62,399
After ten years		1,271		1,272		4,079		4,132
Total	$	131,424	$	133,004	$	100,278	$	103,427
Mortgage-backed securities		57,180		57,461		97,726		100,694
Total	$	188,604	$	190,465	$	198,004	$	204,121

Investments with a carrying value of ~~$89.2~~$88.7 million and ~~$81.8~~$88.8 million at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively, were pledged to secure public deposits and securities sold under repurchase agreements.

Other securities ~~include~~includes Federal Home Loan Bank of Cincinnati and Indianapolis stock as of ~~September 30, 2019. As of~~March 31, 2020 and December 31, ~~2018, other securities only includes Federal Home Loan Bank of Cincinnati stock.~~2019.

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

Loan balances as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019 are summarized below:

	(In Thousands)						(In Thousands)
Loans:	September 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Consumer Real Estate	$	159,074		$	80,766		$	174,731		$	165,349
Agricultural Real Estate		200,791			68,609			194,383			199,105
Agricultural		110,270			108,495			109,584			111,820
Commercial Real Estate		502,137			419,784			570,217			551,309
Commercial and Industrial		130,150			121,793			143,261			135,631
Consumer		49,552			41,953			49,022			49,237
Other		8,167			5,889			8,336			8,314
		1,160,141			847,289			1,249,534			1,220,765
Less: Net deferred loan fees and costs		(1,445	)		(915	)		(1,893	)		(1,766	)
		1,158,696			846,374			1,247,641			1,218,999
Less: Allowance for loan losses		(6,759	)		(6,775	)		(8,533	)		(7,228	)
Loans - Net	$	1,151,937		$	839,599		$	1,239,108		$	1,211,771

The distribution of fixed rate loans and variable rate loans by major loan category is as follows as of ~~September 30, 2019:~~March 31, 2020:

	(In Thousands)				(In Thousands)
	Fixed		Variable		Fixed		Variable
	Rate		Rate		Rate		Rate
Consumer Real Estate	$	71,645	$	87,429	$	116,954	$	57,777
Agricultural Real Estate		94,620		106,171		93,095		101,288
Agricultural		70,049		40,221		105,065		4,519
Commercial Real Estate		323,791		178,346		419,430		150,787
Commercial and Industrial		76,229		53,921		126,434		16,827
Consumer		45,069		4,483		45,055		3,967
Other		8,070		97		8,277		59

As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 one to four family residential mortgage loans amounting to ~~$43.1~~$42.7 million and ~~$14.9~~$42.1 million, respectively, have been pledged as security for future loans and existing loans the Bank has received from the Federal Home Loan Bank.

Unless listed separately, Other loans are included in the Commercial and Industrial category for the remainder of the tables in this Note 4.

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

The following table represents the contractual aging of the recorded investment (in thousands) in past due loans by portfolio classification of loans as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, net of deferred loan fees and costs:

September 30, 2019	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
March 31, 2020															30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing

Consumer Real Estate	$	388	$	51	$	434	$	873	$	157,585	$	158,458	$	-	$	842	$	4	$	-	$	846	$	173,130	$	173,976	$	-
Agricultural Real Estate		536		-		-		536		200,089		200,625		-		505		-		-		505		193,625		194,130		-
Agricultural		239		10		253		502		109,903		110,405		-		1,403		-		-		1,403		108,304		109,707		-
Commercial Real Estate		-		-		-		-		501,095		501,095		-		186		-		-		186		568,805		568,991		-
Commercial and Industrial		156		294		-		450		137,945		138,395		-		823		298		-		1,121		150,526		151,647		-
Consumer		117		18		-		135		49,583		49,718		-		89		13		-		102		49,088		49,190		-

Total	$	1,436	$	373	$	687	$	2,496	$	1,156,200	$	1,158,696	$	-	$	3,848	$	315	$	-	$	4,163	$	1,243,478	$	1,247,641	$	-

December 31, 2018	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
December 31, 2019															30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing

Consumer Real Estate	$	342	$	24	$	254	$	620	$	79,612	$	80,232	$	-	$	355	$	70	$	-	$	425	$	164,266	$	164,691	$	-
Agricultural Real Estate		-		-		-		-		68,588		68,588		-		-		107		-		107		198,752		198,859		-
Agricultural		-		-		-		-		108,616		108,616		-		78		7		-		85		111,864		111,949		-
Commercial Real Estate		-		-		-		-		419,131		419,131		-		-		-		-		-		550,082		550,082		-
Commercial and Industrial		-		-		-		-		127,752		127,752		-		201		267		-		468		143,541		144,009		-
Consumer		85		24		8		117		41,938		42,055		-		54		-		-		54		49,355		49,409		-

Total	$	427	$	48	$	262	$	737	$	845,637	$	846,374	$	-	$	688	$	451	$	-	$	1,139	$	1,217,860	$	1,218,999	$	-

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

The following table presents the recorded investment in nonaccrual loans by class of loans as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:

	(In Thousands)				(In Thousands)
	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019

Consumer Real Estate	$	904	$	462	$	1,363	$	1,209
Agricultural Real Estate		-		-		967		88
Agricultural		1,830		-		382		1,769
Commercial Real Estate		-		-		36		37
Commercial & Industrial		456		72		590		288
Consumer		85		8		6		9
Total	$	3,275	$	542	$	3,344	$	3,400

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

Consumer Real Estate: Purchase, refinance, or equity financing of one to four family owner occupied dwelling. Success in repayment is subject to borrower’s income, debt level, character in fulfilling payment obligations, employment, and others.

Agricultural Real Estate: Purchase of farm real estate or for permanent improvements to the farm real estate. Cash flow from the farm operation is the repayment source and is therefore subject to the financial success of the farm operation.

Agricultural: Loans for the production and housing of crops, fruits, vegetables, and livestock or to fund the purchase or re-finance of capital assets such as machinery and equipment and livestock. The production of crops and livestock is especially vulnerable to commodity prices and weather. The vulnerability to commodity prices is offset by the farmer’s ability to hedge their position by the use of future contracts. The risk related to weather is often mitigated by requiring crop insurance.

Commercial Real Estate: Construction, purchase, and refinance of business purpose real estate. Risks include potential construction delays and overruns, vacancies, collateral value subject to market value fluctuations, interest rate, market demands, borrower’s ability to repay in orderly fashion, and others. The Bank does employ stress testing on higher balance loans to mitigate risk by ensuring the customer’s ability to repay in a changing rate environment before granting loan approval.

Commercial and Industrial: Loans to proprietorships, partnerships, or corporations to provide temporary working capital and seasonal loans as well as long term loans for capital asset acquisition. Risks include adequacy of cash flow, reasonableness of projections, financial leverage, economic trends, management ability and estimated capital expenditures during the fiscal year. The Bank does employ stress testing on higher balance loans to mitigate risk by ensuring the customer's ability to repay in a changing rate environment before granting loan approval.

Other: Primarily funds public improvements in the Bank’s service area. Repayment ability is based on the continuance of the taxation revenue as the source of repayment.

Consumer: Funding for individual and family purposes. Success in repayment is subject to borrower’s income, debt level, character in fulfilling payment obligations, employment, and others.

The Bank uses a nine tier risk rating system to grade its loans. The grade of a loan may change during the life of the loan.

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

Loans may be graded 3 when there is no recent information on which to base a current risk evaluation and the following conditions apply:

At inception, the loan was properly underwritten and did not possess an unwarranted level of credit risk:

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

The following table represents the risk category of loans by portfolio class, net of deferred fees and costs, based on the most recent analysis performed as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018:~~2019:

	(In Thousands)										(In Thousands)
	Agricultural				Commercial		Commercial				Agricultural				Commercial		Commercial
	Real Estate		Agricultural		Real Estate		and Industrial		Other		Real Estate		Agricultural		Real Estate		and Industrial		Other
September 30, 2019
March 31, 2020
1-2	$	16,072	$	6,211	$	6,036	$	4,472	$	-	$	13,407	$	2,635	$	7,684	$	4,124	$	-
3		35,757		36,178		87,360		18,069		2,437		32,710		36,033		147,559		24,329		3,344
4		115,160		60,747		399,320		98,960		5,730		117,824		67,419		404,548		103,357		4,992
5		14,232		2,664		3,845		4,707		-		15,492		1,094		3,191		5,166		-
6		19,404		4,605		4,534		3,125		-		14,697		2,526		6,009		5,259		-
7		-		-		-		895		-		-		-		-		1,076		-
8		-		-		-		-		-		-		-		-		-		-
Total	$	200,625	$	110,405	$	501,095	$	130,228	$	8,167	$	194,130	$	109,707	$	568,991	$	143,311	$	8,336

	Agricultural				Commercial		Commercial				Agricultural				Commercial		Commercial
	Real Estate		Agricultural		Real Estate		and Industrial		Other		Real Estate		Agricultural		Real Estate		and Industrial		Other
December 31, 2018
December 31, 2019
1-2	$	4,442	$	5,753	$	4,698	$	3,199	$	-	$	14,655	$	4,093	$	7,860	$	3,844	$	-
3		14,118		38,852		64,341		16,284		3,135		33,951		36,913		131,780		19,790		3,168
4		49,596		63,380		346,072		100,644		2,754		116,834		65,414		401,404		103,527		5,146
5		422		631		2,171		308		-		14,836		2,300		3,699		2,465		-
6		10		-		1,849		542		-		18,583		3,229		5,339		4,983		-
7		-		-		-		886		-		-		-		-		1,086		-
8		-		-		-		-		-		-		-		-		-		-
Total	$	68,588	$	108,616	$	419,131	$	121,863	$	5,889	$	198,859	$	111,949	$	550,082	$	135,695	$	8,314

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

For consumer residential real estate, and other, the Company also evaluates credit quality based on the aging status of the loan, as was previously stated, and by payment activity. The following tables present the recorded investment in those classes based on payment activity and assigned risk grading as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.

	(In Thousands)				(In Thousands)
	Consumer		Consumer		Consumer		Consumer
	Real Estate		Real Estate		Real Estate		Real Estate
	September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Grade
Pass	$	155,346	$	79,121	$	170,812	$	160,930
Special Mention (5)		227		232		1,125		415
Substandard (6)		2,885		879		2,039		3,346
Doubtful (7)		-		-		-		-
Total	$	158,458	$	80,232	$	173,976	$	164,691

	(In Thousands)								(In Thousands)
	Consumer - Credit				Consumer - Other				Consumer - Credit				Consumer - Other
	September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018		March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
Performing	$	3,867	$	3,909	$	45,752	$	38,073	$	3,576	$	4,076	$	45,424	$	44,831
Nonperforming		-		19		99		54		35		15		155		487
Total	$	3,867	$	3,928	$	45,851	$	38,127	$	3,611	$	4,091	$	45,579	$	45,318

Information about impaired loans as of ~~September 30, 2019,~~March 31, 2020, December 31, ~~2018~~2019 and ~~September 30, 2018~~March 31, 2019 are as follows:

			(In Thousands)						(In Thousands)
	September 30, 2019		December 31, 2018		September 30, 2018		March 31, 2020		December 31, 2019		March 31, 2019

Impaired loans without a valuation allowance	$	1,914	$	1,808	$	1,841	$	1,393	$	2,420	$	1,915
Impaired loans with a valuation allowance		1,314		246		970		4,795		641		254
Total impaired loans	$	3,228	$	2,054	$	2,811	$	6,188	$	3,061	$	2,169
Valuation allowance related to impaired loans	$	187	$	31	$	148	$	766	$	197	$	59
Total non-accrual loans	$	3,275	$	542	$	483	$	3,344	$	3,400	$	1,188
Total loans past-due ninety days or more and still accruing	$	-	$	-	$	-	$	-	$	-	$	-
Quarter ended average investment in impaired loans	$	3,141	$	2,533	$	2,158	$	4,314	$	3,120	$	2,135
Year to date average investment in impaired loans	$	2,492	$	1,958	$	1,765	$	4,314	$	2,649	$	2,135

There were $5$45 thousand additional funds available to be advanced in connection with impaired loans.

The Bank had approximately ~~$1.1~~$1.9 million of its impaired loans classified as troubled debt restructured (TDR) as of ~~September 30, 2019, $178 thousand~~March 31, 2020, $1.0 million as of December 31, ~~2018~~2019 and ~~$207~~$173 thousand as of ~~September 30, 2018. During the year to date 2019, there were 5 new loans considered TDR. There were no new loans considered TDR year to date 2018.~~March 31, 2019.

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

Modification programs focused on payment pattern changes and/or modified maturity dates with most receiving a combination of the two concessions. The modifications did not result in the contractual forgiveness of principal. In 2020, two of the loans resulted in payment changes from a monthly payment to principal and interest at maturity on June 19, 2020. Interest was paid current at the time of the modification. The properties involved are to be sold by the loan maturity date. Consequently, the financial impact of the modifications was immaterial. During the year to date 2020, there were 2 new loans considered TDR. There were no new loans considered TDR year to date 2019. The following ~~table~~tables represents three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019:

Pre-

Post-

Pre-

Post-

Pre-

Post-

Three Months

Number of

Modification

Nine Months

Number of

Modification

Number of

Modification

September 30, 2019

Contracts

Outstanding

September 30, 2019

Contracts

Outstanding

March 31, 2020

Contracts

Outstanding

(in thousands)

Modified in the

Recorded

(in thousands)

Modified in the

Recorded

Modified in the

Recorded

Troubled Debt Restructurings

Last Three Months

Investment

Troubled Debt Restructurings

Last Nine Months

Investment

Last Three Months

Investment

Consumer Real Estate

Commercial and

Industrial

Commercial and

Industrial

812

Commercial Real Estate

981

For the three ~~and nine~~ month period ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ there were no TDRs that subsequently defaulted after modification.

For the three ~~and nine~~ month period ended ~~September 30, 2019,~~March 31, 2020, there was one impaired loan that was classified as TDR paid off. There were no impaired loans classified as TDR paid ~~off.~~off for the three month period ended March 31, 2019.

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

For the majority of the Bank’s impaired loans, the Bank will apply the fair value of collateral or use a measurement incorporating the present value of expected future cash flows discounted at the loan’s effective rate of interest. To determine fair value of collateral, collateral asset values securing an impaired loan are periodically evaluated. Maximum time of re-evaluation is every 12 months for chattels and titled vehicles and every two years for real estate. In this process, third party evaluations are obtained. Until such time that updated appraisals are received, the Bank may discount the collateral value used.

The Bank uses the following guidelines as stated in policy to determine when to realize a charge-off, whether a partial or full loan balance. A charge-off in whole or in part is realized when unsecured consumer loans, credit card credits and overdraft lines of credit reach 90 days delinquency. At 120 days delinquent, secured consumer loans are charged down to the value of the collateral, if repossession of the collateral is assured and/or in the process of repossession. Consumer mortgage loan deficiencies are charged down upon the sale of the collateral or sooner upon the recognition of collateral deficiency. Commercial and agricultural credits are charged down at 120 days delinquency, unless an established and approved work-out plan is in place or litigation of the credit will likely result in recovery of the loan balance. Upon notification of bankruptcy, unsecured debt is charged off. Additional charge-off may be realized as further unsecured positions are recognized.

The following tables present loans individually evaluated for impairment by class of loans for the three months ended ~~September 30,~~March 31, 2020 and March 31, 2019 and ~~September 30, 2018.~~for the year ended December 31, 2019.

	(In Thousands)												(In Thousands)
											QTD												QTD
							QTD		QTD		Interest								QTD		QTD		Interest
Three Months Ended September 30, 2019			Unpaid				Average		Interest		Income
Three Months Ended March 31, 2020															Unpaid				Average		Interest		Income
	Recorded		Principal		Related		Recorded		Income		Recognized		Recorded		Principal		Related		Recorded		Income		Recognized
	Investment		Balance		Allowance		Investment		Recognized		Cash Basis		Investment		Balance		Allowance		Investment		Recognized		Cash Basis
With no related allowance recorded:
Consumer Real Estate	$	626	$	626	$	-	$	628	$	9	$	3	$	644	$	644	$	-	$	649	$	5	$	4
Agricultural Real Estate		406		406		-		406		-		-		30		30		-		291		3		-
Agricultural		368		368		-		368		-		-		348		348		-		386		5		-
Commercial Real Estate		304		304		-		267		7		-		186		186		-		224		3		-
Commercial and Industrial		210		210		-		219		3		-		154		154		-		699		12		-
Consumer		-		-		-		-		-		-		31		31		-		10		-		-
With a specific allowance recorded:
Consumer Real Estate		126		128		22		172		-		-		194		194		34		212		-		-
Agricultural Real Estate		-		-		-		-		-		-		92		92		15		93		2		-
Agricultural		-		-		-		-		-		-		121		121		12		121		-		-
Commercial Real Estate		-		-		-		-		14		-		3,109		3,109		95		1,036		39		-
Commercial and Industrial		1,188		1,188		165		1,081		-		-		1,279		1,429		610		572		7		-
Consumer		-		-		-		-		-		-		-		-		-		21		-		-
Totals:
Consumer Real Estate	$	752	$	754	$	22	$	800	$	9	$	3	$	838	$	838	$	34	$	861	$	5	$	4
Agricultural Real Estate	$	406	$	406	$	-	$	406	$	-	$	-	$	122	$	122	$	15	$	384	$	5	$	-
Agricultural	$	368	$	368	$	-	$	368	$	-	$	-	$	469	$	469	$	12	$	507	$	5	$	-
Commercial Real Estate	$	304	$	304	$	-	$	267	$	21	$	-	$	3,295	$	3,295	$	95	$	1,260	$	42	$	-
Commercial and Industrial	$	1,398	$	1,398	$	165	$	1,300	$	3	$	-	$	1,433	$	1,583	$	610	$	1,271	$	19	$	-
Consumer	$	-	$	-	$	-	$	-	$	-	$	-	$	31	$	31	$	-	$	31	$	-	$	-

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

	(In Thousands)												(In Thousands)
											QTD												QTD
							QTD		QTD		Interest								QTD		QTD		Interest
Three Months Ended September 30, 2018			Unpaid				Average		Interest		Income
Three Months Ended March 31, 2019															Unpaid				Average		Interest		Income
	Recorded		Principal		Related		Recorded		Income		Recognized		Recorded		Principal		Related		Recorded		Income		Recognized
	Investment		Balance		Allowance		Investment		Recognized		Cash Basis		Investment		Balance		Allowance		Investment		Recognized		Cash Basis
With no related allowance recorded:
Consumer Real Estate	$	589	$	589	$	-	$	645	$	9	$	5	$	648	$	648	$	-	$	603	$	7	$	1
Agricultural Real Estate		-		-		-		-		-		-		-		-		-		-		-		-
Agricultural		-		-		-		-		-		-		-		-		-		-		-		-
Commercial Real Estate		196		196		-		197		3		-		192		192		-		193		3		-
Commercial and Industrial		1,056		1,056		-		504		12		-		1,075		1,075		-		1,085		15		-
Consumer		-		-		-		-		-		-		-		-		-		-		-		-
With a specific allowance recorded:
Consumer Real Estate		174		174		26		227		-		-		254		254		59		254		-		-
Agricultural Real Estate		-		-		-		-		-		-		-		-		-		-		-		-
Agricultural		-		-		-		-		-		-		-		-		-		-		-		-
Commercial Real Estate		-		-		-		-		-		-		-		-		-		-		-		-
Commercial and Industrial		796		796		122		585		3		-		-		-		-		-		-		-
Consumer		-		-		-		-		-		-		-		-		-		-		-		-
Totals:
Consumer Real Estate	$	763	$	763	$	26	$	872	$	9	$	5	$	902	$	902	$	59	$	857	$	7	$	1
Agricultural Real Estate	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Agricultural	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Commercial Real Estate	$	196	$	196	$	-	$	197	$	3	$	-	$	192	$	192	$	-	$	193	$	3	$	-
Commercial and Industrial	$	1,852	$	1,852	$	122	$	1,089	$	15	$	-	$	1,075	$	1,075	$	-	$	1,085	$	15	$	-
Consumer	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

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

~~The following tables present loans individually evaluated for impairment by class of loans for nine months ended September 30, 2019 and September 30, 2018.~~

	(In Thousands)												(In Thousands)
											YTD												Interest
							YTD		YTD		Interest
Nine Months Ended September 30, 2019			Unpaid				Average		Interest		Income
Year Ended December 31, 2019															Unpaid				Average		Interest		Income
	Recorded		Principal		Related		Recorded		Income		Recognized		Recorded		Principal		Related		Recorded		Income		Recognized
	Investment		Balance		Allowance		Investment		Recognized		Cash Basis		Investment		Balance		Allowance		Investment		Recognized		Cash Basis
With no related allowance recorded:
Consumer Real Estate	$	626	$	626	$	-	$	625	$	24	$	7	$	648	$	648	$	-	$	626	$	32	$	9
Agricultural Real Estate		406		406		-		135		-		-		-		-		-		204		-		-
Agricultural		368		368		-		123		-		-		491		491		-		124		-		-
Commercial Real Estate		304		304		-		217		14		-		299		299		-		238		19		-
Commercial and Industrial		210		210		-		697		9		-		982		982		-		637		66		-
Consumer		-		-		-		-		-		-		-		-		-		-		-		-
With a specific allowance recorded:
Consumer Real Estate		126		128		22		220		-		-		181		184		30		211		-		-
Agricultural Real Estate		-		-		-		-		-		-		-		-		-		22		1		-
Agricultural		-		-		-		24		-		-		200		200		21		29		-		-
Commercial Real Estate		-		-		-		-		-		-		-		-		-		-		-		-
Commercial and Industrial		1,188		1,188		165		451		37		-		227		377		142		555		-		-
Consumer		-		-		-		-		-		-		33		33		4		3		-		-
Totals:
Consumer Real Estate	$	752	$	754	$	22	$	845	$	24	$	7	$	829	$	832	$	30	$	837	$	32	$	9
Agricultural Real Estate	$	406	$	406	$	-	$	135	$	-	$	-	$	-	$	-	$	-	$	226	$	1	$	-
Agricultural	$	368	$	368	$	-	$	147	$	-	$	-	$	691	$	691	$	21	$	153	$	-	$	-
Commercial Real Estate	$	304	$	304	$	-	$	217	$	14	$	-	$	299	$	299	$	-	$	238	$	19	$	-
Commercial and Industrial	$	1,398	$	1,398	$	165	$	1,148	$	46	$	-	$	1,209	$	1,359	$	142	$	1,192	$	66	$	-
Consumer	$	-	$	-	$	-	$	-	$	-	$	-	$	33	$	33	$	4	$	3	$	-	$	-

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

(In Thousands)

YTD

YTD

YTD

Interest

Nine Months Ended September 30, 2018

Unpaid

Average

Interest

Income

Recorded

Principal

Related

Recorded

Income

Recognized

Investment

Balance

Allowance

Investment

Recognized

Cash Basis

With no related allowance recorded:

Consumer Real Estate

$
589

$
589

$
-

$
554

$
23

$
15

Agricultural Real Estate

-

-

-

22

-

-

Agricultural

-

-

-

-

-

-

Commercial Real Estate

196

196

-

199

8

-

Commercial and Industrial

1,056

1,056

-

238

12

-

Consumer

-

-

-

-

-

-

With a specific allowance recorded:

Consumer Real Estate

174

174

26

153

-

-

Agricultural Real Estate

-

-

-

-

-

-

Agricultural

-

-

-

-

-

-

Commercial Real Estate

-

-

-

186

-

-

Commercial and Industrial

796

796

122

413

11

-

Consumer

-

-

-

-

-

-

Totals:

Consumer Real Estate

$
763

$
763

$
26

$
707

$
23

$
15

Agricultural Real Estate

$
-

$
-

$
-

$
22

$
-

$
-

Agricultural

$
-

$
-

$
-

$
-

$
-

$
-

Commercial Real Estate

$
196

$
196

$
-

$
385

$
8

$
-

Commercial and Industrial

$
1,852

$
1,852

$
122

$
651

$
23

$
-

Consumer

$
-

$
-

$
-

$
-

$
-

$
-

As of ~~September 30, 2019,~~March 31, 2020, the Company had ~~$187~~$50 thousand of foreclosed residential real estate property obtained by physical possession and ~~$379~~$292 thousand of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process according to local jurisdictions. As of ~~September 30, 2018,~~March 31, 2019, the Company had ~~$68~~no foreclosed residential real estate property obtained by physical possession and ~~$174~~$639 thousand of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings were in process according to local jurisdictions.

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

The Allowance for Loan and Lease Losses (ALLL) has a direct impact on the provision expense. An increase in the ALLL is funded through recoveries and provision expense. The following tables summarize the activities in the allowance for credit losses.

	(In Thousands)						(In Thousands)
	Nine Months Ended			Twelve Months Ended			Three Months Ended			Twelve Months Ended
	September 30, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Allowance for Loan & Lease Losses
Balance at beginning of year	$	6,775		$	6,868		$	7,228		$	6,775
Provision for loan loss		410			324			1,430			1,138
Loans charged off		(554	)		(580	)		(164	)		(841	)
Recoveries		128			163			39			156
Allowance for Loan & Lease Losses	$	6,759		$	6,775		$	8,533		$	7,228
Allowance for Unfunded Loan Commitments & Letters of Credit	$	430		$	274		$	470		$	479
Total Allowance for Credit Losses	$	7,189		$	7,049		$	9,003		$	7,707

The Company segregates its ALLL into two reserves: The ALLL and the Allowance for Unfunded Loan Commitments and Letters of Credit (AULC). When combined, these reserves constitute the total Allowance for Credit Losses (ACL).

The AULC is reported within other liabilities on the balance sheet while the ALLL is netted within the loans, net asset line. The ACL presented above represents the full amount of reserves available to absorb possible credit losses.

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

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

Additional analysis, presented in thousands, related to the allowance for credit losses for three months ended ~~September 30,~~March 31, 2020 and March 31, 2019 ~~and September 30, 2018~~ in addition to the ending balances as of December 31, ~~2018~~2019 is as follows:

	Consumer Real Estate			Agricultural Real Estate		Agricultural			Commercial Real Estate			Commercial and Industrial			Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated			Total			Consumer Real Estate			Agricultural Real Estate		Agricultural			Commercial Real Estate		Commercial and Industrial		Consumer			Unfunded Loan Commitment & Letters of Credit			Unallocated		Total
Three Months Ended September 30, 2019
Three Months Ended March 31, 2020
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	275		$	340	$	756		$	3,320		$	1,461		$	526		$	370	$	5		$	7,053		$	311		$	314	$	691		$	3,634	$	1,727	$	551		$	479		$	-	$	7,707
Charge Offs		(39	)		-		(22	)		-			(55	)		(103	)		-		-			(219	)		(35	)		-		-			-		-		(129	)		-			-		(164	)
Recoveries		-			-		1			2			13			32			-		-			48			3			-		-			3		3		30			-			-		39
Provision (Credit)		38			12		(2	)		(17	)		131			90			-		(5	)		247			66			13		(26	)		236		1,020		81			-			40		1,430
Other Non-interest expense related to unfunded		-			-		-			-			-			-			60		-			60			-			-		-			-		-		-			(9	)		-		(9	)
Ending Balance	$	274		$	352	$	733		$	3,305		$	1,550		$	545		$	430	$	-		$	7,189		$	345		$	327	$	665		$	3,873	$	2,750	$	533		$	470		$	40	$	9,003
Ending balance: individually evaluated for impairment	$	22		$	-	$	-		$	-		$	165		$	-		$	-	$	-		$	187		$	34		$	15	$	12		$	95	$	610	$	-		$	-		$	-	$	766
Ending balance: collectively evaluated for impairment	$	252		$	352	$	733		$	3,305		$	1,385		$	545		$	430	$	-		$	7,002		$	311		$	312	$	653		$	3,778	$	2,140	$	533		$	470		$	40	$	8,237
Ending balance: loans acquired with deteriorated credit quality	$	-		$	-	$	-		$	-		$	-		$	-		$	-	$	-		$	-		$	-		$	-	$	-		$	-	$	-	$	-		$	-		$	-	$	-
FINANCING RECEIVABLES:
Ending balance	$	158,458		$	200,625	$	110,405		$	501,095		$	138,395		$	49,718		$	-	$	-		$	1,158,696		$	173,976		$	194,130	$	109,707		$	568,991	$	151,647	$	49,190		$	-		$	-	$	1,247,641
Ending balance: individually evaluated for impairment	$	752		$	406	$	368		$	304		$	1,398		$	-		$	-	$	-		$	3,228		$	838		$	122	$	469		$	3,295	$	1,433	$	31		$	-		$	-	$	6,188
Ending balance: collectively evaluated for impairment	$	157,659		$	200,219	$	110,037		$	500,791		$	136,997		$	49,718		$	-	$	-		$	1,155,421		$	173,093		$	194,008	$	109,238		$	565,695	$	150,111	$	49,159		$	-		$	-	$	1,241,304
Ending balance: loans acquired with deteriorated credit quality	$	47		$	-	$	-		$	-		$	-		$	-		$	-	$	-		$	47		$	45		$	-	$	-		$	-	$	103	$	-		$	-		$	-	$	148

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

December 31, 2018	Consumer Real Estate		Agricultural Real Estate		Agricultural		Commercial Real Estate		Commercial and Industrial		Consumer		Unfunded Loan Commitment & Letters of Credit		Unallocated		Total
December 31, 2019																			Consumer Real Estate		Agricultural Real Estate		Agricultural		Commercial Real Estate		Commercial and Industrial		Consumer		Unfunded Loan Commitment & Letters of Credit		Unallocated		Total
ALLOWANCE FOR CREDIT LOSSES:
Ending Balance	$	247	$	250	$	768	$	3,217	$	1,305	$	484	$	274	$	504	$	7,049	$	311	$	314	$	691	$	3,634	$	1,727	$	551	$	479	$	-	$	7,707
Ending balance: individually evaluated for impairment	$	26	$	-	$	-	$	-	$	5	$	-	$	-	$	-	$	31	$	30	$	-	$	21	$	-	$	142	$	4	$	-	$	-	$	197
Ending balance: collectively evaluated for impairment	$	221	$	250	$	768	$	3,217	$	1,300	$	484	$	274	$	504	$	7,018	$	281	$	314	$	670	$	3,634	$	1,585	$	547	$	479	$	-	$	7,510
Ending balance: loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
FINANCING RECEIVABLES:
Ending balance	$	80,232	$	68,588	$	108,616	$	419,131	$	127,752	$	42,055	$	-	$	-	$	846,374	$	164,691	$	198,859	$	111,949	$	550,082	$	144,009	$	49,409	$	-	$	-	$	1,218,999
Ending balance: individually evaluated for impairment	$	757	$	-	$	-	$	194	$	1,103	$	-	$	-	$	-	$	2,054	$	829	$	-	$	691	$	299	$	1,209	$	33	$	-	$	-	$	3,061
Ending balance: collectively evaluated for impairment	$	79,359	$	68,588	$	108,616	$	418,937	$	126,649	$	42,055	$	-	$	-	$	844,204	$	163,816	$	198,859	$	111,258	$	549,783	$	142,694	$	49,376	$	-	$	-	$	1,215,786
Ending balance: loans acquired with deteriorated credit quality	$	116	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	116	$	46	$	-	$	-	$	-	$	106	$	-	$	-	$	-	$	152

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

	Consumer Real Estate			Agricultural Real Estate			Agricultural			Commercial Real Estate		Commercial and Industrial			Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated			Total			Consumer Real Estate			Agricultural Real Estate		Agricultural			Commercial Real Estate			Commercial and Industrial		Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated			Total
Three Months Ended September 30, 2018
Three Months Ended March 31, 2019
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	251		$	255		$	751		$	3,260	$	1,420		$	459		$	315	$	393		$	7,104		$	247		$	250	$	768		$	3,217		$	1,305	$	484		$	274	$	504		$	7,049
Charge Offs		(29	)		-			-			-		-			(94	)		-		-			(123	)		(42	)		-		-			-			-		(165	)		-		-			(207	)
Recoveries		18			-			-			3		3			18			-		-			42			-			-		1			2			3		32			-		-			38
Provision (Credit)		(5	)		(3	)		(8	)		9		(25	)		88			-		(9	)		47			63			20		(63	)		(16	)		182		145			-		(301	)		30
Other Non-interest expense related to unfunded		-			-			-			-		-			-			18		-			18			-			-		-			-			-		-			72		-			72
Ending Balance	$	235		$	252		$	743		$	3,272	$	1,398		$	471		$	333	$	384		$	7,088		$	268		$	270	$	706		$	3,203		$	1,490	$	496		$	346	$	203		$	6,982
Ending balance: individually evaluated for impairment	$	26		$	-		$	-		$	-	$	122		$	-		$	-	$	-		$	148		$	59		$	-	$	-		$	-		$	-	$	-		$	-	$	-		$	59
Ending balance: collectively evaluated for impairment	$	209		$	252		$	743		$	3,272	$	1,276		$	471		$	333	$	384		$	6,940		$	209		$	270	$	706		$	3,203		$	1,490	$	496		$	346	$	203		$	6,923
Ending balance: loans acquired with deteriorated credit quality	$	-		$	-		$	-		$	-	$	-		$	-		$	-	$	-		$	-		$	-		$	-	$	-		$	-		$	-	$	-		$	-	$	-		$	-
FINANCING RECEIVABLES:
Ending balance	$	82,629		$	68,524		$	103,760		$	416,632	$	125,612		$	41,541		$	-	$	-		$	838,698		$	160,276		$	191,736	$	113,021		$	440,281		$	145,381	$	47,770		$	-	$	-		$	1,098,465
Ending balance: individually evaluated for impairment	$	763		$	-		$	-		$	196	$	1,852		$	-		$	-	$	-		$	2,811		$	902		$	-	$	-		$	192		$	1,075	$	-		$	-	$	-		$	2,169
Ending balance: collectively evaluated for impairment	$	81,748		$	68,524		$	103,760		$	416,436	$	123,760		$	41,541		$	-	$	-		$	835,769		$	159,028		$	191,736	$	113,021		$	440,089		$	142,263	$	47,770		$	-	$	-		$	1,093,907
Ending balance: loans acquired with deteriorated credit quality	$	118		$	-		$	-		$	-	$	-		$	-		$	-	$	-		$	118		$	346		$	-	$	-		$	-		$	2,043	$	-		$	-	$	-		$	2,389

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

~~Additional analysis, presented in thousands, related to the allowance for credit losses for nine months ended September 30, 2019 and September 30, 2018 is as follows:~~

Consumer
Real Estate

Agricultural
Real Estate

Agricultural

Commercial
Real Estate

Commercial
and Industrial

Consumer

Unfunded
Loan
Commitment
& Letters of
Credit

Unallocated

Total

Nine Months Ended September 30, 2019

ALLOWANCE FOR CREDIT LOSSES:

Beginning balance

$
247

$
250

$
768

$
3,217

$
1,305

$
484

$
274

$
504

$
7,049

Charge Offs

(95
)

-

(22
)

-

(55
)

(382
)

-

-

(554
)
Recoveries

-

-

3

7

21

97

-

-

128

Provision (Credit)

122

102

(16
)

81

279

346

-

(504
)

410

Other Non-interest expense related to
   unfunded

-

-

-

-

-

-

156

-

156

Ending Balance

$
274

$
352

$
733

$
3,305

$
1,550

$
545

$
430

$
-

$
7,189

Ending balance: individually evaluated
   for impairment

$
22

$
-

$
-

$
-

$
165

$
-

$
-

$
-

$
187

Ending balance: collectively evaluated
   for impairment

$
252

$
352

$
733

$
3,305

$
1,385

$
545

$
430

$
-

$
7,002

Ending balance: loans acquired with
   deteriorated credit quality

$
-

$
-

$
-

$
-

$
-

$
-

$
-

$
-

$
-

FINANCING RECEIVABLES:

Ending balance

$
158,458

$
200,625

$
110,405

$
501,095

$
138,395

$
49,718

$
-

$
-

$
1,158,696

Ending balance: individually evaluated
   for impairment

$
752

$
406

$
368

$
304

$
1,398

$
-

$
-

$
-

$
3,228

Ending balance: collectively evaluated
   for impairment

$
157,659

$
200,219

$
110,037

$
500,791

$
136,997

$
49,718

$
-

$
-

$
1,155,421

Ending balance: loans acquired with
   deteriorated credit quality

$
47

$
-

$
-

$
-

$
-

$
-

$
-

$
-

$
47

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

Consumer
Real Estate

Agricultural
Real Estate

Agricultural

Commercial
Real Estate

Commercial
and Industrial

Consumer

Unfunded
Loan
Commitment
& Letters of
Credit

Unallocated

Total

Nine Months Ended September 30, 2018

ALLOWANCE FOR CREDIT LOSSES:

Beginning balance

$
343

$
244

$
667

$
3,149

$
1,546

$
441

$
227

$
478

$
7,095

Charge Offs

(63
)

-

-

(15
)

(100
)

(272
)

-

-

(450
)
Recoveries

18

-

6

7

8

79

-

-

118

Provision (Credit)

(63
)

8

70

131

(56
)

223

-

(94
)

219

Other Non-interest expense related to
   unfunded

-

-

-

-

-

-

106

-

106

Ending Balance

$
235

$
252

$
743

$
3,272

$
1,398

$
471

$
333

$
384

$
7,088

Ending balance: individually evaluated
   for impairment

$
26

$
-

$
-

$
-

$
122

$
-

$
-

$
-

$
148

Ending balance: collectively evaluated
   for impairment

$
209

$
252

$
743

$
3,272

$
1,276

$
471

$
333

$
384
��

$
6,940

Ending balance: loans acquired with
   deteriorated credit quality

$
-

$
-

$
-

$
-

$
-

$
-

$
-

$
-

$
-

FINANCING RECEIVABLES:

Ending balance

$
82,629

$
68,524

$
103,760

$
416,632

$
125,612

$
41,541

$
-

$
-

$
838,698

Ending balance: individually evaluated
   for impairment

$
763

$
-

$
-

$
196

$
1,852

$
-

$
-

$
-

$
2,811

Ending balance: collectively evaluated
   for impairment

$
81,748

$
68,524

$
103,760

$
416,436

$
123,760

$
41,541

$
-

$
-

$
835,769

Ending balance: loans acquired with
   deteriorated credit quality

$
118

$
-

$
-

$
-

$
-

$
-

$
-

$
-

$
118

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

Basic earnings per share are calculated using the two-class method. The two-class method is an earnings allocation formula under which earnings per share is calculated from common stock and participating securities according to dividends declared and participation rights in undistributed earnings. Under this method, all earnings distributed and undistributed, are allocated to participating securities and common shares based on their respective rights to receive dividends. Unvested share-based payment awards that contain non-forfeitable rights to dividends are considered participating securities (i.e. unvested restricted stock), not subject to performance based measures. Basic earnings per share is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding. Application of the two-class method for participating securities results a more dilutive basic earnings per share as the participating securities are allocated the same amount of income as if they are outstanding for purposes of basic earnings per share. There is no additional potential dilution in calculating diluted earnings per share, therefore basic and diluted earnings per share are the same amounts. Other than the restricted stock plan, the Company has no other stock based compensation plans.

	(in thousands of dollars)						(in thousands of dollars)						(in thousands of dollars)
	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018			March 31, 2020			March 31, 2019
Earnings per share
Net income	$	4,275		$	3,875		$	13,679		$	11,756		$	4,105		$	3,224
Less: distributed earnings allocated to participating securities		(14	)		(13	)		(37	)		(38	)		(13	)		(12	)
Less: undistributed earnings allocated to participating securities		(18	)		(26	)		(63	)		(80	)		(20	)		(12	)
Net earnings available to common shareholders	$	4,243		$	3,836		$	13,579		$	11,638		$	4,072		$	3,200

Weighted average common shares outstanding including participating securities		11,121,426			9,274,507			11,105,993			9,268,819			11,134,870			11,089,839
Less: average unvested restricted shares		(79,335	)		(93,242	)		(81,569	)		(92,683	)		(84,732	)		(83,417	)
Weighted average common shares outstanding		11,042,091			9,181,265			11,024,424			9,176,136			11,050,138			11,006,422
Basic earnings and diluted per share	$	0.38		$	0.42		$	1.23		$	1.27		$	0.37		$	0.29

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

Fair values of financial instruments are management's estimate of the values at which the instruments could be exchanged in a transaction between willing parties. These estimates are subjective and may vary significantly from amounts that would be realized in actual transactions. In addition, other significant assets are not considered financial assets including deferred tax assets, premises, equipment and intangibles. Further, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on the fair value estimates and have not been considered in any of the estimates.

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

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

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

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

The carrying value of Federal Home Loan Bank stock of Cincinnati and Indianapolis, approximates fair value based on the redemption provisions of the respective Federal Home Loan Bank.

The carrying amount approximates fair value due to insignificant amount of time between origination and date of sale.

The fair values of the loans are estimated using a credit mark adjustment along with discounted cash flow analysis, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality. The credit mark adjustment was estimated using merger and acquisition analysis of nationwide bank and thrift deals and/or the Bank’s most recent acquisition experience.

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

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

Fair values or FHLB advances are estimated using discounted cash flow analysis based on the Company’s current incremental borrowing rates for similar types or borrowing arrangements.

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

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

The estimated fair values, and related carrying or notional amounts, for on and off-balance sheet financial instruments as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 are reflected below.

	(In Thousands)										(In Thousands)
	September 30, 2019										March 31, 2020
	Carrying		Fair								Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3		Amount		Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	114,592	$	114,592	$	114,592	$	-	$	-	$	90,837	$	90,837	$	90,837	$	-	$	-
Interest-bearing time deposits		4,554		4,554		-		4,554		-		4,869		4,834		-		4,834		-
Securities - available-for-sale	��	190,465		190,465		14,009		174,947		1,509		204,121		204,121		10,073		192,511		1,537
Other securities		5,789		5,789		-		-		5,789		5,810		5,810		-		-		5,810
Loans held for sale		606		606		-		-		606		2,153		2,153		-		-		2,153
Loans, net		1,151,937		1,129,954		-		-		1,129,954		1,239,108		1,216,038		-		-		1,216,038
Interest receivable		7,830		7,830		-		-		7,830		7,114		7,114		-		-		7,114
								-
Financial Liabilities:
Interest bearing deposits	$	741,313	$	741,360	$	-	$	-	$	741,360	$	804,990	$	805,033	$	-	$	-	$	805,033
Non-interest bearing deposits		261,719		261,719		-		261,719		-		261,786		261,786		-		261,786		-
Time deposits		274,996		275,658		-		-		275,658		281,931		284,636		-		-		284,636
Total Deposits		1,278,028		1,278,707		-		261,719		1,016,988		1,348,707		1,351,455		-		261,786		1,089,669

Federal funds purchased and securities sold under agreement to repurchase		30,056		30,056		-		-		30,056		30,585		30,585		-		-		30,585
Federal Home Loan Bank advances		24,669		24,672		-		-		24,672		24,788		24,858		-		-		24,858
Interest payable		739		739		-		-		739		727		727		-		-		727

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

	(In Thousands)										(In Thousands)
	December 31, 2018										December 31, 2019
	Carrying		Fair								Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3		Amount		Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	38,365	$	38,365	$	38,365	$	-	$	-	$	51,296	$	51,296	$	51,296	$	-	$	-
Interest-bearing time deposits		4,019		3,954		-		3,954		-		4,309		4,331		-		4,331		-
Securities - available-for-sale		168,447		168,447		36,935		130,085		1,427		222,293		222,293		10,021		210,782		1,490
Other securities		3,679		3,679		-		-		3,679		5,810		5,810		-		-		5,810
Loans held for sale		495		495		-		-		495		4,248		4,248		-		-		4,248
Loans, net		839,599		823,914		-		-		823,914		1,211,771		1,188,014		-		-		1,188,014
Interest receivable		4,542		4,542		-		-		4,542		6,769		6,769		-		-		6,769

Financial Liabilities:
Interest bearing deposits	$	525,955	$	525,955	$	-	$	-	$	525,955	$	746,628	$	746,691	$	-	$	-	$	746,691
Non-interest bearing deposits		215,422		215,422		-		215,422		-		265,156		265,156		-		265,156		-
Time deposits		187,413		187,545		-		-		187,545		276,563		277,008		-		-		277,008
Total Deposits		928,790		928,922		-		215,422		713,500		1,288,347		1,288,855		-		265,156		1,023,699

Federal funds purchased and securities sold under agreement to repurchase		32,181		3,181		-		-		32,181		48,073		48,073		-		-		48,073
Federal Home Loan Bank advances		-		-		-		-		-		24,806		24,811		-		-		24,811
Interest payable		418		418		-		-		418		754		754		-		-		754

In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities in active markets that the Company has the ability to access.

Available-for-sale securities, when quoted prices are available in an active market, securities are valued using the quoted price and are classified as Level 1.

Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

Available-for-sale securities classified as Level 2 are valued using the prices obtained from an independent pricing service. The prices are not adjusted. Securities of obligations of state and political subdivisions are valued using a type of matrix, or grid, pricing in which securities are benchmarked against the treasury rate based on credit rating. Substantially all assumptions used by the independent pricing service are observable in the marketplace, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace.

Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability. The Bank holds some local municipals that the Bank evaluates based on the credit strength of the underlying project. The fair value is determined by valuing similar credit payment streams at similar rates.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company's assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset.

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

The following summarizes financial assets measured at fair value on a recurring basis as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, segregated by level or the valuation inputs within the fair value hierarchy utilized to measure fair value:

Assets and Liabilities Measured at Fair Value on a Recurring Basis (In Thousands)	Assets and Liabilities Measured at Fair Value on a Recurring Basis (In Thousands)							Assets and Liabilities Measured at Fair Value on a Recurring Basis (In Thousands)
September 30, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Observable Inputs (Level 3)
March 31, 2020									Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets - (Securities Available-for-Sale)
U.S. Treasury		$	14,009	$	-	$	-		$	10,073	$	-	$	-
U.S. Government agencies			-		80,043		-			-		49,749		-
Mortgage-backed securities			-		57,461		-			-		100,694		-
State and local governments			-		37,443		1,509			-		42,068		1,537
Total Securities Available-for-Sale		$	14,009	$	174,947	$	1,509		$	10,073	$	192,511	$	1,537

December 31, 2018	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Observable Inputs (Level 3)
December 31, 2019							Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets - (Securities Available-for-Sale)
U.S. Treasury	$	22,830	$	-	$	-	$	10,021	$	-	$	-
U.S. Government agencies		14,105		55,222		-		-		62,445		-
Mortgage-backed securities		-		36,262		-		-		95,197		-
State and local governments		-		38,601		1,427		-		53,140		1,490
Total Securities Available-for-Sale	$	36,935	$	130,085	$	1,427	$	10,021	$	210,782	$	1,490

The following tables represent the changes in the Level 3 fair-value category of which unobservable inputs are relied upon as of the three ~~and nine~~ month periods ended ~~September 30, 2019~~March 31, 2020 and ~~September 30, 2018.~~March 31, 2019.

	(In Thousands)						(In Thousands)
	Fair Value Measurements Using Significant						Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)						Unobservable Inputs (Level 3)
	State and Local Governments Tax-Exempt		State and Local Governments Taxable		State and Local Governments Total		State and Local Governments Tax-Exempt		State and Local Governments Taxable		State and Local Governments Total
Balance at July 1, 2019	$	-	$	1,505	$	1,505
Balance at January 1, 2020							$	-	$	1,490	$	1,490

Change in Market Value		-		4		4		-		47		47

Payments & Maturities		-		-		-		-		-		-

Balance at September 30, 2019	$	-	$	1,509	$	1,509
Balance at March 31, 2020							$	-	$	1,537	$	1,537

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

	(In Thousands)								(In Thousands)
	Fair Value Measurements Using Significant								Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)								Unobservable Inputs (Level 3)
	State and Local Governments Tax-Exempt		State and Local Governments Taxable			State and Local Governments Total			State and Local Governments Tax-Exempt		State and Local Governments Taxable		State and Local Governments Total
Balance at January 1, 2018	$	-	$	1,428		$	1,428
Balance at January 1, 2019									$	-	$	1,427	$	1,427

Change in Market Value		-		(35	)		(35	)		-		16		16

Payments & Maturities		-		-			-			-		-		-

Balance at September 30, 2018	$	-	$	1,393		$	1,393
Balance at March 31, 2019									$	-	$	1,443	$	1,443

Most of the Company's available-for-sale securities, including any bonds issued by local municipalities, have CUSIP numbers or have similar characteristics of those in the municipal markets, making them marketable and comparable as Level 2.

The Company also has assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis. At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, such assets consist primarily of collateral dependent impaired loans. Collateral dependent impaired loans categorized as Level 3 assets consist of non-homogeneous loans that are considered impaired. The Company estimates the fair value of the loans based on the present value of expected future cash flows using management's best estimate of key assumptions. These assumptions include future payment ability, timing of payment streams, and estimated realizable values of available collateral (typically based on outside appraisals.)

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

At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, fair value of collateral dependent impaired loans categorized as Level 3 was ~~$106~~$3.3 million and ~~$215~~$444 thousand, respectively. The specific allocation for impaired loans was ~~$22~~$145 and ~~$31~~$197 thousand as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively, which are accounted for in the allowance for loan losses (see Note 4).

Other real estate is reported at either the lower of the fair value of the real estate minus the estimated costs to sell the asset or the cost of the asset. The determination of fair value of the real estate relies primarily on appraisals from third parties. If the fair value of the real estate, minus the estimated costs to sell the asset, is less than the asset's cost, the deficiency is recognized as a valuation allowance against the asset through a charge to expense. The valuation allowance is therefore increased or decreased, through charges or credits to expense, for changes in the asset's fair value or estimated selling costs.

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements:

(In Thousands)

Range

(In Thousands)

Range

Fair Value at

(Weighted

Fair Value at

(Weighted

September 30, 2019

Valuation Technique

Unobservable Inputs

Average)

March 31, 2020

Valuation Technique

Unobservable Inputs

Average)

State and local government

1,509

Discounted Cash Flow

Credit strength of underlying project or

entity / Discount rate

0-5%

(2.41%)

1,537

Discounted Cash Flow

Credit strength of underlying project or

entity / Discount rate

0-5%

(1.88%)

Collateral dependent

impaired loans

106

Collateral based

measurements

Discount to reflect current market

conditions and ultimate collectability

0-50%

(17.19%)

3,251

Collateral based

measurements

Discount to reflect current market

conditions and ultimate collectability

0-50%

(4.26%)

Other real estate owned -

commercial

164

Appraisals

Discount to reflect current

market

0-20%

(23.31% )

Appraisals

Discount to reflect current

market

— %

( — )

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

The following table presents impaired loans and other real estate owned as recorded at fair value on ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019:

	Assets Measured at Fair Value on a Nonrecurring Basis at September 30, 2019								Assets Measured at Fair Value on a Nonrecurring Basis at March 31, 2020
	(In Thousands)								(In Thousands)
	Balance at September 30, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at March 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Collateral dependent impaired loans	$	106	$	-	$	-	$	106	$	3,251	$	-	$	-	$	3,251
Other real estate owned - commercial		164		-		-		164		-		-		-		-

	Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2018								Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2019
	(In Thousands)								(In Thousands)
	Balance at December 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at December 31, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Collateral dependent impaired loans	$	215	$	-	$	-	$	215	$	444	$	-	$	-	$	444
Other real estate owned - commercial		-		-		-		-		164		-		-		164

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

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

The Company had no Federal Funds purchased as of ~~September 30, 2019~~March 31, 2020 and ~~$6.5~~$17.8 million as of December 31, ~~2018,~~2019, respectively. During the same time periods, the ~~company~~Company also had ~~$30.1~~$30.6 million and ~~$25.7~~$30.2 million in securities sold under agreement to repurchase.

	September 30, 2019										March 31, 2020
	Remaining Contractual Maturity of the Agreements (In Thousands)										Remaining Contractual Maturity of the Agreements (In Thousands)

	Overnight & Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total		Overnight & Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Federal funds purchased	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Repurchase agreements
US Treasury & agency securities		1,698		-		-		28,358		30,056		1,324		-		-		29,261		30,585
	$	1,698	$	-	$	-	$	28,358	$	30,056	$	1,324	$	-	$	-	$	29,261	$	30,585

	December 31, 2018										December 31, 2019
	Remaining Contractual Maturity of the Agreements (In Thousands)										Remaining Contractual Maturity of the Agreements (In Thousands)

	Overnight & Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total		Overnight & Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Federal funds purchased	$	6,486	$	-	$	-	$	-	$	6,486	$	17,843	$	-	$	-	$	-	$	17,843
Repurchase agreements
US Treasury & agency securities		806		-		-		24,889		25,695		1,814		-		3,965		24,451		30,230
	$	7,292	$	-	$	-	$	24,889	$	32,181	$	19,657	$	-	$	3,965	$	24,451	$	48,073

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

In ~~February 2016, the FASB issued ASU No. 2016-02~~ ~~“Leases (Topic 842).”~~ ASU 2016-02 establishes a right of use model that requires a lessee to record a right of use asset and a lease liability for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. A lease will be treated as sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as a financing. If the lessor doesn’t convey risks and rewards or control, an operating lease results. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements, with certain practical expedients available. Early adoption is permitted. The Company has adopted ASU 2016-02 on January 1, 2019 and recorded a right of use asset and a corresponding liability in the amount of $491.7 thousand. This did not have a significant impact on the company’s financial statements.

InJune 2016, FASB issued ASU No. 2016-13 “~~Financial~~“Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

The ASU is effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (i.e., January 1, 2020, for calendar year entities). FASB recently approved a delay in adoption for Smaller Reporting Companies. The Company has completed an analysis to determine ~~they qualify~~that it qualifies as a Smaller Reporting Company. ~~Adoption~~As such, adoption can be postponed until periods beginning after December 15, 2022 (i.e., January 1, 2023, for calendar year entities). Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.

The Company has contracted with an external advisor and has formed a committee to determine the methodology to be used. Most importantly, the Company is gathering as much data as possible to enable review scenarios and determine which calculations will produce the most reliable results. The Company began working with the third party service provider to review parallel reports starting in June 2019. The Company will not adopt ASU 2016-13 in calendar year 2020 and management is currently evaluating when or if they would elect to early ~~adopt.~~ adopt ASU 2016-13.

In January 2017, the FASB issued ASU No. 2017-04 ~~“Intangibles~~“Intangibles – Goodwill and other (Topic 350) – Simplifying the Test for Goodwill Impairment.” These amendments eliminate Step 2 from the goodwill impairment test. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The guidance is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. ASU 2017-04 should be adopted on a prospective basis. The Company has adopted ASU 2017-04 effective January 1, 2020, as require, and does not expect the ASU ~~2017-04~~ to have a material impact on its financial ~~statements, as goodwill~~statements. Goodwill testing ~~has been~~is scheduled to be completed ~~annually without any impairment concerns.~~during the fourth quarter.

In August 2018, the FASB issued ASU No. 2018-13 ~~“Fair~~“Fair Value Measurement (Topic 820) - Disclosure Framework-Changes to the Disclosure Requirements for Fair Value ~~Measuremen~~t.Measurement.” ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. The amendments in this update remove disclosures that no longer are considered cost beneficial, modify/clarify the specific requirements of certain disclosures, and add disclosure requirements identified as relevant. ASU 2018-13 is effective for years beginning after December 15, 2019, with early adoption permitted. The Company ~~is in the process of evaluating and does not expect~~adopted ASU 2018-13 ~~to have a~~effective January 1, 2020, as required, without material ~~impact~~effect on its accounting disclosures.

44In March 2020 in connection with the implementation of the CARES Act and related provisions, we have elected the temporary relief in the Coronavirus Aid, Relief and Economic Security Act (CARES Act) not to apply the guidance in ASC 310-40 on accounting for troubled debt restructurings (TDRs) to loan modifications related to COVID-19 made between March 1, 2020 and the earlier of (1) December 31, 2020 or (2) 60 days after the end of the COVID-19 national emergency. The relief was only applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019.

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

2020 started out to be the year of execution. After a good beginning in terms of loan growth and initiatives the first two months, March brought the year of unprecedented change. The Federal Reserve decreased its overnight rate by fifty basis points on March 3rd. As we were adjusting to that change, they again decreased the rate on March 15^th by a before unseen 100 basis points. We began to see the disruption caused by COVID-19 and the focus of the Bank quickly changed. Execution took on a new meaning related to following the actions governed by the Bank’s pandemic flu plan. The Bank took immediate measures to protect its customers and employees from risk of spread while continuing to provide financial services. Please see section titled COVID-19 for additional information related to actions taken.

During the first quarter, the Bank continued to grow loans by 13.58% or $149.2 million over March 31, 2019 and 2.35% or $28.6 million over December 31, 2019. In comparison for the same time periods, deposits grew 13.58% or $161.3 million over March 31, 2019 and 4.69% or $60.4 million over December 31, 2019. Home loan activity was robust, and the activity id expected to continue into second quarter as our applications continued to grow. Deposit growth correlated to a flight to safety as the stock market experienced great volatility.

Our strategic initiative of attracting and cultivating talent was explored with the retirements of our Chief Lending Officer and Marketing Manager in the first quarter. Todd Graham’s duties were assumed by Rex Rice who had been our Senior Commercial Banking Manager. The shift in the commercial team was completed with David Gerken promoted to Sr. VP/Commercial Banking Manager and we added Brett Baumeister as our Sr. VP/Commercial Banking Manager in Eastern Ohio. Mr. Gerken was an existing team member and Mr. Baumeister was a new addition within the last year. Marty Filogamo was replaced by Amy Cover, who had been the Assistant Marketing Manager. The management team is experienced, and we are confident of their ability to lead the Bank in the years to come.

The Company ~~continued second quarter’s “quarter~~remains well capitalized and prepared to face the new challenges coming our way in 2020. Our history shows we weathered the 2008-2009 financial crisis and recession. We did so without taking Troubled Asset Relief Program (TARP) funds and our performance over the time frame was significantly higher than our peers. It is the character of ~~execution”~~the communities we serve that contributed to that success. It is not just what is done during the ~~“quarter on fire”~~storm but how well prepared for the ~~third quarter of 2019. The~~storm you are. F&M has prepared well with historically low troubled loans the last few years due to having strong credit quality controls in place. Additional loan provision was taken in the first quarter of 2019 was impacted by a very labor-intensive process as we welcomed new employees, customers and shareholders into the F&M family. This followed our merger with Limberlost Bancshares, Inc. on January 1, 2019 and three weeks later the integrationin view of the ~~Bank~~unknown length and breadth of ~~Geneva into The Farmers & Merchants State Bank’s core operating system. Financially,~~ the ~~merger is becoming accretive to earnings during 2019, with a larger legal lending limit enabling the expansion of existing customer’s borrowings,~~declining economic situation and ~~a wider range of product and services now available to all customers. The second and third quarters have been the time~~its potential effect on our loan portfolio.

~~A Chief People Officer was added in second quarter 2019 to assist with increasing the level of~~serving our ~~Company’s talent. The Company has invested in~~shareholders, communities, and customers while protecting our retail infrastructure and has been conducting extensive training. During the last two quarters, the Company has spent time developing a three year strategic plan. The vision statement was updated toemployees. Investigating solutions will be “Community Vested to Help People Realize Their Best Lives.” An outcome of the strategic planning process included the following five strategic initiatives that will help take the Company to the next level: customer acquisition and retention, talent optimization, actively pursue acquisition opportunities, improve operating efficiency and financial performance, and develop a comprehensive digital strategyour focus for ~~internal and external constituencies.~~

The third quarter growing conditions for late planted crops were favorable with the crop outlook better than originally anticipated given the late planting dates. The use of crop insurance and the receipt of government subsidies for many of our farms will result in an acceptable year. The large grain carryover and trade disruptions as a result of tariffs continue to weigh on commodity prices. Agri-businesses will likely feel the largest negative effect of non-planted acreage; although, it is believed most are financially sound and have the ability to withstand the potential negative financial impact. Recent land sales continue to be strong suggesting farmer optimism and an overall solid financial position. Results will continue to be monitored going into fourth quarter and 2020. The overall ag sector remains healthy.

The labor shortage is still impacting our commercial customers; whether it is slowing existing projects or expanding the use of technology. It remains one of the largest concerns for 2019. Performance is strong and competition is fierce. The strong performance is evidenced by the size of paydowns and payoffs that have occurred. Regional banks in our market area are busy with larger projects and the small to midsize business segment is where our community bank excels. Overall, the commercial division is optimistic on growth. Many loans which closed in the second quarter ~~were funded~~and for as long as it takes. Please see below for what we have accomplished so far in 2020.

The Company expects to continue to maintain the payment of its quarterly dividend consistent with its past practices. We are sensitive to the needs of our long-time shareholders that utilize these funds to supplement their living expenses, especially in this low interest rate environment.

The Company held its Annual Meeting on April 16^th; however, in light of the governmental restrictions the meeting was significantly different than in the ~~third, replacing~~past. There was no dinner, no presentation of 2019 or an outlook for 2020 and only a small group of directors and officers present. For the ~~accelerated paydowns~~three items to be considered at the meeting, shareholders were asked to seriously consider not attending and ~~payoffs~~vote by proxy. Over 80% of the ~~first half~~shareholders voted by proxy.

With the health of our employees and customers being our top concern, as of March 20^th, the ~~year. Two larger relationships which include construction may not~~Bank temporarily suspended branch lobby hours to the public for walk-in transactions. Appointments can be ~~completely drawn until the fourth quarter. The commercial real estate market remains very active~~made at branches to complete all needed paperwork and ~~competition is extending amortization~~transactions. Drive-thru services remain open as well as all ATM’s and ~~rate terms. Commercial and industrial markets remain healthy with competition thinly priced creating a high demand for the borrower’s non-credit business.~~ ITM’s to complete needed

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

~~Nationally,~~transactions. To assure branches remain open, employees have been divided into teams who rotate every three days to two weeks as a means to practice social distancing while limiting any possible exposure. Internal controls have not been significantly modified due to COVID-19.

As a Small Business Administration (SBA) approved provider, the ~~automotive demand has fallen below 17 million units for~~Bank was able to immediately participate in the ~~first time since 2014.~~SBA Paycheck Protection Program (PPP) established under the CARES Act, which was signed into law on March 27, 2020. The PPP will provide much needed assistance to businesses in our communities. The Bank ~~ran an automotive special during second quarter and~~ has been able to ~~maintain~~present applications for around 496 small businesses which will provide approximately $69 million in needed funding. We are proud of the ~~portfolio balances~~work our team has been able to do in a very short window. As of this writing, a second round of funding has become available and the Bank is working to submit applications. The Bank will continue to assist small businesses in applying for these funds. A final number is not yet available as it is a very fluid process. These forgivable loans to cover employee payroll, utilities and rent or interest on mortgage payments, will provide significant benefits to the communities we serve.

With the Federal Reserve rate drops of 150 basis points in March (100 basis points of which was directly related to the effects of the virus on the economy), a surge in home loan activity has occurred. Much of the activity is refinance related and the Bank has experienced the highest amount of applications in its history, both in number of and dollar amount. Given the nature of the programs, the results will mostly be recorded in the ~~retail market. The yield on the new loans being generated is also higher than what last year’s loans were, by about 50 basis points.~~second quarter. The Bank sells most of its home loans into the secondary market through Freddie Mac.

Existing loans on our books for which the Bank has ~~been busy contracting~~received inquiries into forbearance agreements, totaled over 100 as of April 15^th. Of these inquiries, 78 customers entered into agreements totaling just over $7.65 million. 24 loans are in-house making up $1.86 million in principal balance and 54 are secondary market loans which we service with ~~automotive dealers~~balances totaling $5.8 million. Some inquiries were only for possible future requests. We remain ready to assist our customers through this difficult time in the ~~newer markets to expand our opportunities. This should help to maintain the balances in the consumer market.~~ best manner possible.

Home loan origination activity substantially improved in the third quarter and the division was on fire. One of the biggest impediments to continued improvement is the lack of available housing in our markets, specifically at the moderate level. The Bank is ~~experiencing increased activity in purchases~~offering its “Skip-a-pay” program to consumers with installment loans, which allows the customer to skip the payment and ~~home improvement. Fixed mortgage rates fell in third quarter resulting in~~extend the maturity of the contract for the payment period. We are allowing two payments to be skipped upon request with an ~~increase in refinance volume.~~additional one possible at the end of the initial request upon review. Normally, the Bank would charge a fee for this program – the fee has been waived. The Bank would also normally require the interest for the period to be collected and that requirement is currently waived. Interest is a part of the extended maturity payments. We have assisted 101 customers currently with loan balances totaling almost $1.4 million. 73 of those customers have returned the extension documents representing over $1.0 million and 141 extended months.

~~Yield~~Waiving of late payment fees for our customers was instigated on March 16, 2020. As of April 15^th, the Bank has foregone fees of $63.3 thousand on loans to help our customers. As a community bank, it is ~~high due~~by definition what we should do.

The Bank’s most popular checking account, which includes requirements to earn a reward, has removed the ~~payoff~~requirement of ~~two loans~~debit card transactions to be completed during a cycle. In the Bank’s geographical area, the states have issued “stay at home” guidelines and many of our customers were concerned with being able to complete the requirement. The debit card transaction requirement has been waived for the cycles representing the activity for April and May. This impacted almost 11.5 thousand accounts and representing over $90.8 million in average account balances. The product includes the ~~second quarter,~~option of attaching a savings account for which the same ~~relationship, that was a reversal of a fair value adjustment of~~requirements have been waived and impacts an additional almost $27 thousand accounts and $107.7 million ~~that was established~~ in ~~the Limberlost acquisition. The payoff totaled approximately $3.8 million~~average account balances, calculated as ~~the customer was able to secure financing elsewhere. This enabled the widening~~ of the ~~net interest margin which would have tightened otherwise from~~cycle ended March 31^st. Overall, typically 80-85% of our customers meet all the ~~increased cost~~requirements. The waiving of ~~funds outpacing~~ the ~~asset yield improvement. Cost~~debit card transactions will likely allow those customers to receive the reward and possibly an additional 77.5% of ~~deposits continues to put pressure on~~ the ~~margin.~~previous non-qualifiers that represented the other 15-20% in total.

Profitability from core operations is on track to match the expectations for 2019 with the acquisition factored in. As additional acquisition costs continue to lessen, the negative impact on ROA, and ROE should also lessen. F&M will continue to operate on the foundation of a strong community bank platform in the communities we serve and are a part of.

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

The ~~focus remains~~Bank has committed to continue paying employees their full pay during this unprecedented time. Accumulated PTO and vacation time have been frozen and are not required to be used to receive full pay. The Bank continues to promote social distancing by encouraging employees who can work remotely to do so and in other cases, departments have been dispersed to keep the team separated. As of April 1^st, the Bank is following The Families First Coronavirus Response Act (FFCRA) which requires employers to provide their employees with paid sick leave and extended family and medical leave for specified reasons related to COVID-19. These provisions are in effect until December 31, 2020. Qualifying reasons for leave related to COVID-19 include the employee: (1) being subject to a quarantine order, (2) being advised by a healthcare provider to self-quarantine, (3) experiencing COVID-19 systems and is seeking a medical diagnosis, (4) caring for an individual subject to a quarantine order, (5) caring for his or her child whose school or place of care is closed or (6) experiencing any other substantially-similar condition specified by the U.S. Department of Health and Human Services. All time off related to the above reasons is being separately documented within our time and attendance system. The Bank will be able to reduce its employer tax for up to two weeks (80 hours, or a part-time employee’s two-week equivalent).

Given the timing of the outbreak in the United States of the COVID-19 pandemic, management believes that the main impact on ~~growth~~the Company’s first quarter performance was a factor in the economic qualitative adjustment for ~~2019 along~~the calculation of the allowance for loan loss. Subsequently the loan loss provision was increased which also included an increase due to loan growth. The COVID-19 pandemic represents an unprecedented challenge to the global economy in general and the financial services sector in particular. However, there is still significant uncertainty regarding the overall length of the pandemic and the aggregate impact that it will have on global and regional economies, including uncertainties regarding the potential positive effects of governmental actions taken in response to the pandemic during the latter portion of the first quarter of 2020 and into April. With so much uncertainty, it is impossible for the Bank to accurately predict the impact that the pandemic will have on the Company’s primary markets and the overall extent to which it will affect the Company’s financial condition and results of operations during the remainder of the current fiscal year. At a minimum, the actions taken by the Company to assist its customers experiencing challenges from the pandemic, such as through the Bank’s “Skip-a-pay” program, the waiver of late payment fees, and the entry into loan forbearance agreements, will likely have a material impact on the Company’s second quarter performance. Nonetheless, management believes that the Company’s current regulatory capital position is adequate to face the coming challenges

The Company has a limited exposure to many sectors of the economy that will likely be impacted for an extended period such as the travel, restaurant, hospitality, energy and retail industries. The Bank does not have any direct exposure to the energy industry and hotels and food related businesses are less than 10% of our overall loan portfolio as shown in the chart which follows. In addition, the Bank’s hotel customers are financially strong business owners, operating brand name hotels in compelling locations. The Bank has increased its provision for loan losses in the current quarter by over $1 million, as have many other financial institutions. The Bank is fully prepared to make additional provisions as warranted by the COVID-19 situation.

The Company’s management team has evaluated its exposure to increased loan losses related to the COVID-19 pandemic and has identified the following industry segments most impacted by the pandemic as of March 31, 2020:

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

Industry Segments (Dollars in Thousands)	Outstanding Loan Balance		Percent of Total Loan Portfolio			Three Months Full Payment Deferment		Percent of Total Loans Adjusted with Full Deferment			Three Months Interest Only Modifications		Percent of Total Loans Adjusted with Interest Only
Hospitality (Hotels)	$	69,313		5.55	%	$	-		0.00	%	$	22,468		23.68	%
Restaurants		16,286		1.30	%		2,065		15.43	%		2,892		3.05	%
Retail Commercial Real Estate *		108,050		8.65	%		5,468		40.85	%		28,096		29.61	%
Entertainment		22,680		1.82	%		1,303		9.73	%		-		0.00	%
Car Dealers		25,823		2.07	%		-		0.00	%		-		0.00	%
Gas Stations		19,491		1.56	%		-		0.00	%		10,361		10.92	%
Other							4,551		34.00	%		31,074		32.75	%
Total	$	261,643		20.95	%	$	13,387		100.00	%	$	94,891		100.00	%

# of Customers						21					64

*Includes Owner Occupied
Report on Adjusted Loans as of April 6, 2020

Additional information, on the chart depicting the commercial loan payment modification summary above, is of the largest amounts in the Other line item. Under the full payment deferment, Other includes $2.2 million of multi-family real estate and under the interest-only deferment, it includes car washes of $5 million and $16.6 million of industrial commercial real estate.

Our credit administration is closely monitoring and analyzing these higher risk segments within the loan portfolio, tracking loan payment deferrals, customer liquidity and providing timely reports to senior management and the board of directors. Based on the Company’s capital levels, prudent underwriting policies, loan concentration diversification and our geographic footprint, we expect to be able to manage the economic risks and uncertainties associated with the ~~widening of our footprint from additional offices. Welcoming~~pandemic and ~~developing our newest offices is also important and a priority. The Company is positioned for positive results in 2019 and remains well~~remain adequately capitalized.

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

Our executive offices are located at 307 North Defiance Street, Archbold, Ohio 43502, and our telephone number is (419) 446-2501. The Bank operates thirty full service banking offices throughout Northwest Ohio and Northeast Indiana.

On January 1, 2019, six offices of Bank of Geneva, located in the Indiana counties of Adams, Allen and Jay, were merged with and into The Farmers & Merchants State Bank. The Bank has continued its expansion strategy and the new offices are expected to provide new growth opportunities.

The Farmers & Merchants State Bank engages in general commercial banking and savings business including commercial, agricultural and residential mortgage, consumer and credit card lending activities. The largest segment of the lending business relates to commercial, both real estate and non-real estate. The type of commercial business ranges from small business to multi-million dollar companies. The loans are a reflection of business located within the Banks’ market area. Because the Bank's offices are located in Northwest Ohio and Northeast Indiana, a substantial amount of the loan portfolio is comprised of loans made to customers in the farming industry for such items as farm land, farm equipment, livestock and operating loans for seed, fertilizer, and feed. Other types of lending activities include loans for home improvements, and loans for the purchase of autos, trucks, recreational vehicles, motorcycles, and other consumer goods.

The Bank also provides checking account services, as well as savings and time deposit services such as certificates of deposits. In addition, Automated Teller Machines (ATMs) or Interactive Teller Machines (ITMs) are provided at most branch locations along with other independent locations in the market area. ITMs operate as an ATM with the addition of remote

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

teller access to assist the user. The Bank has custodial services for Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs). The Bank provides on-line banking access for consumer and business customers. For consumers, this includes bill-pay, on-line statement opportunities and mobile banking. For business customers, it provides the option of electronic transaction origination such as wire and Automated Clearing House (ACH) file transmittal. In addition, the Bank offers remote deposit capture or electronic deposit processing and merchant credit card services. Mobile banking was added in 2012 and has been widely accepted and used by consumers. Over the past couple of years, the Bank has updated its consumer offerings with “Secure” and “Pure” checking in 2014 and with KASASA Cash Back in 2015. During the second quarter 2017, new business checking products were announced and existing business accounts were converted to one of three new products, Business Essential, Edge or Elite. The new products provided customers with new options to bundle services and for the Bank to utilize the full relationship to determine pricing. This was the next step of implementation for the Bank’s “earn to free” strategic initiative. During second quarter 2019, “Smart 25” checking and Business Money Market savings products were launched. Upgrades to our digital products and services continue to occur in both retail and business lines.

The Bank has established underwriting policies and procedures which facilitate operating in a safe and sound manner in accordance with supervisory and regulatory guidance. Within this sphere of safety and soundness, the Bank's practice has been to not promote innovative, unproven credit products which may not be in the best interest of the Bank or its customers. The Bank does offer a hybrid mortgage loan. Hybrid loans are loans that start out as a fixed rate mortgage but after a set number of years automatically adjust to an adjustable rate mortgage. The Bank offers a three year fixed rate mortgage after which the interest rate will adjust annually. The majority of the Bank's adjustable rate mortgages are of this type. In order to offer longer term fixed rate mortgages, the Bank does participate in the Freddie Mac, Farmer Mac and Small Business Lending programs. The Bank also normally retains the servicing rights on these partially or 100% sold loans. In order for the customer to participate in these programs they must meet the requirements established by those agencies. In addition, the Bank does sell some of its longer term fixed rate agricultural mortgages into the secondary market with the aid of a broker.

The Bank does not have a program to fund sub-prime loans. Sub-prime loans are characterized as a lending program or strategy that targets borrowers who pose a significantly higher risk of default than traditional retail banking customers.

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

All loan requests are reviewed as to credit worthiness and are subject to the Bank's underwriting guidelines as to secured versus unsecured credit. Secured loans are in turn subject to loan to value (LTV) requirements based on collateral types as set forth in the Bank's Loan Policy. In addition, credit scores of those seeking consumer credit are reviewed and if they do not meet the Bank's Loan Policy guidelines an additional officer approval is required.

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

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

F&M Investment Services, the brokerage department of the Bank, opened for business in April 1999. Securities are offered through Raymond James Financial Services, Inc.

In December of 2014, the Company became a financial holding company within the meaning of the Bank Holding Company Act of 1956 as amended (the “Act”), in order to provide the flexibility to take advantage of the expanded powers available to a financial holding company under the Act. Our subsidiary bank is in turn regulated and examined by the Ohio Division of Financial Institutions and the Federal Deposit Insurance Corporation. The activities of our bank subsidiary are also subject to other federal and state laws and regulations. The Company also formed a captive insurance company (the “captive”) in December 2014 which is located in Nevada and regulated by the State of Nevada Division of Insurance.

The Bank’s primary market includes communities located in the Ohio counties of Defiance, Fulton, Hancock, Henry, Lucas, Williams, Wood and in the Indiana counties of Adams, Allen, DeKalb, Jay and Steuben. In our banking activities, we compete directly with other commercial banks, credit unions, farm credit services, and savings and loan institutions in each of our operating localities. In a number of our locations, we compete against entities which are much larger than us. The primary factors in competing for loans and deposits are the rates charged as well as location and quality of the services provided.

At ~~September 30, 2019,~~March 31, 2020, we had ~~355~~360 full time equivalent employees. The employees are not represented by a collective bargaining unit. We provide our employees with a comprehensive benefit program, some of which ~~are~~is contributory. We consider our employee relations to be good.

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

The Bank remains attentive to the current regulatory environment in light of the regulatory agencies’ risk-based approach to examinations. Regulatory changes and the complexity of new and amended rules have resulted in lack of clarity and uncertainties which could pose an increased risk of noncompliance. Various significant mortgage rules require monitoring by means of testing, validation of results, additional training, and further research or consultation to assist with ongoing compliance.

The global spread of the Coronavirus (COVID-19) and resulting declaration of a world-wide pandemic have impacted the financial services industry and banking operations in the United States (US) and world-wide. The financial services sector is identified as a Critical Infrastructure Sector by the Department of Homeland Security during the COVID-19 response efforts. How basic business operations can be conducted has undergone a rapid and dramatic change. At the same time continuity of business operations involves promoting safety and security of customers and employees, providing a quality customer experience, and maintaining effective delivery systems and channels of communication. Regulatory guidance has been issued to manage and mitigate the unprecedented impact of the COVID-19 pandemic on business operations. Regulatory agencies promote prudent and practical efforts to assist customers and communities during this national emergency. Such assistance to alleviate the financial impact on affected customers can involve modification of loan terms for existing borrowers, waiver of certain fees and charges, providing small dollar loans, and offering forbearance on mortgage loans obligations due to financial hardship. Legislation enacted in March 2020 has provided the Families First Coronavirus Response Act (FFCRA) and CARES Act. The FFCRA which is effective through December 31, 2020, provides for a paid leave for employees (of employers with fewer than 500 employees) who must quarantine due to the coronavirus, are caring for a sick family member, or caring for a child out of school. It significantly expands existing protections currently available to employees who take leave to care for a sick family member. The CARES Act, among other matters, resulted in expansion of SBA Lending Programs; provided for a financial election to suspend GAAP principles and regulatory determinations for COVID-19 related loan modifications that would otherwise be deemed Trouble Debt Restructuring; gave the FDIC authority to establish a temporary Debt Guarantee Program for bank liabilities; delayed Current Expected Credit Losses (CECL) compliance; reduced the Community Bank Leverage Ratio to 8% to eliminate risk-based capital compliance for banks under $10 billion; required credit furnishers that agree to deferred loan payments, forbearance on a delinquent account, or any other relief during the national emergency to report accounts as current to Credit Reporting Agencies; and defined forbearance requirements and terms for single family and multi-family loans backed by federal government agencies or government sponsored entities due to COVID-19 financial hardship. Of immediate and significant importance has been the rollout of the SBA PPP. The PPP authorized lending of up to $350 billion in 100% guaranteed 7(a) loans to cover payroll costs, interest on

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

mortgage payments, rent obligations, and utilities. The PPP provides a guaranteed loan for which a portion of the loan up to or equal to 8 weeks of covered payroll and specific operating expenses can be forgiven. The maximum loan size is capped at the lessor of 250% of the average monthly payroll costs or $10 million. Further legislation and regulatory guidance may result depending on the duration of the COVID-19 spread and subsequent economic impact to customers, communities, businesses, and industry sectors.

The Economic Growth Regulatory Relief and Consumer Protection Act (EGRRCPA) ~~was~~, signed into law in May ~~2018. EGRRCPA~~2018, was intended to pave the way for banks to lend to creditworthy borrowers and better serve their communities. ~~Rollback of~~It provided regulatory relief for some burdensome requirements resulting from the Dodd-Frank Wall Street Reform and Consumer Protection ~~Act was welcomed by community banks. Regulatory relief has not been immediate, as guidance and new rulemaking remains to be completed to implement various provisions. Sections~~Act. Provisions in the EGRRCPA ~~address~~addressed access to mortgage credit; consumer access to credit; protections for veterans, consumers, and homeowners; rules for certain bank holding companies, capital access; and protections for student borrowers. ~~Implementation~~Regulatory guidance and rulemaking continue on implementation of ~~the rules and guidance for the~~ various ~~provisions of the EGRRCPA will commence as rulemaking occurs.~~ provisions.

The U.S. Department of the Treasury’s final rules on Customer Due Diligence (CDD) and Beneficial Ownership added a fifth core element to the original core elements necessary for an effective Bank Secrecy Act and Anti-Money Laundering compliance program. ~~These rules were effective~~Effective in ~~May 2018. The~~2018, the CDD Final Rule ~~is a significant step toward~~promoted greater financial transparency. ~~Prior to these new rules,~~It has impacted and limited the ability for individuals to hide financial activity through anonymous ownership of business ~~entities was a weakness in the fight against financial crime. By gaining~~entities. With a more complete profile of entity customers, financial institutions can help further reduce the flow of illicit funds through the US banking system.

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

With regard to all regulatory matters, the Bank remains committed in making good faith efforts to comply with technical requirements of the laws, rules, regulations, and guidance from both federal and state agencies which govern its activities.

The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, and the Company follows general practices within the financial services industry in which it operates. At times the application of these principles requires management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements and accompanying notes.

These assumptions, estimates and judgments are based on information available as of the date of the financial statements. As this information changes, the financial statements could reflect different assumptions, estimates and judgments. Certain policies inherently have a greater reliance on assumptions, estimates and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Examples of critical assumptions, estimates and judgments are when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not required to be recorded at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability must be recorded contingent upon a future event. These policies, along with the disclosures presented in the notes to the condensed consolidated financial statements and in the management discussion and analysis of the financial condition and results of operations, provide information on how significant assets and liabilities are valued and how those values are determined for the financial statements. Based on the valuation techniques used and the sensitivity of financial statement amounts to assumptions, estimates, and judgments underlying those amounts, management has identified the determination of the ALLL, the valuation of its Mortgage Servicing Rights and the valuation of real estate acquired through or in lieu ~~of;~~of loan foreclosures (“OREO Property”) as the accounting areas that require the most subjective or complex judgments, and as such could be the most subject to revision as new information becomes available.

OREO Property held for sale ~~and~~ is initially recorded at fair value at the date of foreclosure. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of cost or fair value minus estimated costs to sell.

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

Costs of holding foreclosed real estate are charged to expense in the current period, except for significant property improvements, which are capitalized. Valuations are periodically performed by management and a write-down is recorded by a charge to non-interest expense if the carrying value exceeds the fair value minus estimated costs to sell.

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

The net income from operations of foreclosed real estate held for sale is reported either in noninterest income or noninterest expense depending upon whether the property is in a gain or loss position overall. At ~~September 30, 2019~~March 31, 2020 OREO property holdings were ~~$351~~$185 thousand. OREO totaled ~~$600~~$214 thousand and ~~$717~~$510 thousand as of December 31, ~~2018~~2019 and ~~September 30, 2018~~March 31, 2019 respectively.

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

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

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

The Bank is also required to estimate the value of its mortgage servicing rights. The Bank’s mortgage servicing rights relating to fixed rate single-family mortgage loans that isit has sold without recourse but services for others for a fee represent an asset on the Bank’s balance sheet. The valuation is completed by an independent third party.

The expected and actual rates of mortgage loan prepayments are the most significant factors driving the potential for the impairment of the value of mortgage servicing assets. Increases in mortgage loan prepayments reduce estimated future net servicing cash flows because the life of the underlying loan is reduced.

The Bank’s mortgage servicing rights relating to loans serviced for others represent an asset. This asset is initially capitalized and included in other assets on the Company's consolidated balance sheet. The mortgage servicing rights are then amortized ~~against~~as noninterest ~~income~~expense in proportion to, and over the period of the estimated future net servicing income of the underlying mortgage servicing ~~rights using the level yield method. The amortization thereof is recorded in non-interest expense.~~rights. There are a number of factors, however, that can affect the ultimate value of the mortgage servicing rights to the Bank. The expected and actual rates of mortgage loan prepayments are the most significant factors driving the potential for the impairment of the value of mortgage servicing assets. Increases in mortgage loan prepayments reduce estimated future net servicing cash flows because the life of the underlying loan is reduced, meaning that the present value of the mortgage servicing rights is less than the carrying value of those rights on the Bank's balance sheet. Therefore, in an attempt to reflect an accurate expected value to the Bank of the mortgage servicing rights, the Bank receives a valuation of its mortgage servicing rights from an independent third party. The independent third party's valuation of the mortgage servicing rights is based on relevant characteristics of the Bank's loan servicing portfolio, such as loan terms, interest rates and recent national prepayment experience, as well as current national market interest rate levels, market forecasts and other economic conditions. For purposes of determining impairment, the mortgage servicing assets are stratified into like groups based on loan type, term, new versus seasoned and interest rate. Management, with the advice from its third party valuation firm, reviewed the assumptions related to prepayment speeds, discount rates, and capitalized mortgage servicing income on a quarterly basis. Changes are reflected in the following quarter's analysis related to the mortgage servicing asset. In addition, based upon the independent third party's valuation of the Bank's mortgage servicing rights, management then establishes a valuation allowance by each strata, if necessary, to quantify the likely impairment of the value of the mortgage servicing rights to the Bank. The estimates of prepayment speeds and discount rates are inherently uncertain, and different estimates could have a material impact on the Bank's net income and results of operations. The valuation allowance is evaluated and adjusted quarterly by management to reflect changes in the fair value of the underlying mortgage servicing rights based on market conditions. The accuracy of these estimates and assumptions by management and its third party valuation specialist can be directly tied back to the fact that management has only been required to record minor valuation allowances through its income statement over time based upon the valuation of each stratum of servicing rights.

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

For more information regarding the estimates and calculations used to establish the ALLL please see Note 4 to the consolidated financial statements provided herewith.

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

The Company plans to continue in its growth mode in ~~2019~~2020 led by loan growth from within our newer markets. The Bank is focused on funding the loan growth with the least expensive source of deposits, sale of securities or borrowings. Growing deposits will also be a focus especially in our newer markets. The Bank offers the Insured Cash Sweep (“ICS”) product accessed through the Promontory network of financial institutions which helps to reduce the amount of pledged securities. This has provided more availability for runoff of securities by the Bank if warranted to fund loan growth. Competition for deposits is intense with most competitors offering “special” rates for specific terms.

Liquidity in terms of cash and cash equivalents ended ~~$76.2~~$39.5 million higher as of ~~September 30, 2019~~March 31, 2020 than it was at yearend December 31, ~~2018.~~2019. An increase in deposits helped to fund the ~~$312.3~~$27.3 million increase in net loans since yearend ~~2018. All loan portfolios increased as a result of the Limberlost acquisition with the largest loan growth having occurred in agricultural~~2019. Commercial real estate, ~~and commercial real estate portfolios. Consumer~~consumer real estate and commercial and industrial portfolios ~~also experienced large increases.~~increased compared to December 31, 2019. The remaining three portfolios decreased compared to yearend with agricultural real estate the largest decrease.

In comparing to the same prior year period, the ~~September 30, 2019~~March 31, 2020 (net of deferred fees and cost) loan balances of $1.2 billion accounted for ~~$320.0~~$149.2 million or ~~38.2%~~13.6% increase when compared to ~~2018’s $838.7 million.~~2019’s $1.1 billion. The year over year improvement ~~in all loan categories~~ was made up of a combined increase of ~~199.2%~~33.1% in ~~agricultural~~commercial and industrial related loans (comprised of ~~192.8%~~29.2% in ~~agricultural~~commercial real estate loans and ~~6.4%~~3.9% in non-real estate ~~agricultural~~commercial loans). Consumer real estate loans increased by ~~91.8%~~8.5%, consumer loans by ~~19.7%,~~3.0% and other loans by ~~36.0% and commercial and industrial~~12.8%. Agricultural related loans ~~by 29.2%.~~(comprised of an increase of 1.2% in agricultural real estate and a decrease of 2.9% in non-real estate agricultural loans) decreased 1.7% year over year. The Company credits the growth ~~not only~~ to ~~the Limberlost acquisition, but also~~ the strong team of lenders focused on providing customers valuable localized services and thereby increasing our market share.

The chart below shows the breakdown of the loan portfolio category as of ~~September 30,~~March 31, for the last three years, net of deferred fees and costs.

	(In Thousands)						(In Thousands)
	September 30, 2019		September 30, 2018		September 30, 2017		March 31, 2020		March 31, 2019		March 31, 2018
	Amount		Amount		Amount		Amount		Amount		Amount
Consumer Real Estate	$	158,458	$	82,629	$	83,875	$	173,976	$	160,276	$	84,052
Agricultural Real Estate		200,625		68,524		63,571		194,130		191,736		67,569
Agricultural		110,405		103,760		87,239		109,707		113,021		99,954
Commercial Real Estate		501,095		416,632		393,913		568,991		440,281		414,666
Commercial and Industrial		130,228		119,607		124,165		143,311		137,989		123,515
Consumer		49,718		41,541		35,887		49,190		47,770		38,631
Other		8,167		6,005		6,555		8,336		7,392		6,350

Total Loans, net	$	1,158,696	$	838,698	$	795,205	$	1,247,641	$	1,098,465	$	834,737

The following is a contractual maturity schedule by major category of loans excluding fair value adjustments as of ~~September 30, 2019.~~March 31, 2020.

	(In Thousands)						(In Thousands)
			After One						After One
	Within		Year Within		After		Within		Year Within		After
	One Year		Five Years		Five Years		One Year		Five Years		Five Years
Consumer Real Estate	$	5,516	$	16,780	$	136,971	$	4,832	$	26,646	$	143,333
Agricultural Real Estate		177		5,660		196,000		505		4,696		190,162
Agricultural		64,939		30,949		14,372		63,163		33,350		13,065
Commercial Real Estate		32,816		220,684		248,828		46,573		251,259		272,564
Commercial and Industrial		61,580		57,158		11,463		67,925		62,164		13,164
Consumer		6,151		32,344		10,973		5,126		34,109		9,711
Other		825		895		6,440		640		800		6,889

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

While the security portfolio has been utilized to fund loan growth for the last three years, additional sources have been cultivated during ~~2017,~~ 2018, 2019, and ~~2019.~~2020. The security portfolio ~~increased $22.0~~decreased $18.2 million in the first ~~nine~~three months ~~2019~~of 2020 from yearend ~~2018.~~2019. The amount of pledged investment securities ~~increased~~decreased by ~~$7.4 million~~$72 thousand as compared to yearend and increased ~~$8.0~~$5.6 million as compared to ~~September 30, 2018. The difference in the growth and consequently pledged securities, improves liquidity~~March 31, 2019. Liquidity is improved with the additional option of selling unpledged investment securities if needed to fund loan growth or other initiatives. As of ~~September 30, 2019,~~March 31, 2020, pledged investment securities totaled ~~$89.2~~$88.7 million. The current portfolio is in a net unrealized gain position of ~~$1.9~~$6.1 million.

For the Bank, an additional ~~$17.3~~$1.1 million is also available from the Federal Home Loan Bank based on current amounts of pledged collateral, ~~pledging~~ with up to $97 million available in additional borrowings provided adequate additional collateral is pledged.

With the exception of FHLB stocks, carried at cost, which is shown as other securities, all of the Company’s security portfolio is categorized as “available-for-sale” and as such is recorded at fair value.

Management feels confident that liquidity needs for future growth can be met through additional maturities and/or sales from the security portfolio, increased deposits and additional borrowings. For short term needs, the Bank has $123.4 million of unsecured borrowing capacity through its correspondent banks.

Overall total assets increased ~~41.1%~~3.0% since yearend ~~2018~~2019 and grew ~~42.1%~~12.9% since ~~September 30, 2018.~~March 31, 2019. The largest growth in both periods was in the loan portfolios followed by cash and ~~equivalents.~~equivalents in 2020 and securities in 2019. COVID-19 has not had an impact on Goodwill ~~also increased with the acquisition of the Bank of Geneva.~~at this point but will continue to monitor going forward.

Deposits accounted for the largest growth within liabilities, up ~~37.6%~~4.7% or ~~$349.2~~$60.4 million since yearend and 13.6% or $161.3 million over ~~both yearend and September 30, 2018~~March 31, 2019 balances. Core deposits continue to drive the increase which provide the opportunity to generate additional noninterest income. This growth aided the increased liquidity position and funded the loan growth for the periods along with usage of purchased Federal Funds for daily borrowings.

Shareholders’ equity increased by ~~$84.1~~$6.2 million as of the ~~third~~first quarter of ~~2019~~2020 compared to yearend ~~2018,~~2019, as ~~the acquisition of Limberlost, which included stock in the transaction, was completed on January 1, 2019 along with~~ earnings ~~exceeding~~exceeded dividend declarations in the first ~~three quarters.~~quarter. Accumulated other comprehensive ~~loss decreased~~income increased in ~~loss~~gain position by ~~$4.5~~$3.8 million from December ~~2018~~2019 to an unrealized gain of ~~$1.5~~$4.8 million at ~~September 30, 2019.~~March 31, 2020. Dividends declared were the same as ~~the first two quarters~~fourth quarter 2019 at ~~$0.15~~$0.16 per share. Compared to ~~September 30, 2018,~~March 31, 2019, shareholders’ equity increased ~~63.2%~~9.0% or ~~$88.1~~$19.5 million. Profits are higher year-to-date ~~September 2019~~March 2020 than year-to-date ~~September 2018~~March 2019 by ~~$1.9 million with the Limberlost acquisition.~~$881 thousand.

Basel III regulatory capital requirements became effective in 2016. The Bank and Company include a capital conservation buffer as a part of the transition provision. For calendar year 2016, the applicable required capital conservation buffer percentage of 0.625% was the base above which institutions avoid limitations on distributions and certain discretionary bonus payments. For the calendar year 2017, the applicable required capital conservation buffer percentage was 1.25%. For 2018, the capital conservation buffer percentage increased to 1.875%. The total buffer requirement increased to 2.5% for calendar year 2019. As of ~~September 30, 2019,~~March 31, 2020, the Company and the Bank are both positioned well above the 2019 requirement.

The Holding Company has sufficient liquidity to maintain its dividend policy without relying on the upstreaming of dividends from the Bank.

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

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

Comparison of Results of Interest Earnings and Expenses for three month periods ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~

When comparing ~~third~~first quarter ~~2019~~2020 to ~~third~~first quarter ~~2018,~~2019, average loan balances ~~with the acquisition of Limberlost~~ grew ~~$294.9~~$128.8 million. This represented a ~~35.5%~~11.6% increase in a one-year time period. Interest income on loan balances also experienced an increase of ~~$4.5~~$1.2 million as compared to the quarter ended ~~September 30, 2018.~~March 31, 2019.

The available-for-sale securities portfolio increased in average balances by ~~$6.3~~$32.6 million when comparing to the previous year while the income increased ~~$287~~$441 thousand over ~~third~~first quarter. Fed Funds sold and ~~interest bearing~~interest-bearing deposits increased in average balances by ~~$93.3~~$15.0 million as compared to the same quarter in ~~2018 which resulted in increased~~2019 with decreased income of ~~$495~~$42 thousand for the current ~~quarter.~~quarter due to much lower interest rates.

Overall total interest income for the quarter comparisons was higher for ~~third~~first quarter ~~2019~~2020 by ~~44.7%~~10.1% or ~~$5.3~~$1.6 million as to ~~third~~first quarter ~~2018.~~2019.

~~In terms of annualized~~Annualized yield, for the quarter ended ~~September 30, 2019, it~~March 31, 2020, was ~~4.74% which compares~~4.66% as compared to ~~a year ago third~~4.80% for the quarter ended ~~September 30, 2018 of 4.52%.~~March 31, 2019. The following chart demonstrates the value of increased loan balances in the balance sheet mix. The yields on tax-exempt securities and the portion of the tax-exempt IDB loans included in loans have been tax adjusted based on a 21% tax rate in the charts to follow.

	(In Thousands)										(In Thousands)
	Quarter to Date Ended September 30, 2019				Annualized Yield/Rate						Quarter to Date Ended March 31, 2020				Annualized Yield/Rate
Interest Earning Assets:	Average Balance		Interest/Dividends		September 30, 2019			September 30, 2018			Average Balance		Interest/Dividends		March 31, 2020			March 31, 2019
Loans	$	1,126,173	$	15,202		5.40	%		5.16	%	$	1,236,848	$	15,883		5.14	%		5.30	%
Taxable investment securities		167,654		1,082		2.58	%		1.95	%		190,158		1,321		2.78	%		2.22	%
Tax-exempt investment securities		32,530		149		2.32	%		2.45	%		28,832		132		2.32	%		2.49	%
Fed funds sold & other		112,961		579		2.05	%		1.71	%		46,393		128		1.10	%		2.17	%
Total Interest Earning Assets	$	1,439,318	$	17,012		4.74	%		4.52	%	$	1,502,231	$	17,464		4.66	%		4.80	%

Change in Interest Income Quarter to Date ~~September 30, 2019~~March 31, 2020 Compared to ~~September 30, 2018~~March 31, 2019

	(In Thousands)								(In Thousands)
Interest Earning Assets:	Total Change			Change Due to Volume			Change Due to Rate		Total Change			Change Due to Volume			Change Due to Rate
Loans	$	4,477		$	3,982		$	495	$	1,203		$	1,655		$	(452	)
Taxable investment securities		372			143			229		479			266			213
Tax-exempt investment securities		(85	)		(92	)		7		(38	)		(33	)		(5	)
Fed funds sold & other		495			478			17		(42	)		41			(83	)
Total Interest Earning Assets	$	5,259		$	4,511		$	748	$	1,602		$	1,929		$	(327	)

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

Offsetting some of the increase in interest income for the quarter was the increase in ~~cost of funds~~interest expense in ~~2019. Third~~2020. First quarter ~~2019~~2020 was higher by ~~$2.3 million~~$326 thousand than ~~third~~first quarter ~~2018.~~2019. Since ~~2018 with the Limberlost acquisition,~~2019, average interest-bearing deposit balances have increased ~~$278.1~~$136.1 million or 15.2% and resulted in approximately ~~$2.0 million~~$288 thousand more in interest expense for the most recent quarter. ~~Additionally, interest~~Interest expense on FHLB borrowings was ~~up $237~~down $21 thousand in the ~~third~~first quarter ~~2019~~2020 over the same time frame in ~~2018~~2019 due to borrowings taken on from the ~~acquisition.~~Limberlost acquisition being repaid. During the quarter, the prime rate has dropped 50 basis ~~points.~~points and dropped 75 basis points in the last half of 2019. Management has adjusted deposit rates accordingly.

	(In Thousands)										(In Thousands)
	Quarter to Date Ended September 30, 2019				Annualized Yield/Rate						Quarter to Date Ended March 31, 2020				Annualized Yield/Rate
Interest Bearing Liabilities:	Average Balance		Interest		September 30, 2019			September 30, 2018			Average Balance		Interest		March 31, 2020			March 31, 2019
Savings deposits	$	734,075	$	2,044		1.11	%		0.67	%	$	773,130	$	1,485		0.77	%		0.91	%
Other time deposits		276,793		1,610		2.33	%		1.53	%		277,579		1,416		2.04	%		1.79	%
Other borrowed money		24,582		257		4.18	%		1.60	%		24,787		266		4.29	%		3.91	%
Fed funds purchased & securities
sold under agreement to repurchase		28,947		201		2.78	%		2.08	%	$	38,954	$	244		2.51	%		2.19	%
Total Interest Bearing Liabilities	$	1,064,397	$	4,112		1.55	%		0.92	%	$	1,114,450	$	3,411		1.22	%		1.26	%

Change in Interest Expense Quarter to Date ~~September 30, 2019~~March 31, 2020 Compared to ~~September 30, 2018~~March 31, 2019

	(In Thousands)						(In Thousands)
Interest Bearing Liabilities:	Total Change		Change Due to Volume		Change Due to Rate		Total Change			Change Due to Volume			Change Due to Rate
Savings deposits	$	1,123	$	507	$	616	$	(42	)	$	196		$	(238	)
Other time deposits		920		558		362		330			175			155
Other borrowed money		237		205		32		(21	)		(49	)		28
Fed funds purchased & securities
sold under agreement to repurchase		67		22		45		59			32			27
Total Interest Bearing Liabilities	$	2,347	$	1,292	$	1,055	$	326		$	354		$	(28	)

Overall, net interest spread for the ~~third~~first quarter ~~2019~~2020 is 4110 basis points lower than last year. As the following chart ~~illustrates, higher~~indicates, the decline in yields on interest ~~and dividend income did not offset~~earning assets was greater than the ~~higher interest expense~~decline in the ~~most recent quarter~~cost of funds when comparing to the same period a year ago.

	September 30, 2019			September 30, 2018			September 30, 2017			March 31, 2020			March 31, 2019			March 31, 2018
Interest/Dividend income/yield		4.74	%		4.52	%		4.24	%		4.66	%		4.80	%		4.28	%
Interest Expense/cost		1.55	%		0.92	%		0.72	%		1.22	%		1.26	%		0.75	%
Net Interest Spread		3.19	%		3.60	%		3.52	%		3.44	%		3.54	%		3.53	%
Net Interest Margin		3.60	%		3.85	%		3.71	%		3.75	%		3.87	%		3.72	%

Net interest income was up ~~$2.9~~$1.3 million for the ~~third~~first quarter ~~2019~~2020 over the same time frame in ~~2018~~2019 due to the increase in loan interest income and partially offset by higher interest expense, as previously mentioned. As the new loans added in ~~2018~~2019 and ~~2019~~2020 generate more income, management expects the benefits of the Company’s strategy of repositioning the balance sheet to continue to widen this margin as measured in dollars. In terms of net interest margin rate, the Bank recognizes competition for deposits ~~have~~has and will continue to put pressure on the margin which may lead to a tightening.

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

Comparison of Noninterest Results of Operations - ~~Third~~First Quarter ~~2019~~2020 to ~~Third~~First Quarter ~~2018~~2019

The ALLL has a direct impact on the provision expense. The increase in the ALLL is funded through recoveries and provision expense. The following tables both deal with the allowance for credit losses. The first table breaks down the

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

activity within ALLL for each loan portfolio class and shows the contribution provided by both the recoveries and the provision along with the reduction of the allowance caused by charge-offs. The second table discloses how much of the ALLL is attributed to each class of the loan portfolio, as well as the percent that each particular class of the loan portfolio represents to the entire loan portfolio in the aggregate. The consumer and consumer real estate loan portfolios accounted for the largest component of charge-offs and recoveries for ~~third~~first quarter of ~~2019 as compared to the consumer~~2020 and ~~consumer real estate portfolios which comprised the majority of the charge-offs and recoveries for third quarter 2018.~~2019. The commercial real estate portfolio is currently creating a large impact on the ALLL due to the loan growth.

Total provision for loan losses was ~~$200 thousand~~$1.4 million higher for the ~~third~~first quarter ~~2019~~2020 as compared to the same quarter ~~2018.~~2019. Provision for loan loss was increased due to the uncertainty related to COVID-19 and its effects on the ability of individuals, businesses and other entities to meet their financial obligations. Therefore, it is prudent to incorporate the impact of COVID-19 in the evaluation of the adequacy of Allowance for Loan and Lease Losses (ALLL). Due to the governors’ closure of non-essential businesses in many states, including restaurants (except for carryout and delivery), hair salons, and retail establishments, the risk in those industries has increased. The restaurant and hospitality sectors have been hit especially hard. Risk in the Consumer and 1-4 Family Portfolio has increased but the full impact remains unknown. Increases to the bank’s ALLL for the first quarter of 2020, centered around current customers and businesses that are particularly vulnerable due to the stay at home order and qualitative factors, were adjusted accordingly. Management continues to monitor asset quality, making adjustments to the provision as necessary. Loan charge-offs were ~~$96~~$43 thousand ~~higher~~lower in ~~third~~first quarter ~~2019~~2020 than the same quarter ~~2018.~~2019. Recoveries were $6$1 thousand higher in ~~third~~first quarter ~~2019~~2020 as compared to ~~third~~first quarter ~~2018.~~2019. Combined net charge-offs were ~~$90~~$44 thousand ~~higher~~lower in ~~third~~first quarter ~~2019~~2020 than the same time period ~~2018.~~2019. Past due loans, which include no deferrals related to COVID-19, increased ~~$1.7~~$2.3 million ~~from September 30, 2018~~at March 31, 2020 as compared to ~~September 30,~~March 31, 2019. The majority of the change is attributed to the increase of past due balances in the agricultural, agricultural real estate and commercial ~~portfolios.~~portfolios with a decrease in the consumer real estate portfolio.

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

The following table breaks down the activity within the ALLL for each loan portfolio class and shows the contribution provided by both recoveries and the provision, along with the reduction of the allowance caused by charge-offs. The time period covered is for three months ended ~~September 30,~~March 31, 2020, 2019, ~~2018,~~ and ~~2017.~~2018.

	(In Thousands)									(In Thousands)
	Three Months Ended September 30, 2019			Three Months Ended September 30, 2018			Three Months Ended September 30, 2017			Three Months Ended March 31, 2020			Three Months Ended March 31, 2019			Three Months Ended March 31, 2018
Loans, net	$	1,158,696		$	838,698		$	795,205		$	1,247,641		$	1,098,465		$	834,737
Daily average of outstanding loans	$	1,126,173		$	831,246		$	790,397		$	1,236,848		$	1,108,031		$	825,109

Allowance for Loan Losses - July 1,	$	6,683		$	6,789		$	6,858
Allowance for Loan Losses - January 1,										$	7,228		$	6,775		$	6,868
Loans Charged off:
Consumer Real Estate		39			29			-			35			42			34
Agriculture Real Estate		-			-			-			-			-			-
Agricultural		22			-			-			-			-			-
Commercial Real Estate		-			-			19			-			-			14
Commercial and Industrial		55			-			-			-			-			-
Consumer		103			94			92			129			165			97
		219			123			111			164			207			145
Loan Recoveries:
Consumer Real Estate		-			18			-			3			-			-
Agriculture Real Estate		-			-			-			-			-			-
Agricultural		1			-			-			-			1			3
Commercial Real Estate		2			3			4			3			2			2
Commercial and Industrial		13			3			2			3			3			2
Consumer		32			18			18			30			32			30
		48			42			24			39			38			37
Net Charge Offs		171			81			87			125			169			108
Provision for loan loss		247			47			99			1,430			30			40
Acquisition provision for loan loss		-			-			-			-			-			-
Allowance for Loan & Lease Losses - September 30,		6,759			6,755			6,870
Allowance for Unfunded Loan Commitments & Letters of Credit - September 30,		430			333			228
Total Allowance for Credit Losses - September 30,	$	7,189		$	7,088		$	7,098
Allowance for Loan & Lease Losses - March 31,											8,533			6,636			6,800
Allowance for Unfunded Loan Commitments & Letters of Credit - March 31,											470			346			265
Total Allowance for Credit Losses - March 31,										$	9,003		$	6,982		$	7,065
Ratio of net charge-offs to average Loans outstanding		0.02	%		0.01	%		0.01	%		0.01	%		0.02	%		0.01	%
Ratio of the Allowance for Loan Loss to Nonperforming Loans*		173.25	%	1,399.98%				397.35	%		256.66	%		558.92	%		755.19	%

The Bank uses the following guidelines as stated in policy to determine when to realize a charge-off of a loan, whether partial loan balance or full loan balance. A charge down in whole or in part is realized when unsecured consumer loans, credit card credits and overdraft lines of credit reach 90 days delinquency. At 120 days delinquent, secured consumer loans are charged down to the value of the collateral, if repossession of the collateral is assured and/or in the process of repossession. Consumer mortgage loan deficiencies are charged down upon the sale of the collateral or sooner upon the recognition of collateral deficiency. Commercial and agricultural credits are charged down at 120 days delinquency, unless an established and approved work-out plan is in place or litigation of the credit will likely result in recovery of the loan balance. Upon

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

notification of bankruptcy, unsecured debt is charged off. Additional charge-offs may be realized as further unsecured positions are recognized.

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

Loans classified as nonaccrual were higher as of ~~September 30, 2019~~March 31, 2020 at $3.3 million as compared to ~~$483 thousand~~$1.2 million as of ~~September 30, 2018.~~March 31, 2019. The majority of the increase is in the agricultural, consumer real estate and commercial and industrial portfolios.

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

For the majority of the Bank’s impaired loans, including all collateral dependent loans, the Bank will apply the appraised market value methodology. However, the Bank may also utilize a measurement incorporating the present value of expected future cash flows discounted at the loan's effective rate of interest. To determine appraised market value, collateral asset values securing an impaired loan are periodically evaluated. Maximum time of re-evaluation is every 12 months for chattels and titled vehicles and every two years for real estate. In this process, third party evaluations are obtained and heavily relied upon. Until such time that updated appraisals are received, the Bank may discount the collateral value used.

The following table presents the balances for allowance for loan losses by loan type for ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and ~~September 30, 2018.~~March 31, 2019.

	(In Thousands)					(In Thousands)					(In Thousands)					(In Thousands)
	September 30, 2019					September 30, 2018					March 31, 2020					March 31, 2019
Balance at End of Period Applicable To:	Amount		% of Loan Category			Amount		% of Loan Category			Amount		% of Loan Category			Amount		% of Loan Category
Consumer Real Estate	$	274		13.68	%	$	235		9.85	%	$	345		13.94	%	$	268		14.56	%
Agricultural Real Estate		352		17.31	%		252		8.17	%		327		15.56	%		270		17.50	%
Agricultural		733		9.53	%		743		12.37	%		665		8.79	%		706		10.44	%
Commercial Real Estate		3,305		43.25	%		3,272		49.68	%		3,873		45.61	%		3,203		39.98	%
Commercial and Industrial		1,550		11.94	%		1,398		14.98	%		2,750		12.16	%		1,490		13.19	%
Consumer		545		4.29	%		471		4.95	%		533		3.94	%		496		4.33	%
Unallocated		-		0.00	%		384		0.00	%		40		0.00	%		203		0.00	%
Allowance for Loan & Lease Losses		6,759					6,755					8,533					6,636
Off Balance Sheet Commitments		430					333					470					346
Total Allowance for Credit Losses	$	7,189				$	7,088				$	9,003				$	6,982

Noninterest income was up ~~$478~~$427 thousand for the ~~third~~first quarter ~~2019~~2020 over the same time frame in ~~2018.~~2019. The Company has seen an increase in its mortgage production volume and the gain on the sale of these loans was ~~$76~~$125 thousand higher for the ~~third~~first quarter ~~2019~~2020 over the same period in ~~2018.~~2019. Loan originations on loans held for sale for the ~~third~~first quarter ~~2019~~2020 were ~~$24.7~~$17.3 million with proceeds from sale at ~~$24.8~~$18.1 million for ~~2019~~2020 compared to ~~2018’s third~~2019’s first quarter activity of ~~$13.6~~$8.3 million in originations and ~~$11.8~~$7.8 million in sales. The mortgages sold were both 1-4 family and agricultural real estate loans originated for sale.

The next largest fluctuation in noninterest income was in the ~~combined~~gain on sale of available-for-sale securities. During the current quarter, securities were sold and swapped for higher yield securities resulting in a gain of $270 thousand or an increase of $296 thousand over first quarter 2019. Combined service fee lines ~~which was $412~~were $6 thousand higher than the same quarter last year.

The ~~increase was largely due to~~Bank may see an ~~increase~~impact in ~~servicing rights~~some of the line items such as interchange fee income ~~of $150 thousand~~ and ~~debit card~~overdraft fees going forward; however, we do see additional income ~~of $127 thousand.~~ being derived from home loan activity.

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

The impact of mortgage servicing rights, both to income and expense, is shown in the following table which reconciles the value of mortgage servicing rights. The capitalization runs through noninterest income while the amortization thereof is included in non-interest expense. For the ~~third~~first quarter of ~~2019,~~2020, mortgage servicing rights caused a net ~~$91~~$43 thousand in income, in comparison to a net ~~$17~~$12 thousand income for the ~~third~~first quarter of ~~2018.~~2019. The higher capitalized additions for ~~2019~~2020 are attributed to a higher loan origination level of 1-4 families combined with a higher mortgage servicing rights value being applied to originations of 1-4 families in ~~2019~~2020 as compared to ~~2018.~~2019. For loans of 15 years and less, the value was ~~1.055%~~1.20% in the ~~third~~first quarter ~~2019~~2020 versus ~~1.008%~~1.124% in ~~third~~first quarter ~~2018.~~2019. For loans over 15 years, the value was ~~1.259%~~1.35% versus ~~1.218%~~1.309% for the same periods respectively. The carrying value is well below the market value of $3.0 million which indicates any large expense to fund the valuation allowance to be unlikely in ~~2019.~~2020.

	(In Thousands)						(In Thousands)
	2019			2018			2020			2019
Beginning Balance, January 1,	$	2,385		$	2,299		$	2,629		$	2,385
Capitalized Additions	$	500			338		$	175			87
Amortization	$	(329	)		(264	)	$	(132	)		(75	)
Ending Balance, September 30,	$	2,556			2,373
Ending Balance, March 31,							$	2,672			2,397
Valuation Allowance	$	-			-		$	-			-
Mortgage Servicing Rights net, September 30,	$	2,556		$	2,373
Mortgage Servicing Rights net, March 31,							$	2,672		$	2,397

For the ~~third~~first quarter ~~2019,~~2020, noninterest expenses were ~~$2.5 million higher~~$816 thousand lower than for the same quarter in ~~2018.~~2019. First quarter 2019 included $1.3 million of third party acquisition related costs. Salaries, wages, and employee benefits ~~increased $1.1 million, with the addition of the acquired offices,~~(includes normal merit increases, ~~increased medical costs and~~ restricted stock ~~expense.~~expense, incentive payout and all employee benefits) decreased $6 thousand in total which was comprised of salaries decreasing $89 thousand and benefits increasing $83 thousand. 2019 included $108 thousand acquisition costs in these two categories. Furniture and equipment expenses increased ~~$132~~$62 thousand from the prior year primarily due to an increase in depreciation of ~~$83~~$30 thousand and maintenance contracts of ~~$48~~$34 thousand. Data processing charges ~~increased $118~~decreased $857 thousand for ~~third~~first quarter 2020. First quarter 2019 included data processing charges of $892 thousand related to the acquisition. Building occupancy costs decreased $103 thousand while advertising increased ~~$351~~$43 thousand for the quarter. Franchise taxes increased $110 thousand over first quarter 2019 with the increase in equity due to the issuance of stock in the Bank of Geneva acquisition. Other general and administrative expenses were ~~up $542~~down $77 thousand compared to ~~third~~first quarter ~~2018. Core deposit intangible~~2019 which included $238 thousand of acquisition related costs.

Federal income tax expense was $238 thousand higher for the first quarter 2020 compared to the same quarter in 2019. Effective tax rates were 18.71% and 17.99% for first quarter 2020 and 2019 respectively. The higher effective tax rate for first quarter 2020 equated to an increase in federal income tax expense of $38 thousand while the remainder of the increase was driven from increased $140 thousand, loan and collection expense increased $88 thousand and audit and exam fees increased $72 thousand. Miscellaneous NSF checks and other losses decreased $72 thousand from third quarter 2018.earnings.

Results overall, net income in the ~~third~~first quarter of ~~2019~~2020 was up ~~$400~~$881 thousand as compared to the same quarter last year. First quarter 2020 included an additional $1.4 million of loan loss provision as compared to first quarter 2019. As discussed previously, the long-term effects of COVID-19 and the ability of borrowers to make timely payments are unknown at this time. Tax adjusted acquisition costs for first quarter 2019 were $1.0 million. The Company has done an exceptional job of growing loans while keeping past dues low. The Company remains strong, stable, and well capitalized and has the capacity to continue to cover the increased costs of expansion.

~~Comparison of Results of Interest Earnings and Expenses for nine month periods ended September 30, 2019 and 2018~~

Higher loan balances created the improvement in the interest income for the first nine months of 2019 as compared to the first nine months of 2018. Interest income rose 48.6% or $16.7 million while interest income from loans accounted for the majority of the increase. Contributing to the improvement was an increase in securities income of $489 thousand and an increase in income from Fed Funds sold and interest bearing deposits of $985 thousand over 2018. The change in the balance sheet mix along with the loan growth caused the asset yield to improve by 63 basis points to 5.04% for the first nine months of 2019 compared to first nine months of 2018’s 4.41%. The improvement of the yield was favorably impacted by the $2.0 million reversal of the fair value adjustment from the payoff of the purchased credit-impaired loans as discussed in Note 2.

~~With each quarter of 2019, the loan growth contributed to the continued improvement in asset yield. The growth factor contribution is shown in the charts which follow.~~

~~The average interest earning asset base was $308.1 million higher in first nine months 2019 than the first nine months of 2018, an increase of approximately 29.4%.~~

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

~~The yields on tax-exempt securities and the portion of the tax-exempt IDB loans included in loans have been tax adjusted based on a 21% tax rate in the charts to follow.~~

~~Change in Interest Income Year to Date September 30, 2019 Compared to September 30, 2018~~

Interest expense was also higher for the first nine months of 2019 compared to the first nine months of 2018. At $10.9 million, the first nine months of 2019 was up $6.2 million as compared to same time period 2018 or 130.2%.

The average balance of interest-bearing liabilities was higher by $257.4 million in 2019 than the first nine months of 2018. Interest bearing deposits increased $233.1 million while Fed Funds purchased and securities sold under agreement to repurchase increased by $3.3 million. The higher balance coupled with the slight variation of the balance sheet mix, resulted in a 59 basis points increase in the cost of funds at 1.42% for the first nine months of 2019 as compared to 2018’s 0.83%.

~~Competition has caused deposits to price higher. The change chart on the following page shows the increased cost is only slightly driven more by volume than rate.~~

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

~~Change in Interest Expense Year to Date September 30, 2019 Compared to September 30, 2018~~

Overall, net interest spread figures for the first nine months of 2019 are up from 2018 by 4 basis points and up 18 basis points from 2017. Net interest margin for the first nine months of 2019 is higher than the same period 2018 and 2017. As the chart below illustrates, both higher yields on interest and dividend income, were offset by higher interest expense resulting in total net interest margin up 17 basis points since the first nine months of 2018 and over the first nine months of 2017 by 36 basis points.

Net interest income was up $10.5 million in the first nine months of 2019 over the same time frame in 2018 due to the increase in loan income even with higher interest expense, as previously mentioned. New loans added in 2018 and 2019 will continue to generate more income, while deposit pressure is expected to continue to increase on the expense side.

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

~~Comparison of Results of Noninterest Earnings and Expenses for nine month periods ended September 30, 2019 and 2018~~

Total provision for loan losses was $191 thousand higher for the first nine months 2019 than for the first nine months 2018. While loan growth continued in the first nine months, strong asset quality continued also. The strong asset quality along with only $94 thousand higher net charge-offs offset any need for additional provision above the $410 thousand that was expensed.

(In Thousands)

Nine Months Ended
September 30, 2019

Nine Months Ended
September 30, 2018

Nine Months Ended
September 30, 2017

Loans, net
$
1,158,696

$
838,698

$
795,205

Daily average of outstanding loans
$
1,113,892

$
830,118

$
776,828

Allowance for Loan Losses - January 1,
$
6,775

$
6,868

$
6,784

Loans Charged off:

Consumer Real Estate

95

63

-

Agriculture Real Estate

-

-

-

Agricultural

22

-

-

Commercial Real Estate

-

15

19

Commercial and Industrial

55

100

-

Consumer

382

272

189

554

450

208

Loan Recoveries:

Consumer Real Estate

-

18

13

Agriculture Real Estate

-

-

-

Agricultural

3

6

2

Commercial Real Estate

7

7

11

Commercial and Industrial

21

8

8

Consumer

97

79

63

128

118

97

Net Charge Offs

426

332

111

Provision for loan loss

410

219

197

Acquisition provision for loan loss

-

-

-

Allowance for Loan & Lease Losses - September 30,

6,759

6,755

6,870

Allowance for Unfunded Loan Commitments
    & Letters of Credit - September 30,

430

333

228

Total Allowance for Credit Losses - September 30,
$
7,189

$
7,088

$
7,098

Ratio of net charge-offs to average
   Loans outstanding

0.04
%

0.04
%

0.01
%
Ratio of the Allowance for Loan Loss to
   Nonperforming Loans*

173.25
%

1,399.98%

397.35
%

~~In comparing past due balances of loans 30+ days, September 30, 2019~~ ~~balances were $~~2.5 million as compared to September 30, 2018 balances of $777 thousand. Net charge-offs were also slightly higher at $426 thousand for the first nine months of 2019 compared to the first nine months of 2018’s $332 thousand.

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

Noninterest income for the first nine months 2019 increased over the first nine months of 2018 by $738 thousand. Combined service fees increased by $833 thousand with increased debit card income of $336 thousand and servicing rights income of $163 thousand. Overdraft and returned check income increased $119 thousand while miscellaneous service fees increased $108 thousand. Gain on sale of loans showed a $59 thousand decrease over the first nine months of 2018. The Company did sell some of its available-for-sale securities in first quarter 2019 and recognized a loss of $26 thousand.

Through the first nine months of 2019, noninterest expenses were $8.4 million higher than in the first nine months of 2018. Of this increase, $1.3 million was third party acquisition related costs incurred with the Limberlost transaction. The effect of an increase of $2.4 million in salaries and wages was combined with an increase of $1.1 million in employee benefits. The addition of the acquired offices, normal merit increases, increased restricted stock expense, increased medical costs and increased employer taxes related to the vesting of restricted stock awards have impacted 2019. Acquisition costs included in these categories were $157 thousand.

Data processing fees were $1.2 million higher than last year with $868 thousand of the increase acquisition related. A seven year contract extension was signed in the third quarter of 2016 which has helped reduce the expense while adding new products and services to better align with our customers’ expectations in the coming years. We have already added additional products in 2019, mainly focused on mobile services and business deposit accounts. Furniture and equipment was $519 thousand higher than 2018. Increased depreciation for new offices and office transformations, along with maintenance costs have led to this expense to increase over 2018.

General and administrative expenses were up $1.7 million over the first nine months of 2018 with $195 thousand incurred from the acquisition. The largest increase was $420 thousand for core deposit intangible. Miscellaneous expenses were $225 thousand more than 2018 with acquisition expenses totaling $37 thousand. Loan and collection expenses were up $116 thousand as compared to 2018. The next largest increase for 2019 was in legal expenses. These two line items on the income statement were up by $154 thousand over the first nine months of 2018 with acquisition expenses accounting for $96 thousand of the increase.

Overall, net income through the first nine months of 2019 was up $1.9 million as compared to the first nine months of 2018. Excluding tax adjusted acquisition costs, net income would have been approximately $14.7 million, an increase of $1.0 million as shown below in the table.

The Company continues to grow loans while keeping past dues low. The growth in loans has spurred the increase in net interest income that has flowed through to the bottom line. The asset quality has kept loan provision down as the allowance for loan loss remains adequate for the level of credit risk. The opening of the new offices has hampered earnings in the short term; however, the Company remains focused on the long term.

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

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

Statements contained in this portion of the Company's report may be forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as "intend," "believe," "expect," "anticipate," "should," "planned," "estimated," and "potential." Such forward-looking statements are based on current expectations, but actual results may differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time. Other factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, changes in interest rates, general economic conditions, legislative and regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Bank's market area, changes in relevant accounting principles and guidelines and other factors over which management has no control. The forward-looking statements are made as of the date of this report, and the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results differ from those projected in the forward-looking statements.

Market risk is the exposure to loss resulting from changes in interest rates and equity prices. The primary market risk to which the Company is subject is interest rate risk. The majority of our interest rate risk arises from the instruments, positions and transactions entered into for purposes other than trading such as loans, available for sale securities, interest bearing deposits, short term borrowings and long term borrowings. Interest rate risk occurs when interest bearing assets and liabilities re-price at different times as market interest rates change. For example, if fixed rate assets are funded with variable rate debt, the spread between asset and liability rates will decline or turn negative if rates increase.

Interest rate risk is managed within an overall asset/liability framework. The principal objectives of asset/liability management are to manage sensitivity of net interest spreads and net income to potential changes in interest rates.

Funding positions are kept within predetermined limits designed to ensure that risk-taking is not excessive and that liquidity is properly managed. In the event that our asset/liabilities management strategies are unsuccessful, our profitably may be adversely affected. The Company employs a sensitivity analysis utilizing interest rate shocks to help in this analysis.

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

Interest Rate Shock
on Net Interest Margin

Interest Rate Shock
on Net Interest Income

Net Interest

% Change to

Rate

Rate

Cumulative

% Change to

Margin (Ratio)

Flat Rate

Direction

Changes by

Total ($000)

Flat Rate

4.23%

20.16%

Rising

3.00%

60,436

18.70%

4.01%

14.03%

Rising

2.00%

57,439

12.81%

3.80%

8.00%

Rising

1.00%

54,497

7.03%

3.52%

0.00%

Flat

0.00%

50,916

0.00%

3.49%

-0.78%

Falling

-1.00%

49,947

-1.90%

3.29%

-6.56%

Falling

-2.00%

47,307

-7.09%

3.10%

-11.98%

Falling

-3.00%

44,984

-11.65%

Interest Rate Shock on Net Interest Margin				Interest Rate Shock on Net Interest Income
Net Interest	% Change to	Rate	Rate	Cumulative		% Change to
Margin (Ratio)	Flat Rate	Direction	Changes by	Total ($000)		Flat Rate
3.52%	-10.11%	Rising	3.00%		52,063	-13.41%
3.61%	-7.73%	Rising	2.00%		54,317	-9.66%
3.71%	-5.19%	Rising	1.00%		56,709	-5.68%
3.91%	0.00%	Flat	0.00%		60,127	0.00%
3.71%	-5.18%	Falling	-1.00%		58,756	-2.28%
3.44%	-12.14%	Falling	-2.00%		55,573	-7.57%
3.19%	-18.52%	Falling	-3.00%		52,893	-12.03%

The net interest margin represents the forecasted twelve month margin. The Company also reviews shocks with a 4.0% fluctuation with a delayed time frame of 10 months and over a 24 month time frame. It also shows the effect rate changes will have on both the margin and net interest income. The goal of the Company is to lengthen the term of some of the Bank’s fixed rate liabilities or sources of funds to decrease the exposure to a rising rate environment. Of course, customer desires also impact the Bank’s ability to attract longer term deposits. Some movement into the longer term time deposits has occurred. Over the past ~~five~~ year ~~period,~~with the Limberlost acquisition, the Bank has experienced ~~a decrease~~an increase in the time balances of our deposit portfolio, and therefore, ~~a loss~~an increase of term funding. Over the past two years, the Bank has also paid off term borrowings with the last $5 million maturing ~~last year;~~December 2018; however, additional borrowings were a part of the Limberlost acquisition in 2019.

The shock chart currently shows a ~~widening~~tightening in net interest margin over the next twelve months in ~~an increasing~~both a rising rate and falling rate environment. Due to the existence of such a low rate environment, ~~with a tightening in a falling rate environment.~~the model does not predict expansion of net interest margin at any level. Cost of funds are at ~~1.55%~~1.22% for the quarter ~~and 1.42% year to date~~ so the lowest shock of 100 basis points is where the Bank can take full advantage and reprice funds to match the level of shock. Once the shocks are falling over 100 basis points, the cost of funds cannot lower to match and the loss on net interest income continues to build. ~~Since~~The negative impact in a rising rate environment is partially caused by a timing issue on the ability to reprice assets as quickly as liabilities. The average duration of the majority of the assets is outside the 12 month shock ~~period, the rising rate environment only shows improvement.~~period. The majority of the newer loans added to the commercial real estate portfolio begin with an initial fixed rate period of three to five years whose variable adjustment is outside of the current shock time frame. The Bank continues to adjust its assumptions by including decay rates and key rate ties on certain deposit accounts and continues to review and modify those rates as the index rates change. All shocks are within risk exposure guidelines at all levels. The effect of the rate shocks may be mitigated to the extent that not all lines of business are directly tied to an external index and actual balance sheet composition may differ from prediction.

Overall, the Company must concentrate on increasing loan spreads on variable loans and extend the duration on cost of funds where possible.

As of ~~September 30, 2019,~~March 31, 2020, an evaluation was performed under the supervision and with the participation of the Company's management including the CEO and CFO, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the Company's management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of ~~September 30, 2019~~March 31, 2020 . There have been no changes in the Company's internal control over financial reporting that occurred during the quarter ended ~~September 30, 2019~~March 31, 2020 that have materially affected, or are reasonably likely to materially affect, the ~~registrant's~~Company's internal control over financial reporting.

~~There~~Except as otherwise provide below, there have been no material changes in the Company’s risk factors from those disclosed ~~by Registrant~~ in ~~its~~the Company’s Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2018.~~2019.

The ongoing COVID-19 pandemic and measures intended to prevent its spread could have a material adverse effect on our business, results of operations and financial condition, and such effects will depend on future developments, which are highly uncertain and are difficult to predict.

In December 2019, a novel coronavirus (COVID-19) was reported in China, and, in March 2020, the World Health Organization declared it a pandemic. On March 12, 2020, the President of the United States declared the COVID-19 outbreak in the United States a national emergency. The COVID-19 pandemic has caused significant economic dislocation in the United States as many state and local governments have ordered non-essential businesses to close and residents to shelter in place at home. This has resulted in an unprecedented slow-down in economic activity and a related increase in unemployment. Since the COVID-19 outbreak, more than 22 million people have filed claims for unemployment, and stock markets have declined in value and, in particular, bank stocks have significantly declined in value. In response to the COVID-19 outbreak, the Federal Reserve Board has reduced the benchmark fed funds rate to a target range of 0% to 0.25%, and the yields on 10 and 30-year treasury notes have declined to historic lows. The federal banking agencies have encouraged financial institutions to prudently work with affected borrowers and recently passed legislation to provide relief from reporting loan classifications due to modifications related to the COVID-19 outbreak.

Finally, the spread of the coronavirus has caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences. We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or will otherwise be satisfactory to government authorities. In addition, the success of our operations substantially depends on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years. The unanticipated loss or unavailability of key employees due to the outbreak could harm our ability to operate our business or execute our business strategy.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The United States government has taken steps to attempt to mitigate some of the more severe anticipated economic effects of the virus, including the passage of the CARES Act, but there can be no assurance that such steps will be effective or achieve their desired results in a timely fashion. The extent of such impact from the COVID-19 outbreak and related mitigation efforts will depend on future developments, which are highly uncertain, including but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. As the result, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

Any one or a combination of the factors identified above could negatively impact our business, financial condition and results of operations and prospects. Even after the COVID-19 outbreak has subsided, we may continue to experience materially adverse impacts to our business as a result of the virus’s global economic impact, including the availability of credit, adverse impacts on our liquidity and any recession that has occurred or may occur in the future.

Treasury stock repurchased the quarter ended ~~September 30, 2019.~~March 31, 2020.

Period

(a) Total Number of
Shares Purchased

(b) Average Price
Paid per Share

(c) Total Number
of Shares Purchased as Part
of Publicly Announced Plan
or Programs ⁽¹⁾

(d) Maximum
Number
of Shares that may yet be
purchased under the Plans or
Programs

7/1/2019 to 7/31/2019

—

—

—

500,000

8/1/2019 to 8/31/2019

6,569

⁽²⁾

25.21

⁽²⁾

—

500,000

9/1/2019 to 9/30/2019

—

—

—

500,000

Total

6,569

—

—

500,000

Period	(a) Total Number of Shares Purchased			(b) Average Price Paid per Share			(c) Total Number of Shares Purchased as Part of Publicly Announced Plan or Programs ⁽¹⁾		(d) Maximum Number of Shares that may yet be purchased under the Plans or Programs
1/1/2020 to 1/31/2020		2,064	⁽²⁾		29.97	⁽²⁾		—		550,000

2/1/2020 to 2/29/2020		—			—			—		550,000

3/1/2020 to 3/31/2020		5,000			21.68			5,000		545,000
Total		7,064			24.10			5,000		545,000

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.


Title of each class	Trading Symbol(s)	Name of Each Exchange
Common Stock, No Par Value	FMAO	NASDAQ Capital Market

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

Common Stock, No Par Value	~~11,137,014~~11,129,421
Class	Outstanding as of ~~October 25, 2019~~April 24, 2020

Form 10-Q Items		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets - ~~September 30, 2019~~ March 31, 2020 and December 31, ~~2018~~2019	3

	Condensed Consolidated Statements of Income - Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2020 and March 31, 2019 ~~and September 30, 2018~~	4

	Condensed Consolidated Statements of Comprehensive Income - Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2020 and March 31, 2019 ~~and September 30, 2018~~	5

	Condensed Consolidated Statements of Changes to Stockholders’ Equity - Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2020 and March 31, 2019 ~~and September 30, 2018~~	6-7

	Condensed Consolidated Statements of Cash Flows - ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2020 and March 31, 2019 ~~and September 30, 2018~~	8-9

	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	~~45-62~~41-57

Item 3.	Qualitative and Quantitative Disclosures About Market Risk	6358

Item 4.	Controls and Procedures	6459

PART II.	OTHER INFORMATION	6459

Item 1.	Legal Proceedings	6459

Item 1A.	Risk Factors	6459-60

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6460

Item 3.	Defaults Upon Senior Securities	6460

Item 4.	Mine Safety Disclosures	6460

Item 5.	Other Information	6460

Item 6.	Exhibits	6561

Signatures		6662

101.INS	XBRL Instance Document (1)
101.SCH	XBRL Taxonomy Extension Scheme Document (1)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB	XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document (1)

	(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

307 North Defiance Street, Archbold, Ohio	43502
(Address of principal executive offices)	(Zip Code)

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

	(In Thousands)
											YTD
							YTD		YTD		Interest
Nine Months Ended September 30, 2018			Unpaid				Average		Interest		Income
	Recorded		Principal		Related		Recorded		Income		Recognized
	Investment		Balance		Allowance		Investment		Recognized		Cash Basis
With no related allowance recorded:
Consumer Real Estate	$	589	$	589	$	-	$	554	$	23	$	15
Agricultural Real Estate		-		-		-		22		-		-
Agricultural		-		-		-		-		-		-
Commercial Real Estate		196		196		-		199		8		-
Commercial and Industrial		1,056		1,056		-		238		12		-
Consumer		-		-		-		-		-		-
With a specific allowance recorded:
Consumer Real Estate		174		174		26		153		-		-
Agricultural Real Estate		-		-		-		-		-		-
Agricultural		-		-		-		-		-		-
Commercial Real Estate		-		-		-		186		-		-
Commercial and Industrial		796		796		122		413		11		-
Consumer		-		-		-		-		-		-
Totals:
Consumer Real Estate	$	763	$	763	$	26	$	707	$	23	$	15
Agricultural Real Estate	$	-	$	-	$	-	$	22	$	-	$	-
Agricultural	$	-	$	-	$	-	$	-	$	-	$	-
Commercial Real Estate	$	196	$	196	$	-	$	385	$	8	$	-
Commercial and Industrial	$	1,852	$	1,852	$	122	$	651	$	23	$	-
Consumer	$	-	$	-	$	-	$	-	$	-	$	-

Tier I Leverage Ratio	~~10.21~~10.14	%
Risk Based Capital Tier I	~~12.45~~11.97	%
Total Risk Based Capital	~~13.04~~12.66	%
Stockholders' Equity/Total Assets	~~13.11~~12.98	%
Capital Conservation Buffer	~~5.04~~4.66	%

	(In Thousands)
	Year to Date Ended September 30, 2019				Annualized Yield/Rate
Interest Earning Assets:	Average Balance		Interest/Dividends		September 30, 2019			September 30, 2018
Loans	$	1,113,892	$	46,605		5.58	%		5.04	%
Taxable investment securities		146,085		2,857		2.61	%		1.91	%
Tax-exempt investment securities		20,784		489		3.97	%		2.45	%
Fed funds sold & other		75,388		1,206		2.13	%		1.51	%
Total Interest Earning Assets	$	1,356,149	$	51,157		5.04	%		4.41	%

	(In Thousands)
	Nine Months Ended September 30, 2019			Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
Loans, net	$	1,158,696		$	838,698		$	795,205
Daily average of outstanding loans	$	1,113,892		$	830,118		$	776,828

Allowance for Loan Losses - January 1,	$	6,775		$	6,868		$	6,784
Loans Charged off:
Consumer Real Estate		95			63			-
Agriculture Real Estate		-			-			-
Agricultural		22			-			-
Commercial Real Estate		-			15			19
Commercial and Industrial		55			100			-
Consumer		382			272			189
		554			450			208
Loan Recoveries:
Consumer Real Estate		-			18			13
Agriculture Real Estate		-			-			-
Agricultural		3			6			2
Commercial Real Estate		7			7			11
Commercial and Industrial		21			8			8
Consumer		97			79			63
		128			118			97
Net Charge Offs		426			332			111
Provision for loan loss		410			219			197
Acquisition provision for loan loss		-			-			-
Allowance for Loan & Lease Losses - September 30,		6,759			6,755			6,870
Allowance for Unfunded Loan Commitments & Letters of Credit - September 30,		430			333			228
Total Allowance for Credit Losses - September 30,	$	7,189		$	7,088		$	7,098
Ratio of net charge-offs to average Loans outstanding		0.04	%		0.04	%		0.01	%
Ratio of the Allowance for Loan Loss to Nonperforming Loans*		173.25	%	1,399.98%				397.35	%

	(in thousands of dollars)
	Nine Months Ended
Non-GAAP Reconciliation of Net Income	September 30, 2019			September 30, 2018
	(Unaudited)
Net income as reported	$	13,679		$	11,756
Acquisition expenses		1,270			189
Tax effect		(250	)		(19	)
Net income excluding acquisition expenses	$	14,699		$	11,926

3.1		Amended Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on October 25, 2017).
3.2		Amended and Restated Code of Regulations of the Registrant (incorporated by reference to Exhibit 3.2 to Registrant's Quarterly Report on Form 10-Q filed with the Commission on July 26, 2017).
4.1		Description of Registrant’s Common Stock (incorporated by reference to Exhibit 4.1 to Registrant's Annual Report on Form 10-K filed with the Commission on February 26, 2020).
31.1		Rule 13-a-14(a) Certification - CEO
31.2		Rule 13-a-14(a) Certification - CFO
32.1		Section 1350 Certification - CEO
32.2		Section 1350 Certification - CFO

101.INS		XBRL Instance Document (1)
101.SCH		XBRL Taxonomy Extension Schema Document (1)
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB		XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document (1)

				Farmers & Merchants Bancorp, Inc.,

Date:	~~October 30, 2019~~April 29, 2020	By:	/s/ Lars B. Eller
				Lars B. Eller
				President and Chief Executive Officer



Date:	~~October 30, 2019~~April 29, 2020	By:	/s/ Barbara J. Britenriker
				Barbara J. Britenriker
				Executive Vice-President and
				Chief Financial Officer