10-Q

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

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

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from ________ to ________

Commission File Number:  000-26099

FARMERS & MERCHANTS BANCORP

(Exact name of registrant as specified in its charter)

Delaware	94-3327828
(State or other jurisdiction of incorporation or organization)	(I.R.S.  Employer Identification No.)
111 W. Pine Street, Lodi, California	95240
(Address of principal Executive offices)	(Zip Code)

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

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

Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer  ☐	Accelerated filer  ☒	Non-accelerated filer  ☐	Smaller Reporting Company ☐
(Do not check if a smaller reporting company)

Emerging growth company ☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐    No ☒

Number of shares of common stock of the registrant 812,304 outstanding as of October 31, 2017.

FARMERS & MERCHANTS BANCORP

FORM 10-Q

TABLE OF CONTENTS

PART I. - FINANCIAL INFORMATION			Page
	Item 1 -	Financial Statements
		Consolidated Balance Sheets (Unaudited) as of September 30, 2017, December 31, 2016 and September 30, 2016.	3
		Consolidated Statements of Income (Unaudited) for the Three and Nine Months Ended September 30, 2017 and 2016.	4
		Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Nine Months Ended September 30, 2017 and 2016.	5
		Consolidated Statements of Changes in Shareholders' Equity (Unaudited) for the Nine Months Ended September 30, 2017 and 2016.	6
		Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2017 and 2016.	7
		Notes to the Consolidated Financial Statements (Unaudited)	8
	Item 2 -	Management's Discussion and Analysis of Financial Condition and Results of Operations	35
	Item 3 -	Quantitative and Qualitative Disclosures About Market Risk	56
	Item 4 -	Controls and Procedures	59
PART II. - OTHER INFORMATION
	Item 1 -	Legal Proceedings	60
	Item 1A –	Risk Factors	60
	Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	60
	Item 3 -	Defaults Upon Senior Securities	60
	Item 4 –	Mine Safety Disclosures	60
	Item 5 -	Other Information	60
	Item 6 -	Exhibits	61
Signatures			61
Index to Exhibits			61

31(a) Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31(b) Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32 Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FARMERS & MERCHANTS BANCORP

Consolidated Balance Sheets

(in thousands except share data)

Assets	Sept. 30, 2017 (Unaudited)		December 31, 2016			Sept. 30, 2016 (Unaudited)
Cash and Cash Equivalents:
Cash and Due from Banks	$	44,166	$	54,896		$	56,376
Interest Bearing Deposits with Banks		149,104		43,964			42,927
Total Cash and Cash Equivalents		193,270		98,860			99,303
Investment Securities:
Available-for-Sale		456,323		448,263			358,857
Held-to-Maturity		55,542		58,109			58,905
Total Investment Securities		511,865		506,372			417,762
Loans & Leases:		2,216,779		2,177,601			2,079,670
Less: Allowance for Credit Losses		50,744		47,919			44,446
Loans & Leases, Net		2,166,035		2,129,682			2,035,224
Premises and Equipment, Net		28,734		29,229			26,058
Bank Owned Life Insurance		59,128		57,761			57,320
Interest Receivable and Other Assets		112,743		100,217			91,899
Total Assets	$	3,071,775	$	2,922,121		$	2,727,566
Liabilities
Deposits:
Demand	$	767,162	$	756,236		$	672,351
Interest Bearing Transaction		564,904		495,063			433,220
Savings and Money Market		827,588		760,119			702,441
Time		549,773		570,293			547,625
Total Deposits		2,709,427		2,581,711			2,355,637
Subordinated Debentures		10,310		10,310			10,310
Interest Payable and Other Liabilities		49,409		50,119			89,221
Total Liabilities		2,769,146		2,642,140			2,455,168
Shareholders' Equity
Preferred Stock:  No Par Value,  1,000,000 Shares Authorized, None Issued or Outstanding		-		-			-
Common Stock:  Par Value $0.01, 7,500,000 Shares Authorized, 812,304, 807,329 and 792,387 Shares Issued and Outstanding at September 30, 2017, December 31, 2016 and September 30, 2016, Respectively		8		8			8
Additional Paid-In Capital		93,624		90,671			82,004
Retained Earnings		208,443		189,313			186,920
Accumulated Other Comprehensive (Loss) Income		554		(11	)		3,466
Total Shareholders' Equity		302,629		279,981			272,398
Total Liabilities and Shareholders' Equity	$	3,071,775	$	2,922,121		$	2,727,566

The accompanying notes are an integral part of these unaudited consolidated financial statements

3

FARMERS & MERCHANTS BANCORP

Consolidated Statements of Income  (Unaudited)

(in thousands except per share data)	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017			2016
Interest Income
Interest and Fees on Loans & Leases	$	26,491	$	23,523	$	76,270		$	67,909
Interest on Deposits with Banks		648		51		1,155			133
Interest on Investment Securities:
Taxable		2,038		1,210		6,174			4,113
Exempt from Federal Tax		432		478		1,321			1,447
Total Interest Income		29,609		25,262		84,920			73,602
Interest Expense
Deposits		1,644		1,004		4,353			2,691
Borrowed Funds		-		14		-			18
Subordinated Debentures		115		92		320			272
Total Interest Expense		1,759		1,110		4,673			2,981
Net Interest Income		27,850		24,152		80,247			70,621
Provision for Credit Losses		1,600		250		2,850			2,850
Net Interest Income After Provision for Credit Losses		26,250		23,902		77,397			67,771
Non-Interest Income
Service Charges on Deposit Accounts		897		877		2,591			2,517
Net Gain (Loss) on Sale of Investment Securities		-		3		131			(286	)
Increase in Cash Surrender Value of Life Insurance		458		474		1,367			1,422
Debit Card and ATM Fees		990		847		2,877			2,540
Net Gain on Deferred Compensation Investments		510		1,630		1,703			1,969
Other		783		722		3,914			1,987
Total Non-Interest Income		3,638		4,553		12,583			10,149
Non-Interest Expense
Salaries and Employee Benefits		10,809		10,272		34,751			32,061
Net Gain on Deferred Compensation Investments		510		1,630		1,703			1,969
Occupancy		864		786		2,580			2,240
Equipment		957		853		2,970			2,552
Marketing		329		267		867			929
FDIC		233		320		694			960
Gain on Sale of ORE		-		-		(414	)		(5,941	)
Other		2,605		2,286		8,103			8,400
Total Non-Interest Expense		16,307		16,414		51,254			43,170
Income Before Income Taxes		13,581		12,041		38,726			34,750
Provision for Income Taxes		5,000		4,503		14,137			12,708
Net Income	$	8,581	$	7,538	$	24,589		$	22,042
Basic Earnings Per Common Share	$	10.59	$	9.51	$	30.39		$	27.82

The accompanying notes are an integral part of these unaudited consolidated financial statements

4

FARMERS & MERCHANTS BANCORP

Consolidated Statements of Comprehensive Income (Unaudited)

(in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net Income	$	8,581		$	7,538		$	24,589		$	22,042
Other Comprehensive Income
Change in Net Unrealized Gains (Loss) on Available-for-Sale Securities		322			(709	)		1,106			4,667
Deferred Tax (Benefit) Expense Related to Unrealized Gains		(135	)		299			(465	)		(1,962	)
Reclassification Adjustment for Realized (Gain) Loss on Available-for-Sale Securities Included in Net Income		-			(3	)		(131	)		286
Deferred Tax (Benefit) Expense Related to Reclassification Adjustment		-			(409	)		55			(120	)
Change in Net Unrealized Gains on Available-for-Sale Securities, Net of Tax		187			(822	)		565			2,871
Total Other Comprehensive Income (Loss)		187			(822	)		565			2,871
Comprehensive Income	$	8,768		$	6,716		$	25,154		$	24,913

The accompanying notes are an integral part of these unaudited consolidated financial statements

5

FARMERS & MERCHANTS BANCORP

Consolidated Statements of Changes in Shareholders' Equity  (Unaudited)

(in thousands except share data)	Common Shares Outstanding		Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income, net			Total Shareholders' Equity
Balance, January 1, 2016		790,787	$	8	$	81,164	$	170,068		$	595		$	251,835
Net Income				-		-		22,042			-			22,042
Cash Dividends Declared on														-
Common Stock ($6.55 per share)				-		-		(5,190	)		-			(5,190	)
Issuance of Common Stock		1,600		-		840		-			-			840
Change in Net Unrealized Gain on Securities Available-for-Sale, Net of Tax				-		-		-			2,871			2,871
Balance, September 30, 2016		792,387	$	8	$	82,004	$	186,920		$	3,466		$	272,398
Balance, January 1, 2017		807,329	$	8	$	90,671	$	189,313		$	(11	)	$	279,981
Net Income						-		24,589			-			24,589
Cash Dividends Declared on														-
Common Stock ($6.75 per share)				-		-		(5,459	)		-			(5,459	)
Issuance of Common Stock		4,975		-		2,953		-			-			2,953
Change in Net Unrealized Gain on Securities Available-for-Sale, Net of Tax				-		-		-			565			565
Balance, September 30, 2017		812,304	$	8	$	93,624	$	208,443		$	554		$	302,629

The accompanying notes are an integral part of these unaudited consolidated financial statements

6

FARMERS & MERCHANTS BANCORP

Consolidated Statements of Cash Flows (Unaudited)

	Nine Months Ended September 30,
(in thousands)	2017			2016
Operating Activities:
Net Income	$	24,589		$	22,042
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for Credit Losses		2,850			2,850
Depreciation and Amortization		1,595			1,425
Net Amortization of Investment Security Premiums & Discounts		1,097			1,104
Amortization of Core Deposit Intangible		82			-
Accretion of Discount on Acquired Loans		(163	)		-
Net (Gain) Loss on Sale of Investment Securities		(131	)		286
Net (Gain) Loss on Sale of Property & Equipment		(1,189	)		4
Net Gain on Sale of Other Real Estate		(414	)		(5,941	)
Net Change in Operating Assets & Liabilities:
Net Increase in Interest Receivable and Other Assets		(2,315	)		(3,821	)
Net (Decrease) Increase in Interest Payable and Other Liabilities		107			2,890
Net Cash Used in Operating Activities		26,108			20,839
Investing Activities:
Purchase of Investment Securities Available-for-Sale		(208,985	)		(288,874	)
Proceeds from Sold, Matured or Called Securities Available-for-Sale		201,001			314,726
Purchase of Investment Securities Held-to-Maturity		(1,070	)		(1,807	)
Proceeds from Matured or Called Securities Held-to-Maturity		3,592			4,260
Net Loans & Leases Paid, Originated or Acquired		(39,245	)		(83,440	)
Principal Collected on Loans & Leases Previously Charged Off		205			202
Additions to Premises and Equipment		(3,215	)		(912	)
Purchase of Other Investments		(12,728	)		(6,334	)
Proceeds from Sale of Property & Equipment		3,304			-
Proceeds from Sale of Other Real Estate		3,186			8,282
Net Cash Used in  Investing Activities		(53,955	)		(53,897	)
Financing Activities:
Net Increase in Deposits		127,716			78,105
Cash Dividends		(5,459	)		(5,190	)
Net Cash Provided by Financing Activities		122,257			72,915
Increase in Cash and Cash Equivalents		94,410			39,857
Cash and Cash Equivalents at Beginning of Period		98,860			59,446
Cash and Cash Equivalents at End of Period	$	193,270		$	99,303
Supplementary Data
Loans Transferred to Foreclosed Assets (ORE)	$	-		$	538
Cash Payments Made for Income Taxes	$	13,142		$	9,591
Issuance of Common Stock to the Bank's Non-Qualified Retirement Plans	$	2,953		$	840
Interest Paid	$	4,586		$	2,813

The accompanying notes are an integral part of these unaudited consolidated financial statements

7

FARMERS & MERCHANTS BANCORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Significant Accounting Policies

Farmers & Merchants Bancorp (the “Company”) was organized March 10, 1999. Primary operations are related to traditional banking activities through its subsidiary Farmers & Merchants Bank of Central California (the “Bank”) which was established in 1916. The Bank’s wholly owned subsidiaries include Farmers & Merchants Investment Corporation and Farmers/Merchants Corp. Farmers & Merchants Investment Corporation has been dormant since 1991. Farmers/Merchants Corp. acts as trustee on deeds of trust originated by the Bank.

The Company’s other subsidiaries include F & M Bancorp, Inc. and FMCB Statutory Trust I. F & M Bancorp, Inc. was created in March 2002 to protect the name F & M Bank. During 2002, the Company completed a fictitious name filing in California to begin using the streamlined name “F & M Bank” as part of a larger effort to enhance the Company’s image and build brand name recognition. In December 2003, the Company formed a wholly owned subsidiary, FMCB Statutory Trust I, for the sole purpose of issuing Trust Preferred Securities and related subordinated debentures, in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). FMCB Statutory Trust I is a non-consolidated subsidiary.

On November 18, 2016, Farmers & Merchants Bancorp completed the acquisition of Delta National Bancorp, headquartered in Manteca, California, and the parent holding company for Delta Bank N.A., a locally owned and operated community bank established in 1973. As of the acquisition date, Delta National Bancorp had approximately $112 million in assets and four branch locations in the communities of Manteca, Riverbank, Modesto and Turlock. At the effective time of the acquisition, Delta National Bancorp was merged into Farmers & Merchants Bancorp and Delta Bank, N.A. was merged into Farmers & Merchants Bank of Central California.

The accounting and reporting policies of the Company conform to U.S. GAAP and prevailing practice within the banking industry. The following is a summary of the significant accounting and reporting policies used in preparing the consolidated financial statements.

Basis of Presentation

The accompanying consolidated financial statements and notes thereto have been prepared in accordance with accounting principles generally accepted in the United States of America for financial information.

These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting on Form 10-Q. Accordingly, certain disclosures normally presented in the notes to the annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The results of operations for the three-month and nine-month periods ended September 30, 2017 may not necessarily be indicative of future operating results.

The accompanying consolidated financial statements include the accounts of the Company and the Company’s wholly owned subsidiaries, F & M Bancorp, Inc. and the Bank, along with the Bank’s wholly owned subsidiaries, Farmers & Merchants Investment Corporation and Farmers/Merchants Corp. Significant inter-company transactions have been eliminated in consolidation.

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

8

Certain amounts in the prior years' financial statements and related footnote disclosures have been reclassified to conform to the current-year presentation. These reclassifications had no effect on previously reported net income or total shareholders’ equity.

Cash and Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, the Company has defined cash and cash equivalents as those amounts included in the balance sheet captions Cash and Due from Banks, Interest Bearing Deposits with Banks, Federal Funds Sold and Securities Purchased Under Agreements to Resell. For these instruments, the carrying amount is a reasonable estimate of fair value.

Investment Securities

Investment securities are classified at the time of purchase as held-to-maturity (“HTM”) if it is management’s intent and the Company has the ability to hold the securities until maturity. These securities are carried at cost, adjusted for amortization of premium and accretion of discount using a level yield of interest over the estimated remaining period until maturity. Losses, reflecting a decline in value judged by the Company to be other than temporary, are recognized in the period in which they occur.

Securities are classified as available-for-sale (“AFS”) if it is management’s intent, at the time of purchase, to hold the securities for an indefinite period of time and/or to use the securities as part of the Company’s asset/liability management strategy. These securities are reported at fair value with aggregate unrealized gains or losses excluded from income and included as a separate component of shareholders’ equity, net of related income taxes. Fair values are based on quoted market prices or broker/dealer price quotations on a specific identification basis. Gains or losses on the sale of these securities are computed using the specific identification method.

Trading securities, if any, are acquired for short-term appreciation and are recorded in a trading portfolio and are carried at fair value, with unrealized gains and losses recorded in non-interest income.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement; and (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans & Leases

Loans & leases are reported at the principal amount outstanding net of unearned discounts and deferred loan & lease fees and costs. Interest income on loans & leases is accrued daily on the outstanding balances using the simple interest method. Loan & lease origination fees are deferred and recognized over the contractual life of the loan or lease as an adjustment to the yield. Loans & leases are placed on non-accrual status when the collection of principal or interest is in doubt or when they become past due for 90 days or more unless they are both well-secured and in the process of collection. For this purpose, a loan or lease is considered well secured if it is collateralized by property having a net realizable value in excess of the amount of the loan or lease or is guaranteed by a financially capable party. When a loan or lease is placed on non-accrual status, the accrued and unpaid interest receivable is reversed and charged against current income; thereafter, interest income is recognized only as it is collected in cash. Additionally, cash would be applied to principal if all principal was not expected to be collected. Loans & leases placed on non-accrual status are returned to accrual status when the loans or leases are paid current as to principal, interest, and future payments are expected to be made in accordance with the contractual terms of the loan or lease.

9

A loan or lease is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the original agreement. Impaired loans & leases are either: (1) non-accrual loans & leases; or (2) restructured loans & leases that are still accruing interest. Loans or leases determined to be impaired are individually evaluated for impairment. When a loan or lease is impaired, the Company measures impairment based on the present value of expected future cash flows discounted at the loan or lease's effective interest rate, except that as a practical expedient, it may measure impairment based on a loan or lease's observable market price, or the fair value of the collateral if the loan or lease is collateral dependent. A loan or lease is collateral dependent if the repayment of the loan or lease is expected to be provided solely by the underlying collateral.

A restructuring of a loan or lease constitutes a troubled debt restructuring (TDR) if the Company for economic or legal reasons related to the borrower’s (the term “borrower” is used herein to describe a customer who has entered into either a loan or lease transaction) financial difficulties grants a concession to the borrower that it would not otherwise consider. Restructured loans & leases typically present an elevated level of credit risk, as the borrowers are not able to perform according to the original contractual terms. If the restructured loan or lease was current on all payments at the time of restructure and management reasonably expects the borrower will continue to perform after the restructure, management may keep the loan or lease on accrual. Loans & leases that are on nonaccrual status at the time they become TDR, remain on nonaccrual status until the borrower demonstrates a sustained period of performance, which the Company generally believes to be six consecutive months of payments, or equivalent. A loan or lease can be removed from TDR status if it was restructured at a market rate in a prior calendar year and is currently in compliance with its modified terms. However, these loans or leases continue to be classified as impaired and are individually evaluated for impairment as described above.

Generally, the Company will not restructure loans or leases for borrowers unless: (1) the existing loan or lease is brought current as to principal and interest payments; and (2) the restructured loan or lease can be underwritten to reasonable underwriting standards. If these standards are not met other actions will be pursued (e.g., foreclosure) to collect outstanding loan or lease amounts. After restructure, a determination is made whether the loan or lease will be kept on accrual status based upon the underwriting and historical performance of the restructured credit.

Allowance for Credit Losses

The allowance for credit losses is an estimate of probable incurred credit losses inherent in the Company's loan & lease portfolio as of the balance sheet date. The allowance is established through a provision for credit losses, which is charged to expense. Additions to the allowance are expected to maintain the adequacy of the total allowance after credit losses and loan & lease growth. Credit exposures determined to be uncollectible are charged against the allowance. Cash received on previously charged off amounts is recorded as a recovery to the allowance. The overall allowance consists of three primary components: specific reserves related to impaired loans & leases; general reserves for inherent losses related to loans & leases that are not impaired; and an unallocated component that takes into account the imprecision in estimating and allocating allowance balances associated with macro factors.

The determination of the general reserve for loans & leases that are collectively evaluated for impairment is based on estimates made by management, to include, but not limited to, consideration of historical losses by portfolio segment, internal asset classifications, qualitative factors that include economic trends in the Company's service areas, industry experience and trends, geographic concentrations, estimated collateral values, the Company's underwriting policies, the character of the loan & lease portfolio, and probable losses inherent in the portfolio taken as a whole.

The Company maintains a separate allowance for each portfolio segment (loan & lease type). These portfolio segments include: (1) commercial real estate; (2) agricultural real estate; (3) real estate construction (including land and development loans); (4) residential 1^st mortgages; (5) home equity lines and loans; (6) agricultural; (7) commercial; (8) consumer and other; and (9) equipment leases. The allowance for credit losses attributable to each portfolio segment, which includes both individually evaluated impaired loans & leases and loans & leases that are collectively evaluated for impairment, is combined to determine the Company's overall allowance, which is included on the consolidated balance sheet.

10

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

Pass – A pass loan or lease is a strong credit with no existing or known potential weaknesses deserving of management's close attention.

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

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

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

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

The general reserve component of the allowance for credit losses also consists of reserve factors that are based on management's assessment of the following for each portfolio segment: (1) inherent credit risk; (2) historical losses; and (3) other qualitative factors. These reserve factors are inherently subjective and are driven by the repayment risk associated with each portfolio segment described below:

Commercial Real Estate – Commercial real estate mortgage loans are generally considered to possess a higher inherent risk of loss than the Company’s commercial, agricultural and consumer loan types. Adverse economic developments or an overbuilt market impact commercial real estate projects and may result in troubled loans. Trends in vacancy rates of commercial properties impact the credit quality of these loans. High vacancy rates reduce operating revenues and the ability for properties to produce sufficient cash flow to service debt obligations.

Real Estate Construction – Real estate construction loans, including land loans, are generally considered to possess a higher inherent risk of loss than the Company’s commercial, agricultural and consumer loan types. A major risk arises from the necessity to complete projects within specified cost and time lines. Trends in the construction industry significantly impact the credit quality of these loans, as demand drives construction activity. In addition, trends in real estate values significantly impact the credit quality of these loans, as property values determine the economic viability of construction projects.

Commercial – These loans are generally considered to possess a moderate inherent risk of loss because they are shorter-term; typically made to relationship customers; generally underwritten to existing cash flows of operating businesses; and may be collateralized by fixed assets, inventory and/or accounts receivable. Debt coverage is provided by business cash flows and economic trends influenced by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans.

11

Agricultural Real Estate and Agricultural – These loans are generally considered to possess a moderate inherent risk of loss since they are typically made to relationship customers and are secured by crop production, livestock and related real estate.  These loans are vulnerable to two risk factors that are largely outside the control of Company and borrowers: commodity prices and weather conditions.

Leases – Equipment leases are generally considered to possess a moderate inherent risk of loss. As lessor, the Company is subject to both the credit risk of the borrower and the residual value risk of the equipment. Credit risks are underwritten using the same credit criteria the Company would use when making an equipment term loan. Residual value risk is managed through the use of qualified, independent appraisers that establish the residual values the Company uses in structuring a lease.

Residential 1st Mortgages and Home Equity Lines and Loans – These loans are generally considered to possess a low inherent risk of loss, although this is not always true as evidenced by the correction in residential real estate values that occurred between 2007 and 2012. The degree of risk in residential real estate lending depends primarily on the loan amount in relation to collateral value, the interest rate and the borrower's ability to repay in an orderly fashion. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate that the borrowers' capacity to repay their obligations may be deteriorating.

Consumer & Other – A consumer installment loan portfolio is usually comprised of a large number of small loans scheduled to be amortized over a specific period. Most installment loans are made for consumer purchases. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate that the borrowers' capacity to repay their obligations may be deteriorating.

At least quarterly, the Board of Directors reviews the adequacy of the allowance, including consideration of the relative risks in the portfolio, current economic conditions and other factors. If the Board of Directors and management determine that changes are warranted based on those reviews, the allowance is adjusted. In addition, the Company's and Bank's regulators, including the Federal Reserve Board (“FRB”), the California Department of Business Oversight (“DBO”) and the Federal Deposit Insurance Corporation (“FDIC”), as an integral part of their examination process, review the adequacy of the allowance. These regulatory agencies may require additions to the allowance based on their judgment about information available at the time of their examinations.

Acquired Loans

Loans acquired through purchase or through a business combination are recorded at their fair value at the acquisition date. Credit discounts, which reflect estimates of credit losses, expected to be incurred over the life of the loan, are included in the determination of fair value; therefore, an allowance for loan losses is not recorded at the acquisition date.

Allowance for Credit Losses on Off-Balance-Sheet Credit Exposures

The Company also maintains a separate allowance for off-balance-sheet commitments. Management estimates anticipated losses using historical data and utilization assumptions. The allowance for off-balance-sheet commitments is included in Interest Payable and Other Liabilities on the Company’s Consolidated Balance Sheet.

Premises and Equipment

Premises, equipment, and leasehold improvements are stated at cost, less accumulated depreciation and amortization. Depreciation is computed principally by the straight-line method over the estimated useful lives of the assets. Estimated useful lives of buildings range from 30 to 40 years, and for furniture and equipment from 3 to 7 years. Leasehold improvements are amortized over the lesser of the terms of the respective leases, or their useful lives, which are generally 5 to 10 years. Remodeling and capital improvements are capitalized while maintenance and repairs are charged directly to occupancy expense.

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Other Real Estate

Other real estate, which is included in other assets, is expected to be sold and is comprised of properties no longer utilized for business operations and property acquired through foreclosure in satisfaction of indebtedness. These properties are recorded at fair value less estimated selling costs upon acquisition. Revised estimates to the fair value less cost to sell are reported as adjustments to the carrying amount of the asset, provided that such adjusted value is not in excess of the carrying amount at acquisition. Initial losses on properties acquired through full or partial satisfaction of debt are treated as credit losses and charged to the allowance for credit losses at the time of acquisition. Subsequent declines in value from the recorded amounts, routine holding costs, and gains or losses upon disposition, if any, are included in non-interest expense as incurred.

Income Taxes

The Company uses the liability method of accounting for income taxes. This method results in the recognition of deferred tax assets and liabilities that are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. The deferred provision for income taxes is the result of the net change in the deferred tax asset and deferred tax liability balances during the year. This amount combined with the current taxes payable or refundable results in the income tax expense for the current year.

The Company follows the standards set forth in the “Income Taxes” topic of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. This standard prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

The Company accounts for leases with Investment Tax Credits (ITC) under the deferred method as established in ASC 740-10. ITC are viewed and accounted for as a reduction of the cost of the related assets and presented as deferred income on the Company’s financial statement.

When tax returns are filed, it is certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Interest expense and penalties associated with unrecognized tax benefits, if any, are included in the provision for income taxes in the Consolidated Statements of Income.

Basic Earnings Per Common Share

The Company’s common stock is not traded on any exchange. The shares are primarily held by local residents and are not actively traded. Basic earnings per common share amounts are computed by dividing net income by the weighted average number of common shares outstanding for the period. There are no common stock equivalent shares. Therefore, there is no presentation of diluted basic earnings per common share. See Note 6 for additional information.

Segment Reporting

The “Segment Reporting” topic of the FASB ASC requires that public companies report certain information about operating segments. It also requires that public companies report certain information about their products and services, the geographic areas in which they operate, and their major customers. The Company is a holding company for a community bank, which offers a wide array of products and services to its customers. Pursuant to its banking strategy, emphasis is placed on building relationships with its customers, as opposed to building specific lines of business. As a result, the Company is not organized around discernible lines of business and prefers to work as an integrated unit to customize solutions for its customers, with business line emphasis and product offerings changing over time as needs and demands change. Therefore, the Company only reports one segment.

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Low Income Housing Tax Credit Investments (LIHTC)

The Company accounts for its interest in LIHTC using the cost method as established in ASC 323-740. As an investor, the Company obtains income tax credits and deductions from the operating losses of these tax credit entities. The income tax credits and deductions are allocated to the investors based on their ownership percentages and are recorded as a reduction of income tax expense (or an increase to income tax benefit) and a reduction of federal income taxes payable.

Comprehensive Income

The “Comprehensive Income” topic of the FASB ASC establishes standards for the reporting and display of comprehensive income and its components in the financial statements. Other comprehensive income (loss) refers to revenues, expenses, gains, and losses that U.S. GAAP recognize as changes in value to an enterprise but are excluded from net income. For the Company, comprehensive income includes net income and changes in fair value of its available-for-sale investment securities.

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.

Business Combinations And Related Matters

Business combinations are accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations. Under the acquisition method, the acquiring entity in a business combination recognizes 100 percent of the acquired assets and assumed liabilities, regardless of the percentage owned, at their estimated fair values as of the date of acquisition. Any excess of the fair value over the purchase price of net assets and other identifiable intangible assets acquired is recorded as bargain purchase gain. Assets acquired and liabilities assumed from contingencies must also be recognized at fair value, if the fair value can be determined during the measurement period. Results of operations of an acquired business are included in the statement of operations from the date of acquisition. Acquisition-related costs, including conversion charges, are expensed as incurred. The Company applied this guidance to the acquisition of Delta National Bancorp, which was consummated on November 18, 2016. The Company's consolidated financial statements reflect the operations of Delta National Bancorp beginning November 19, 2016.

Intangible Assets

Intangible assets are comprised of core deposit intangibles acquired in the Delta National Bancorp acquisition and included in other assets. Intangible assets with definite useful lives are amortized over their respective estimated useful lives. If an event occurs that indicates the carrying amount of an intangible asset may not be recoverable, management reviews the asset for impairment.

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2. Investment Securities

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

(in thousands):

	Amortized		Gross Unrealized				Fair/Book
September 30, 2017	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	3,091	$	78	$	-	$	3,169
US Treasury Notes		144,657		2		249		144,410
US Govt SBA		31,732		45		86		31,691
Mortgage Backed Securities (1)		274,877		1,985		819		276,043
Other		1,010		-		-		1,010
Total	$	455,367	$	2,110	$	1,154	$	456,323

	Amortized		Gross Unrealized				Fair/Book
December 31, 2016	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	3,127	$	114	$	-	$	3,241
US Treasury Notes		134,755		5		332		134,428
US Govt SBA		36,532		42		260		36,314
Mortgage Backed Securities (1)		272,858		1,725		1,313		273,270
Other		1,010		-		-		1,010
Total	$	448,282	$	1,886	$	1,905	$	448,263

	Amortized		Gross Unrealized				Fair/Book
September 30, 2016	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	83,129	$	165	$	1	$	83,293
US Treasury Notes		85,470		211		-		85,681
Mortgage Backed Securities (1)		183,268		5,605		-		188,873
Other		1,010		-		-		1,010
Total	$	352,877	$	5,981	$	1	$	358,857

⁽¹⁾ All Mortgage Backed Securities consist of securities collateralized by residential real estate and were issued by an agency or government sponsored entity of the U.S. government.

The book values, estimated fair values and unrealized gains and losses of investments classified as held-to-maturity are as follows (in thousands):

	Book		Gross Unrealized				Fair
September 30, 2017	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	55,542	$	749	$	-	$	56,291
Total	$	55,542	$	749	$	-	$	56,291

	Book		Gross Unrealized				Fair
December 31, 2016	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	58,109	$	339	$	40	$	58,408
Total	$	58,109	$	339	$	40	$	58,408

	Book		Gross Unrealized				Fair
September 30, 2016	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	58,905	$	1,549	$	-	$	60,454
Total	$	58,905	$	1,549	$	-	$	60,454

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

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The amortized cost and estimated fair values of investment securities at September 30, 2017 by contractual maturity are shown in the following table (in thousands):

	Available-for-Sale				Held-to-Maturity
September 30, 2017	Amortized Cost		Fair/Book Value		Book Value		Fair Value
Within one year	$	111,092	$	111,024	$	1,985	$	1,989
After one year through five years		30,477		30,394		9,221		9,238
After five years through ten years		13,429		13,408		13,694		13,887
After ten years		25,492		25,454		30,642		31,177
		180,490		180,280		55,542		56,291
Investment securities not due at a single maturity date:
Mortgage-backed securities		274,877		276,043		-		-
Total	$	455,367	$	456,323	$	55,542	$	56,291

Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The following tables show those investments with gross unrealized losses and their market value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at the dates indicated (in thousands):

	Less Than 12 Months				12 Months or More				Total
September 30, 2017	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Securities Available-for-Sale
US Treasury Notes	$	74,414	$	249	$	-	$	-	$	74,414	$	249
US Govt SBA		18,669		86		-		-		18,669		86
Mortgage Backed Securities		122,887		819		-		-		122,887		819
Total	$	215,970	$	1,154	$	-	$	-	$	215,970	$	1,154

	Less Than 12 Months				12 Months or More				Total
December 31, 2016	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Securities Available-for-Sale
US Treasury Notes	$	99,429	$	332	$	-	$	-	$	99,429	$	332
US Govt SBA		27,483		260		-		-		27,483		260
Mortgage Backed Securities		123,157		1,313		-		-		123,157		1,313
Total	$	250,069	$	1,905	$	-	$	-	$	250,069	$	1,905
Securities Held-to-Maturity
Obligations of States and Political Subdivisions	$	7,251	$	40	$	-	$	-	$	7,251	$	40
Total	$	7,251	$	40	$	-	$	-	$	7,251	$	40

	Less Than 12 Months				12 Months or More				Total
September 30, 2016	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Securities Available-for-Sale
Government Agency & Government-Sponsored Entities	$	59,993	$	1	$	-	$	-	$	59,993	$	1
Total	$	59,993	$	1	$	-	$	-	$	59,993	$	1

As of September 30, 2017, the Company held 485 investment securities of which 156 were in a loss position for less than twelve months. No securities were in a loss position for twelve months or more. Management periodically evaluates each investment security for other-than-temporary impairment relying primarily on industry analyst reports and observations of market conditions and interest rate fluctuations. Management believes it will be able to collect all amounts due according to the contractual terms of the underlying investment securities.

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Securities of Government Agency and Government Sponsored Entities – The unrealized losses on the Company’s investment in securities of government agency and government sponsored entities were $0, $0, and $1,000 at September 30, 2017, December 31, 2016 and September 30, 2016, respectively. The unrealized losses were caused by interest rate fluctuations. Repayment of these investments is guaranteed by an agency or government sponsored entity of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company's investment. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at September 30, 2017, December 31, 2016, and September 30, 2016.

U.S. Treasury Notes – At September 30, 2017, six U.S. Treasury Note security investments were in a loss position for less than 12 months and none were in a loss position for 12 months or more. The unrealized losses on the Company's investment in U.S. Treasury Notes were $249,000 at September 30, 2017 and $332,000 at December 31, 2016. There were no U.S. Treasury Notes in a loss position at September 30, 2016. The unrealized losses were caused by interest rate fluctuations. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at September 30, 2017 and December 31, 2016.

U.S. Government SBA – At September 30, 2017, 94 U.S. Government SBA security investments were in a loss position for less than 12 months and none were in a loss position for 12 months or more. The unrealized losses on the Company's investment in U.S. Government SBA securities were $86,000 at September 30, 2017 and $260,000 at December 31, 2016. The unrealized losses were caused by interest rate fluctuations. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at September 30, 2017 and December 31, 2016. The Company did not own any U.S. Government SBA securities prior to December 2016.

Mortgage Backed Securities – At September 30, 2017, 55 mortgage backed security investments were in a loss position for less than 12 months and none were in a loss position for 12 months or more. The unrealized losses on the Company's investment in mortgage backed securities were $819,000, $1.3 million, and $0 at September 30, 2017, December 31, 2016, and September 30, 2016, respectively. The unrealized losses on the Company’s investment in mortgage-backed securities were caused by interest rate fluctuations. The contractual cash flows of these investments are guaranteed by an agency or government sponsored entity of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company's investment. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2017, December 31, 2016 and September 30, 2016, respectively.

Obligations of States and Political Subdivisions - At September 30, 2017, no obligations of states and political subdivisions were in a loss position for less than 12 months. None were in a loss position for 12 months or more. As of September 30, 2017, over ninety-eight percent of the Company’s bank-qualified municipal bond portfolio is rated at either the issue or issuer level, and all of these ratings are “investment grade.” The Company monitors the status of the two percent of the portfolio that is not rated and at the current time does not believe any of them to be exhibiting financial problems that could result in a loss in any individual security.

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The unrealized losses on the Company’s investment in obligations of states and political subdivisions were $0, $40,000 and $0 at September 30, 2017, December 31, 2016 and September 30, 2016, respectively. Management believes that any unrealized losses on the Company's investments in obligations of states and political subdivisions were primarily caused by interest rate fluctuations. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2016 and September 30, 2016.

Proceeds from sales and calls of securities were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2017		2016		2017		2016
Proceeds	$	-	$	1,855	$	7,831	$	104,750
Gains		-		3		143		248
Losses		-		-		12		534

Pledged Securities

As of September 30, 2017, securities carried at $201.8 million were pledged to secure public deposits, Federal Home Loan Bank (“FHLB”) borrowings, and other government agency deposits as required by law. This amount was $171.9 million at December 31, 2016, and $185.1 million at September 30, 2016.

Investment in Unconsolidated Subsidiary

On April 5, 2017, the Company purchased 4.9% of the voting shares of Bank of Rio Vista, Rio Vista, California for $1.4 million.  On July 3, 2017, the Federal Reserve Bank of San Francisco approved the Company’s application to acquire an additional 34.55% of the voting shares for $10.5 million.  The purchase of the additional shares closed on July 20, 2017. The Company, as per requirements outlined in ASC 323-10-15-6, does not have the ability to exercise significant influence over BORV’s operating and financial policies. Accordingly, the investment in BORV is accounted for under the cost method of accounting as Other Assets.

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3. Loans & Leases and Allowance for Credit Losses

The following tables show the allocation of the allowance for credit losses by portfolio segment and by impairment methodology at the dates indicated (in thousands):

September 30, 2017	Commercial Real Estate			Agricultural Real Estate		Real Estate Construction			Residential 1st Mortgages		Home Equity Lines & Loans		Agricultural			Commercial			Consumer & Other			Leases			Unallocated		Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2017	$	11,110		$	9,450	$	3,223		$	865	$	2,140	$	7,381		$	8,515		$	200		$	3,586		$	1,449	$	47,919
Charge-Offs		(109	)		-		-			-		-		(7	)		-			(114	)		-			-		(230	)
Recoveries		110			-		-			37		6		-			6			46			-			-		205
Provision		(14	)		1,946		(473	)		95		115		(14	)		539			77			(392	)		971		2,850
Ending Balance- September 30, 2017	$	11,097		$	11,396	$	2,750		$	997	$	2,261	$	7,360		$	9,060		$	209		$	3,194		$	2,420	$	50,744
Third Quarter Allowance for Credit Losses:
Beginning Balance- July 1, 2017	$	11,242		$	10,265	$	2,687		$	872	$	2,170	$	7,236		$	9,544		$	205		$	2,952		$	1,891	$	49,064
Charge-Offs		-			-		-			-		-		-			-			(54	)		-			-		(54	)
Recoveries		99			-		-			18		1		-			2			14			-			-		134
Provision		(244	)		1,131		63			107		90		124			(486	)		44			242			529		1,600
Ending Balance- September 30, 2017	$	11,097		$	11,396	$	2,750		$	997	$	2,261	$	7,360		$	9,060		$	209		$	3,194		$	2,420	$	50,744
Ending Balance Individually Evaluated for Impairment		385			-		-			61		17		69			231			5			-			-		768
Ending Balance Collectively Evaluated for Impairment		10,712			11,396		2,750			936		2,244		7,291			8,829			204			3,194			2,420		49,976
Loans & Leases:
Ending Balance	$	683,037		$	470,738	$	162,167		$	257,920	$	33,350	$	259,127		$	257,951		$	7,312		$	85,177		$	-	$	2,216,779
Ending Balance Individually Evaluated for Impairment		4,855			-		-			1,887		369		368			1,752			7			-			-		9,238
Ending Balance Collectively Evaluated for Impairment	$	678,182		$	470,738	$	162,167		$	256,033	$	32,981	$	258,759		$	256,199		$	7,305		$	85,177		$	-	$	2,207,541

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December 31, 2016	Commercial Real Estate		Agricultural Real Estate		Real Estate Construction		Residential 1st Mortgages			Home Equity Lines & Loans			Agricultural		Commercial		Consumer & Other			Leases		Unallocated			Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2016	$	10,063	$	6,881	$	2,485	$	789		$	2,146		$	6,308	$	7,836	$	175		$	3,294	$	1,546		$	41,523
Charge-Offs		-		-		-		(21	)		(46	)		-		-		(105	)		-		-			(172	)
Recoveries		2		-		-		26			103			-		47		55			-		-			233
Provision		1,045		2,569		738		71			(63	)		1,073		632		75			292		(97	)		6,335
Ending Balance- December 31, 2016	$	11,110	$	9,450	$	3,223	$	865		$	2,140		$	7,381	$	8,515	$	200		$	3,586	$	1,449		$	47,919
Ending Balance Individually Evaluated for Impairment		-		-		-		70			18			128		608		7			-		-			831
Ending Balance Collectively Evaluated for Impairment		11,110		9,450		3,223		795			2,122			7,253		7,907		193			3,586		1,449			47,088
Loans & Leases:
Ending Balance	$	668,046	$	467,685	$	176,462	$	242,247		$	31,625		$	295,325	$	217,577	$	6,913		$	71,721	$	-		$	2,177,601
Ending Balance Individually Evaluated for Impairment		1,932		1,304		-		2,126			402			625		4,464		10			-		-			10,863
Ending Balance Collectively Evaluated for Impairment	$	666,114	$	466,381	$	176,462	$	240,121		$	31,223		$	294,700	$	213,113	$	6,903		$	71,721	$	-		$	2,166,738

September 30, 2016	Commercial Real Estate			Agricultural Real Estate			Real Estate Construction			Residential 1st Mortgages			Home Equity Lines & Loans			Agricultural			Commercial			Consumer & Other			Leases		Unallocated		Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2016	$	10,063		$	6,881		$	2,485		$	789		$	2,146		$	6,308		$	7,836		$	175		$	3,294	$	1,546	$	41,523
Charge-Offs		-			-			-			(7	)		(46	)		-			-			(77	)		-		-		(130	)
Recoveries		2			-			-			13			102			-			45			41			-		-		203
Provision		57			2,490			(27	)		34			(7	)		(86	)		(281	)		40			250		380		2,850
Ending Balance- September 30, 2016	$	10,122		$	9,371		$	2,458		$	829		$	2,195		$	6,222		$	7,600		$	179		$	3,544	$	1,926	$	44,446
Third Quarter Allowance for Credit Losses:
Beginning Balance- July 1, 2016	$	10,236		$	9,501		$	2,442		$	837		$	2,149		$	6,223		$	7,849		$	170		$	3,442	$	1,269	$	44,118
Charge-Offs		-			-			-			-			-			-			-			(25	)		-		-		(25	)
Recoveries		-			-			-			4			69			-			16			14			-		-		103
Provision		(114	)		(130	)		16			(12	)		(23	)		(1	)		(265	)		20			102		657		250
Ending Balance- September 30, 2016	$	10,122		$	9,371		$	2,458		$	829		$	2,195		$	6,222		$	7,600		$	179		$	3,544	$	1,926	$	44,446
Ending Balance Individually Evaluated for Impairment		-			-			-			74			18			129			620			7			-		-		848
Ending Balance Collectively Evaluated for Impairment		10,122			9,371			2,458			755			2,177			6,093			6,980			172			3,544		1,926		43,598
Loans & Leases:
Ending Balance	$	627,114		$	439,972		$	175,045		$	238,376		$	32,513		$	274,704		$	214,086		$	6,975		$	70,885	$	-	$	2,079,670
Ending Balance Individually Evaluated for Impairment		4,324			513			-			2,173			409			640			4,509			11			-		-		12,579
Ending Balance Collectively Evaluated for Impairment	$	622,790		$	439,459		$	175,045		$	236,203		$	32,104		$	274,064		$	209,577		$	6,964		$	70,885	$	-	$	2,067,091

The ending balance of loans individually evaluated for impairment includes restructured loans in the amount of $3.0 million at September 30, 2017, $3.3 million at December 31, 2016 and $4.9 million at September 30, 2016, which are no longer classified as TDRs.

20

The following tables show the loan & lease portfolio allocated by management’s internal risk ratings at the dates indicated (in thousands):

September 30, 2017	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	678,083	$	4,458	$	496	$	683,037
Agricultural Real Estate		465,427		1,281		4,030		470,738
Real Estate Construction		152,989		9,178		-		162,167
Residential 1st Mortgages		256,906		43		971		257,920
Home Equity Lines & Loans		33,297		-		53		33,350
Agricultural		250,372		5,331		3,424		259,127
Commercial		253,144		4,184		623		257,951
Consumer & Other		7,142		-		170		7,312
Leases		82,889		2,288		-		85,177
Total	$	2,180,249	$	26,763	$	9,767	$	2,216,779

December 31, 2016	Pass		Special Mention		Substandard		Total Loans
Loans & Leases:
Commercial Real Estate	$	659,694	$	6,817	$	1,535	$	668,046
Agricultural Real Estate		464,997		1,384		1,304		467,685
Real Estate Construction		176,462		-		-		176,462
Residential 1st Mortgages		241,816		47		384		242,247
Home Equity Lines and Loans		31,558		-		67		31,625
Agricultural		283,525		11,366		434		295,325
Commercial		208,172		6,974		2,431		217,577
Consumer & Other		6,705		-		208		6,913
Leases		71,721		-		-		71,721
Total	$	2,144,650	$	26,588	$	6,363	$	2,177,601

September 30, 2016	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	618,975	$	7,141	$	998	$	627,114
Agricultural Real Estate		437,059		1,418		1,495		439,972
Real Estate Construction		173,556		1,489		-		175,045
Residential 1st Mortgages		237,254		404		718		238,376
Home Equity Lines & Loans		32,408		-		105		32,513
Agricultural		273,184		1,070		450		274,704
Commercial		204,119		7,105		2,862		214,086
Consumer & Other		6,816		-		159		6,975
Leases		70,885		-		-		70,885
Total	$	2,054,256	$	18,627	$	6,787	$	2,079,670

See “Note 1. Significant Accounting Policies - Allowance for Credit Losses” for a description of the internal risk ratings used by the Company. There were no loans or leases outstanding at September 30, 2017, December 31, 2016, and September 30, 2016, rated doubtful or loss.

21

The following tables show an aging analysis of the loan & lease portfolio by the time past due at the dates indicated (in thousands):

September 30, 2017	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	-	$	-	$	-	$	-	$	-	$	683,037	$	683,037
Agricultural Real Estate		-		-		-		-		-		470,738		470,738
Real Estate Construction		-		-		-		-		-		162,167		162,167
Residential 1st Mortgages		-		-		-		-		-		257,920		257,920
Home Equity Lines & Loans		-		-		-		-		-		33,350		33,350
Agricultural		-		-		-		-		-		259,127		259,127
Commercial		-		3		-		-		3		257,948		257,951
Consumer & Other		16		-		-		4		20		7,292		7,312
Leases		-		-		-		-		-		85,177		85,177
Total	$	16	$	3	$	-	$	4	$	23	$	2,216,756	$	2,216,779

December 31, 2016	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	-	$	-	$	-	$	-	$	-	$	668,046	$	668,046
Agricultural Real Estate		-		-		-		1,304		1,304		466,381		467,685
Real Estate Construction		-		-		-		-		-		176,462		176,462
Residential 1st Mortgages		-		-		-		95		95		242,152		242,247
Home Equity Lines and Loans		-		-		-		-		-		31,625		31,625
Agricultural		-		-		-		243		243		295,082		295,325
Commercial		-		-		-		1,425		1,425		216,152		217,577
Consumer & Other		10		-		-		7		17		6,896		6,913
Leases		-		-		-		-		-		71,721		71,721
Total	$	10	$	-	$	-	$	3,074	$	3,084	$	2,174,517	$	2,177,601

September 30, 2016	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	-	$	-	$	-	$	998	$	998	$	626,116	$	627,114
Agricultural Real Estate		-		983		-		322		1,305		438,667		439,972
Real Estate Construction		-		-		-		-		-		175,045		175,045
Residential 1st Mortgages		-		-		-		55		55		238,321		238,376
Home Equity Lines & Loans		-		-		-		-		-		32,513		32,513
Agricultural		-		-		-		243		243		274,461		274,704
Commercial		-		-		-		1,450		1,450		212,636		214,086
Consumer & Other		5		-		-		7		12		6,963		6,975
Leases		-		-		-		-		-		70,885		70,885
Total	$	5	$	983	$	-	$	3,075	$	4,063	$	2,075,607	$	2,079,670

22

The following tables show information related to impaired loans & leases for the periods indicated (in thousands):

							Three Months Ended September 30, 2017				Nine Months Ended September 30, 2017
September 30, 2017	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	106	$	107	$	-	$	107	$	2	$	121	$	9
Agricultural Real Estate		-		-		-		488		-		868		-
Residential 1st Mortgages		399		456		-		403		3		415		6
Home Equity Lines & Loans		-		-		-		-		-		21		-
Agricultural		-		-		-		30		-		40		-
Commercial		-		-		-		-		-		504		-
	$	505	$	563	$	-	$	1,028	$	5	$	1,969	$	15
With an allowance recorded:
Commercial Real Estate	$	2,991	$	2,977	$	384	$	3,000	$	25		2,509	$	80
Residential 1st Mortgages		519		574		26		472		3		442		12
Home Equity Lines & Loans		83		90		4		67		-		76		2
Agricultural		367		367		69		499		7		588		21
Commercial		1,760		1,752		234		1,696		14		1,624		44
Consumer & Other		4		11		4		14		-		12		-
	$	5,724	$	5,771	$	721	$	5,748	$	49		5,251	$	159
Total	$	6,229	$	6,334	$	721	$	6,776	$	54	$	7,220	$	174

December 31, 2016	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	184	$	184	$	-	$	354	$	7
Residential 1st Mortgages		451		504		-		404		10
Home Equity Lines and Loans		-		-		-		181		-
Agricultural		-		-		-		144		5
Commercial		3,023		3,023		-		3,053		133
	$	4,963	$	5,016	$	-	$	4,705	$	158
With an allowance recorded:
Residential 1st Mortgages	$	430	$	469	$	21	$	336	$	13
Home Equity Lines and Loans		90		97		5		123		4
Agricultural		625		625		128		581		22
Commercial		1,441		1,640		608		1,536		8
Consumer & Other		6		13		6		12		-
	$	2,592	$	2,844	$	768	$	2,588	$	47
Total	$	7,555	$	7,860	$	768	$	7,293	$	205

							Three Months Ended September 30, 2016				Nine Months Ended September 30, 2016
September 30, 2016	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	1,074	$	1,071	$	-	$	575	$	2	$	248	$	6
Agricultural Real Estate		322		322		-		404		-		270		3
Residential 1st Mortgages		414		466		-		417		3		411		7
Home Equity Lines & Loans		-		-		-		-		-		339		-
Agricultural		191		191		-		192		2		193		5
Commercial		3,042		3,043		-		3,053		33		3,073		100
Consumer & Other		-		-				1		-		1		-
	$	5,043	$	5,093	$	-	$	4,642	$	40	$	4,535	$	121
With an allowance recorded:
Residential 1st Mortgages	$	430	$	471	$	21	$	335	$	3	$	290	$	9
Home Equity Lines & Loans		92		98		5		93		1		142		3
Agricultural		640		640		137		644		6		529		18
Commercial		1,466		1,648		620		1,536		-		1,599		8
Consumer & Other		7		13		7		8		-		18		-
	$	2,635	$	2,870	$	790	$	2,616	$	10	$	2,578	$	38
Total	$	7,678	$	7,963	$	790	$	7,258	$	50	$	7,113	$	159

23

Total recorded investment shown in the prior tables will not equal the total ending balance of loans & leases individually evaluated for impairment on the allocation of allowance tables. This is because the calculation of recorded investment takes into account charge-offs, net unamortized loan & lease fees & costs, unamortized premium or discount, and accrued interest. This table also excludes impaired loans that were previously modified in a troubled debt restructuring, are currently performing and are no longer classified as TDRs.

At September 30, 2017, the Company allocated $721,000 of specific reserves to $6.2 million of troubled debt restructured loans & leases, all of which were performing. The Company had no commitments at September 30, 2017 to lend additional amounts to customers with outstanding loans or leases that are classified as TDRs.

During the three and nine-month periods ending September 30, 2017, there were four loans & leases modified as a troubled debt restructuring. When a loan is restructured, the modification of the terms can include one or a combination of the following: a reduction of the stated interest rate; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate were for 5 years. Modifications involving an extension of the maturity date ranged from 7 to 10 years.

The following table presents loans or leases by class modified as troubled debt restructured loans or leases during the three and nine-month periods ended September 30, 2017 (in thousands):

	Three Months Ended September 30, 2017						Nine Months Ended September 30, 2017
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Residential 1st Mortgages		1	$	112	$	112		1	$	112	$	112
Home Equity Lines & Loans		1		32		32		1		32		32
Commercial		2		138		138		2		138		138
Total		4	$	282	$	282		4	$	282	$	282

The TDRs described above increased the allowance for credit losses by $13,000 for the three and nine-month periods ending September 30, 2017.

During the three and nine-months ended September 30, 2017, the twelve months ended December 31, 2016, and the three and nine-month periods ending September 30, 2016 there were no payment defaults on loans or leases modified as troubled debt restructurings within twelve months following the modification. The Company considers a loan or lease to be in payment default once it is greater than 90 days contractually past due under the modified terms.

The following table presents loans by class modified as troubled debt restructured loans for the period ended December 31, 2016 (in thousands):

	December 31, 2016
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial Real Estate		1	$	112	$	112
Residential 1st Mortgages		2		289		281
Home Equity Lines and Loans		2		305		286
Total		5	$	706	$	679

24

The troubled debt restructurings described above had no impact on the allowance for credit losses and resulted in charge-offs of $27,000 for the twelve months ended December 31, 2016.

At December 31, 2016, the Company allocated $736,000 of specific reserves to $5.9 million of troubled debt restructured loans, of which $4.5 million were performing. The Company had no commitments at December 31, 2016, to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

During the period ending December 31, 2016, the terms of certain loans were modified as troubled debt restructurings. Modifications involving a reduction of the stated interest rate of the loan were for 5 years. Modifications involving an extension of the maturity date were for 10 years.

The following table presents loans or leases by class modified as troubled debt restructured loans or leases during the three and nine-month periods ended September 30, 2016 (in thousands):

	Three Months Ended September 30, 2016						Nine Months Ended September 30, 2016
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Residential 1st Mortgages		1	$	192	$	192		2	$	289	$	281
Home Equity Lines & Loans		-		-		-		2		305		286
Total		1	$	192	$	192		4	$	594	$	567

The TDRs described above had no impact on the allowance for credit losses for the three and nine-month periods ending September 30, 2016, and resulted in charge-offs of $0 and $27,000 for the three and nine-month periods ended September 30, 2016.

At September 30, 2016, the Company allocated $758,000 of specific reserves to $6.1 million of troubled debt restructured loans & leases, of which $4.6 million were performing. The Company had no commitments at September 30, 2016 to lend additional amounts to customers with outstanding loans or leases that are classified as troubled debt restructurings.

During the three-month period ending September 30, 2016, there was one loan modified as a troubled debt restructuring. During the nine-month period ending September 30, 2016, the terms of certain loans & leases were modified as troubled debt restructurings. The modification of the terms of such loans & leases can include one or a combination of the following: a reduction of the stated interest rate; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate were for 5 years. Modifications involving an extension of the maturity date were for 10 years.

4. Fair Value Measurements

The Company follows the “Fair Value Measurement and Disclosures” topic of the FASB ASC, which establishes a framework for measuring fair value in U.S. GAAP and expands disclosures about fair value measurements. This standard applies whenever other standards require, or permit, assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. In this standard, the FASB clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, this standard establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy is as follows:

25

Level 1 inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date.

Level 2 inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

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

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

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

The Company does not record all loans & leases at fair value on a recurring basis. However, from time to time, a loan or lease is considered impaired and an allowance for credit losses is established. Once a loan or lease is identified as individually impaired, management measures impairment in accordance with the “Receivable” topic of the FASB ASC. The fair value of impaired loans or leases is estimated using one of several methods, including collateral value when the loan is collateral dependent, market value of similar debt, enterprise value, and discounted cash flows. Impaired loans & leases not requiring an allowance represent loans & leases for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans & leases. Impaired loans & leases where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. The fair value of collateral dependent impaired loans is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including sales comparison, cost and the income approach. Adjustments are often made in the appraisal process by the appraisers to take into account differences between the comparable sales and income and other available data. Such adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value. The valuation technique used for Level 3 nonrecurring impaired loans is primarily the sales comparison approach less selling costs of 10%.

Other Real Estate (“ORE”) is reported at fair value on a non-recurring basis. Fair values are based on recent real estate appraisals. These appraisals may use a single valuation approach or a combination of approaches including sales comparison, cost and the income approach. Adjustments are often made in the appraisal process by the appraisers to take into account differences between the comparable sales and income and other available data. Such adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value. The valuation technique used for Level 3 nonrecurring ORE is primarily the sales comparison approach less selling costs of 10%.

At September 30, 2017, there were no formal foreclosure proceedings in process for consumer mortgage loans secured by residential real estate properties.

26

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

			Fair Value Measurements At September 30, 2017, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	3,169	$	-	$	3,169	$	-
US Treasury Notes		144,410		144,410		-		-
US Govt SBA		31,691		-		31,691		-
Mortgage Backed Securities		276,043		-		276,043		-
Other		1,010		200		310		500
Total Assets Measured at Fair Value On a Recurring Basis	$	456,323	$	144,610	$	311,213	$	500

			Fair Value Measurements At December 31, 2016, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	3,241	$	-	$	3,241	$	-
US Treasury Notes		134,428		134,428		-		-
US Govt SBA		36,314		-		36,314		-
Mortgage Backed Securities		273,270		-		273,270		-
Other		1,010		200		310		500
Total Assets Measured at Fair Value On a Recurring Basis	$	448,263	$	134,628	$	313,135	$	500

			Fair Value Measurements At September 30, 2016, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	83,293	$	-	$	83,293	$	-
US Treasury Notes		85,681		85,681		-		-
Mortgage Backed Securities		188,873		-		188,873		-
Other		1,010		200		310		500
Total Assets Measured at Fair Value On a Recurring Basis	$	358,857	$	85,881	$	272,476	$	500

Fair values for Level 2 available-for-sale investment securities are based on quoted market prices for similar securities. During the three and nine-months ended September 30, 2017 and 2016, there were no transfers in or out of Level 1, 2, or 3.

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Available for sale investment securities categorized as Level 3 assets for the period ended September 30, 2017, December 31, 2016, and September 30, 2016, consisted of a $500,000 investment in a limited liability company that purchases SBA loans. There were no gains or losses or transfers in or out of level 3 during the periods ended September 30, 2017, December 31, 2016, and September 30, 2016.

The following tables present information about the Company’s other real estate and impaired loans or leases, classes of assets or liabilities that the Company carries at fair value on a non-recurring basis, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value for the periods indicated. Not all impaired loans or leases are carried at fair value. Impaired loans or leases are only included in the following tables when their fair value is based upon a current appraisal of the collateral, and if that appraisal results in a partial charge-off or the establishment of a specific reserve.

			Fair Value Measurements At September 30, 2017, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired Loans
Commercial Real Estate	$	2,594	$	-	$	-	$	2,594
Residential 1st Mortgage		491		-		-		491
Home Equity Lines and Loans		78		-		-		78
Agricultural		298		-		-		298
Commercial		1,519		-		-		1,519
Total Impaired Loans		4,980		-		-		4,980
Other Real Estate
Real Estate Construction		873		-		-		873
Total Other Real Estate		873		-		-		873
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	5,853	$	-	$	-	$	5,853

			Fair Value Measurements At December 31, 2016, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired Loans:
Residential 1st Mortgage	$	480	$	-	$	-	$	480
Home Equity Lines and Loans		83		-		-		83
Agricultural		497		-		-		497
Commercial		833		-		-		833
Total Impaired Loans		1,893		-		-		1,893
Other Real Estate:
Home Equity Lines and Loans		785		-		-		785
Real Estate Construction		2,960		-		-		2,960
Total Other Real Estate		3,745		-		-		3,745
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	5,638	$	-	$	-	$	5,638

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			Fair Value Measurements At September 30, 2016, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired Loans
Residential 1st Mortgage	$	496	$	-	$	-	$	496
Home Equity Lines and Loans		84		-		-		84
Agricultural		503		-		-		503
Commercial		847		-		-		847
Total Impaired Loans		1,930		-		-		1,930
Other Real Estate
Home Equity Lines and Loans		785		-		-		785
Total Other Real Estate		785		-		-		785
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	2,715	$	-	$	-	$	2,715

The Company’s property appraisals are primarily based on the sales comparison approach and the income approach methodologies, which consider recent sales of comparable properties, including their income generating characteristics, and then make adjustments to reflect the general assumptions that a market participant would make when analyzing the property for purchase. These adjustments may increase or decrease an appraised value and can vary significantly depending on the location, physical characteristics and income producing potential of each property. Additionally, the quality and volume of market information available at the time of the appraisal can vary from period to period and cause significant changes to the nature and magnitude of comparable sale adjustments. Given these variations, comparable sale adjustments are generally not a reliable indicator for how fair value will increase or decrease from period to period. Under certain circumstances, management discounts are applied based on specific characteristics of an individual property.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at September 30, 2017:

(in thousands)	Fair Value		Valuation Technique	Unobservable Inputs	Range, Weighted Avg.
Impaired Loans
Commercial Real Estate	$	2,594	Income Approach	Discount Rate	3.25% - 3.25%, 3.25 %
Residential 1st Mortgage	$	491	Sales Comparison Approach	Adjustment for Difference Between Comparable Sales	1% - 4%, 3 %
Home Equity Lines and Loans	$	78	Sales Comparison Approach	Adjustment for Difference Between Comparable Sales	1% - 2%, 2 %
Agricultural	$	298	Income Approach	Discount Rate	7.50% - 7.50%, 7.50 %
Commercial	$	1,519	Income Approach	Discount Rate	2.00% - 9.00%, 3.00 %
Other Real Estate
Real Estate Construction	$	873	Sales Comparison Approach	Adjustment for Difference Between Comparable Sales	10% - 10%, 10 %

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5. Fair Value of Financial Instruments

U.S. GAAP requires disclosure of fair value information about financial instruments, whether or not recognized on the balance sheet, for which it is practical to estimate that value. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. The use of assumptions and various valuation techniques, as well as the absence of secondary markets for certain financial instruments, will likely reduce the comparability of fair value disclosures between financial institutions. In some cases, book value is a reasonable estimate of fair value due to the relatively short period of time between origination of the instrument and its expected realization.

The following tables summarize the book value and estimated fair value of financial instruments for the periods indicated:

				Fair Value of Financial Instruments Using
September 30, 2017 (in thousands)	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Estimated Fair Value
Assets:
Cash and Cash Equivalents	$	193,270		$	193,270	$	-	$	-		$	193,270
Investment Securities Available-for-Sale:
Government Agency & Government-Sponsored Entities		3,169			-		3,169		-			3,169
U.S. Govt SBA		31,691			-		31,691		-			31,691
U.S. Treasury Notes		144,410			144,410		-		-			144,410
Mortgage Backed Securities		276,043			-		276,043		-			276,043
Other		1,010			200		310		500			1,010
Total Investment Securities Available-for-Sale		456,323			144,610		311,213		500			456,323
Investment Securities Held-to-Maturity:
Obligations of States and Political Subdivisions		55,542			-		39,254		17,037			56,292
Total Investment Securities Held-to-Maturity		55,542			-		39,254		17,037			56,292
FHLB Stock		10,342			N/A		N/A		N/A			N/A
Loans & Leases, Net of Deferred Fees & Allowance:
Commercial Real Estate		671,940			-		-		665,566			665,566
Agricultural Real Estate		459,342			-		-		446,684			446,684
Real Estate Construction		159,417			-		-		159,131			159,131
Residential 1st Mortgages		256,923			-		-		258,256			258,256
Home Equity Lines and Loans		31,089			-		-		31,869			31,869
Agricultural		251,767			-		-		249,995			249,995
Commercial		248,891			-		-		247,344			247,344
Consumer & Other		7,103			-		-		7,067			7,067
Leases		81,983			-		-		85,032			85,032
Unallocated Allowance		(2,420	)		-		-		(2,420	)		(2,420	)
Total Loans & Leases, Net of Deferred Fees & Allowance		2,166,035			-		-		2,148,524			2,148,524
Accrued Interest Receivable		11,498			-		11,498		-			11,498
Liabilities:
Deposits:
Demand		767,162			767,162		-		-			767,162
Interest Bearing Transaction		564,904			564,904		-		-			564,904
Savings and Money Market		827,588			827,588		-		-			827,588
Time		549,773			-		547,796		-			547,796
Total Deposits		2,709,427			2,159,654		547,796		-			2,707,450
Subordinated Debentures		10,310			-		6,589		-			6,589
Accrued Interest Payable		939			-		939		-			939

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				Fair Value of Financial Instruments Using
December 31, 2016 (in thousands)	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Estimated Fair Value
Assets:
Cash and Cash Equivalents	$	98,960		$	98,960	$	-	$	-		$	98,960
Investment Securities Available-for-Sale:
Government Agency & Government-Sponsored Entities		3,241			-		3,241		-			3,241
U.S. Govt SBA		36,314			-		36,314		-			36,314
U.S. Treasury Notes		134,428			134,428		-		-			134,428
Mortgage Backed Securities		273,270			-		273,270		-			273,270
Other		1,010			200		310		500			1,010
Total Investment Securities Available-for-Sale		448,263			134,628		313,135		500			448,263
Investment Securities Held-to-Maturity:
Obligations of States and Political Subdivisions		58,109			-		40,415		17,993			58,408
Total Investment Securities Held-to-Maturity		58,109			-		40,415		17,993			58,408
FHLB Stock		8,872			N/A		N/A		N/A			N/A
Loans & Leases, Net of Deferred Fees & Allowance:
Commercial Real Estate		656,936			-		-		651,877			651,877
Agricultural Real Estate		458,235			-		-		444,393			444,393
Real Estate Construction		173,239			-		-		172,682			172,682
Residential 1st Mortgages		241,382			-		-		241,174			241,174
Home Equity Lines and Loans		29,485			-		-		30,495			30,495
Agricultural		287,944			-		-		286,074			286,074
Commercial		209,062			-		-		207,215			207,215
Consumer & Other		6,713			-		-		6,706			6,706
Leases		68,135			-		-		67,893			67,893
Unallocated Allowance		(1,449	)		-		-		(1,449	)		(1,449	)
Total Loans & Leases, Net of Deferred Fees & Allowance		2,129,682			-		-		2,107,060			2,107,060
Accrued Interest Receivable		10,047			-		10,047		-			10,047
Liabilities:
Deposits:
Demand		756,236			756,236		-		-			756,236
Interest Bearing Transaction		495,063			495,063		-		-			495,063
Savings and Money Market		760,119			760,119		-		-			760,119
Time		570,293			-		569,183		-			569,183
Total Deposits		2,581,711			2,011,418		569,183		-			2,580,601
Subordinated Debentures		10,310			-		6,578		-			6,578
Accrued Interest Payable		852			-		852		-			852

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				Fair Value of Financial Instruments Using
September 30, 2016 (in thousands)	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Estimated Fair Value
Assets:
Cash and Cash Equivalents	$	99,303		$	99,303	$	-	$	-		$	99,303
Investment Securities Available-for-Sale:
Government Agency & Government-Sponsored Entities		83,293			-		83,293		-			83,293
US Treasury Notes		85,681			85,681		-		-			85,681
Mortgage Backed Securities		188,873			-		188,873		-			188,873
Other		1,010			200		310		500			1,010
Total Investment Securities Available-for-Sale		358,857			85,881		272,476		500			358,857
Investment Securities Held-to-Maturity:
Obligations of States and Political Subdivisions		58,905			-		42,675		17,779			60,454
Total Investment Securities Held-to-Maturity		58,905			-		42,675		17,779			60,454
FHLB Stock		8,872			N/A		N/A		N/A			N/A
Loans & Leases, Net of Deferred Fees & Allowance:
Commercial Real Estate		616,992			-		-		620,655			620,655
Agricultural Real Estate		430,601			-		-		422,056			422,056
Real Estate Construction		172,587			-		-		172,358			172,358
Residential 1st Mortgages		237,547			-		-		241,703			241,703
Home Equity Lines and Loans		30,318			-		-		31,397			31,397
Agricultural		268,482			-		-		267,101			267,101
Commercial		206,486			-		-		205,769			205,769
Consumer & Other		6,796			-		-		6,832			6,832
Leases		67,341							69,408			69,408
Unallocated Allowance		(1,926	)		-		-		(1,926	)		(1,926	)
Total Loans & Leases, Net of Deferred Fees & Allowance		2,035,224			-		-		2,035,353			2,035,353
Accrued Interest Receivable		10,116			-		10,116		-			10,116
Liabilities:
Deposits:
Demand		672,351			672,351		-		-			672,351
Interest Bearing Transaction		433,220			433,220		-		-			433,220
Savings and Money Market		702,441			702,441		-		-			702,441
Time		547,625			-		547,145		-			547,145
Total Deposits		2,355,637			1,808,012		547,145		-			2,355,157
Subordinated Debentures		10,310			-		6,606		-			6,606
Accrued Interest Payable		681			-		681		-			681

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Fair value estimates presented herein are based on pertinent information available to management as of September 30, 2017, December 31, 2016, and September 30, 2016. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purpose of these financial statements since that date, and; therefore, current estimates of fair value may differ significantly from the amounts presented above. The methods and assumptions used to estimate the fair value of each class of financial instrument listed in the table above are explained below.

Cash and Cash Equivalents - The carrying amounts reported in the balance sheet for cash and due from banks, interest-bearing deposits with banks, federal funds sold, and securities purchased under agreements to resell are a reasonable estimate of fair value. All cash and cash equivalents are classified as Level 1.

Investment Securities - Fair values for investment securities consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond's terms and conditions, among other things. Based on the available market information the classification level could be 1, 2, or 3.

Federal Home Loan Bank Stock - It is not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability.

Loans & Leases, Net of Deferred Loan & Lease Fees & Allowance - Fair values of loans & leases are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans & leases are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans & leases are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans & leases do not necessarily represent an exit price.

Deposit Liabilities - The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. Fair values for fixed-maturity certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

Subordinated Debentures - The fair values of the Company’s Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

Accrued Interest Receivable and Payable - The carrying amount of accrued interest receivable and payable approximates their fair value resulting in a Level 2 classification.

6. Dividends and Basic Earnings Per Common Share

Farmers & Merchants Bancorp common stock is not traded on any exchange. The shares are primarily held by local residents and are not actively traded. On May 9, 2017, the Board of Directors of Farmers & Merchants Bancorp announced a mid-year cash dividend of $6.75 per share, a 3.1% increase over the $6.55 per share paid on July 1, 2016. The cash dividend was paid on July 1, 2017, to shareholders of record on June 9, 2017.

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Basic earnings per common share amounts are computed by dividing net income by the weighted average number of common shares outstanding for the period. The Company has no securities or other contracts, such as stock options, that could require the issuance of common stock.   Accordingly, diluted earnings per share are not presented. The following table calculates the basic earnings per common share for the three and nine months ended September 30, 2017 and 2016.

	Three Months Ended September 30,				Nine Months Ended September 30,
(net income in thousands)	2017		2016		2017		2016
Net Income	$	8,581	$	7,538	$	24,589	$	22,042
Weighted Average Number of Common Shares Outstanding		810,291		792,387		809,002		792,223
Basic Earnings Per Common Share Amount	$	10.59	$	9.51	$	30.39	$	27.82

7. Shareholders’ Equity

During the first and third quarters of 2017, the Company issued a combined total 4,975 shares of common stock to the Bank’s non-qualified defined contribution retirement plans. These shares were issued at prices ranging from $590.00 to $595.00 per share based upon valuations completed during the quarter of issuance by a nationally recognized bank consulting and advisory firm and in reliance upon the exemption in Section 4(a)(2) of the Securities Act of 1933, as amended, and the regulations promulgated thereunder. The proceeds were contributed to the Bank as equity capital.

During the first quarter of 2016, the Company issued 1,600 shares of common stock to the Bank’s non-qualified defined contribution retirement plans. These shares were issued at a price of $525 per share based upon a valuation completed during the quarter of issuance by a nationally recognized bank consulting and advisory firm and in reliance upon the exemption in Section 4(2) of the Securities Act of 1933, as amended, the regulations promulgated thereunder. The proceeds were contributed to the Bank as equity capital.

8. Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU will require the earlier recognition of credit losses on loans and other financial instruments based on an expected loss model, replacing the incurred loss model that is currently in use. Under the new guidance, an entity will measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The expected loss model will apply to loans and leases, unfunded lending commitments, held-to maturity debt securities and other debt instruments measured at amortized cost. The impairment model for available-for-sale debt securities will require the recognition of credit losses through a valuation allowance when fair value is less than amortized cost, regardless of whether the impairment is considered to be other-than-temporary. The new guidance is effective on January 1, 2020, with early adoption permitted on January 1, 2019. The Company is currently evaluating the provisions of this ASU and has created a cross-functional team to begin its implementation efforts of this new guidance. While the Company has not quantified the impact of this ASU, it is evaluating historical loan level data requirements necessary for the implementation of the model, consulting with outside professionals, evaluating our current IT system, as well as various methodologies for determining expected credit losses. The Company does not intend to early adopt this ASU.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new standard is being issued to increase the transparency and comparability around lease obligations. Previously unrecorded off-balance sheet obligations will now be brought more prominently to light by presenting lease liabilities on the face of the balance sheet, accompanied by enhanced qualitative and quantitative disclosures in the notes to the financial statements. This ASU applies to leasing arrangements exceeding a twelve-month term. ASU 2016-02 is effective for annual periods, including interim periods within those annual periods beginning after December 15, 2018 and requires a modified retrospective method upon adoption. Early application of the amendments is permitted. The Company is currently evaluating the provisions of this ASU to determine the potential impact the new standard will have on the Company’s consolidated financial statements. While the Company has not quantified the impact to its balance sheet, it does expect the adoption of this ASU will result in a gross-up in its balance sheet as a result of recording a right-of-use asset and a lease liability for these leases. The Company does not intend to early adopt this ASU.

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In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09, Revenue from Contracts with Customers (Topic 606).  As a result of the deferral, the guidance in ASU 2014-09 will be effective for the Company for reporting periods beginning after December 15, 2017. The Update modifies the guidance companies use to recognize revenue from contracts with customers for transfers of goods or services and transfers of nonfinancial assets, unless those contracts are within the scope of other standards. The guidance also requires new qualitative and quantitative disclosures, including information about contract balances and performance obligations. The Company is currently evaluating the impact the adoption of this update will have on the consolidated financial statements. As a financial institution, the Company’s largest component of revenue, interest income, is excluded from the scope of this ASU. The Company is currently performing an overall assessment of revenue streams potentially affected by the ASU, including certain deposit related fees and interchange fees, to determine the potential impact of this guidance on our consolidated financial statements. The Company does not intend to early adopt this ASU.

Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

The following is management’s discussion and analysis of the major factors that influenced our financial performance for the three and nine months ended September 30, 2017. This analysis should be read in conjunction with our 2016 Annual Report to Shareholders on Form 10-K, and with the unaudited financial statements and notes as set forth in this report.

Forward–Looking Statements

This Form 10-Q contains various forward-looking statements, usually containing the words “estimate,” “project,” “expect,” “objective,” “goal,” or similar expressions and includes assumptions concerning Farmers & Merchants Bancorp’s (together with its subsidiaries, the “Company” or “we”) operations, future results, and prospects. These forward-looking statements are based upon current expectations and are subject to risks and uncertainties. In connection with the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary statement identifying important factors which could cause the actual results of events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions.

Such factors include the following: (1) economic conditions in the Central Valley of California; (2) significant changes in interest rates and loan prepayment speeds; (3) credit risks of lending and investment activities; (4) changes in federal and state banking laws or regulations; (5) competitive pressure in the banking industry; (6) changes in governmental fiscal or monetary policies; (7) uncertainty regarding the economic outlook resulting from the continuing war on terrorism, as well as actions taken or to be taken by the U.S. or other governments as a result of further acts or threats of terrorism; (8) water management issues in California and the resulting impact on the Company’s agricultural customers; (9) expansion into new geographic markets and new lines of business; and (10) other factors discussed in Item 1A. Risk Factors located in the Company’s 2016 Annual Report on Form 10-K.

Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances arising after the date on which they are made.

Introduction

Farmers & Merchants Bancorp, or the Company, is a bank holding company formed March 10, 1999. Its subsidiary, Farmers & Merchants Bank of Central California, or the Bank, is a California state-chartered bank formed in 1916. Banking services are provided in twenty-seven locations in the Company's service area. The service area includes Sacramento, San Joaquin, Stanislaus, Merced and Contra Costa Counties with branches in Sacramento, Elk Grove, Galt, Lodi, Stockton, Linden, Modesto, Turlock, Hilmar, Merced, Manteca, Riverbank, Walnut Creek and Concord.

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As a bank holding company, the Company is subject to regulation and examination by the Board of Governors of the Federal Reserve System (“FRB”). As a California, state-chartered, non-fed member bank, the Bank is subject to regulation and examination by the California Department of Business Oversight (“DBO”) and the Federal Deposit Insurance Corporation (“FDIC”).

Overview

Although the Company has initiated efforts to expand its geographic footprint into the East Bay area of San Francisco, California, the Company’s primary service area remains the mid Central Valley of California, a region that can be significantly impacted by the seasonal needs of the agricultural industry. Accordingly, discussion of the Company’s Financial Condition and Results of Operations is influenced by the seasonal banking needs of its agricultural customers (e.g., during the spring and summer customers draw down their deposit balances and increase loan borrowing to fund the purchase of equipment and planting of crops. Correspondingly, deposit balances are replenished and loans repaid in late fall and winter as crops are harvested and sold).

The State of California experienced drought conditions from 2013 through most of 2016.  Although significant levels of rain and snow in late 2016 and early 2017 have alleviated drought conditions in many areas of California, including the Company’s primary service area, the long-term risks associated with the availability of water continue to exist.

For the three and nine months ended September 30, 2017, Farmers & Merchants Bancorp reported net income of $8,581,000 and $24,589,000, earnings per share of $10.59 and $30.39 and return on average assets of 1.13% and 1.10%, respectively. Return on average shareholders’ equity was 11.54% and 11.28% for the three and nine months ended September 30, 2017.

For the three and nine months ended September 30, 2016, Farmers & Merchants Bancorp reported net income of $7,538,000 and $22,042,000, earnings per share of $9.51 and $27.82 and return on average assets of 1.14% and 1.13%, respectively. Return on average shareholders’ equity was 11.22% and 11.16% for the three and nine months ended September 30, 2016.

The following is a summary of the financial results for the nine-month period ended September 30, 2017 compared to September 30, 2016.

· Net income increased 11.6% to $24.6 million from $22.0 million.

· Earnings per share increased 9.2% to $30.39 from $27.82.

· Total assets increased 12.6% to $3.1 billion from $2.7 billion.

· Total loans & leases increased 6.6% to $2.2 billion from $2.1 billion.

· Total deposits increased 15.0% to $2.7 billion from $2.4 billion.

The primary reasons for the Company’s $4.0 million or 11.4% increase in pre-tax income in the first nine months of 2017 as compared to the same period of 2016 were:

· A $9.63 million increase in net interest income related to the growth in earning assets.

· A $1.17 million increase in the gain on sale of fixed assets related to the disposition of one of the Company’s properties.

· A $417,000 increase in gain on sale of investment securities.

· A $919,000 reduction in non-interest expense related to the Delta Bancorp acquisition that took place in 2016.

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These positive impacts were partially offset by:

· A $5.53 million increase in non-interest expense related to a non-recurring gain on sale of ORE that took place in the first quarter of the prior year (2016) and was recorded as a reduction to non-interest expense.

· A $2.69 million increase in salaries and employee benefits.

Results of Operations

Net Interest Income / Net Interest Margin

The tables on the following pages reflect the Company's average balance sheets and volume and rate analysis for the three and nine-month periods ended September 30, 2017 and 2016.

The average yields on earning assets and average rates paid on interest-bearing liabilities have been computed on an annualized basis for purposes of comparability with full year data. Average balance amounts for assets and liabilities are the computed average of daily balances.

Net interest income is the amount by which the interest and fees on loans & leases and other interest earning assets exceed the interest paid on interest bearing sources of funds. For the purpose of analysis, the interest earned on tax-exempt investments and municipal loans is adjusted to an amount comparable to interest subject to normal income taxes.  This adjustment is referred to as “taxable equivalent” and is noted wherever applicable.

The Volume and Rate Analysis of Net Interest Income summarizes the changes in interest income and interest expense based on changes in average asset and liability balances (volume) and changes in average rates (rate). For each category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to: (1) changes in volume (change in volume multiplied by initial rate); (2) changes in rate (change in rate multiplied by initial volume); and (3) changes in rate/volume, also called  “changes in mix” (allocated in proportion to the respective volume and rate components).

The Company’s earning assets and rate sensitive liabilities are subject to repricing at different times, which exposes the Company to income fluctuations when interest rates change. In order to minimize income fluctuations, the Company attempts to match asset and liability maturities. However, some maturity mismatch is inherent in the asset and liability mix. See “Item 3. Quantitative and Qualitative Disclosures about Market Risk – Interest Rate Risk.”

37

Farmers & Merchants Bancorp

Quarterly Average Balances and Interest Rates

(Interest and Rates on a Taxable Equivalent Basis)

(in thousands)

	Three Months Ended Sept 30, 2017									Three Months Ended Sept 30, 2016
Assets	Balance			Interest			Rate			Balance			Interest			Rate
Interest Bearing Deposits with Banks	$	189,647		$	648			1.36	%	$	39,523		$	51			0.51	%
Investment Securities:
U.S. Treasuries		80,985			224			1.11	%		65,719			157			0.96	%
U.S. Govt SBA		32,458			162			2.00	%		-			-			0.00	%
Government Agency & Government-Sponsored Entities		3,098			22			2.84	%		31,186			33			0.42	%
Obligations of States and Political Subdivisions - Non-Taxable		56,036			663			4.73	%		60,401			735			4.87	%
Mortgage Backed Securities		282,477			1,623			2.30	%		195,840			1,014			2.07	%
Other		1,010			6			2.38	%		1,010			5			1.98	%
Total Investment Securities		456,064			2,700			2.37	%		354,156			1,944			2.20	%
Loans & Leases:
Real Estate		1,565,218			18,889			4.79	%		1,477,705			17,208			4.62	%
Home Equity Lines & Loans		32,705			430			5.22	%		32,064			401			4.96	%
Agricultural		260,398			3,083			4.70	%		272,799			2,846			4.14	%
Commercial		258,574			3,041			4.67	%		215,727			2,246			4.13	%
Consumer		5,872			73			4.93	%		4,957			64			5.12	%
Other		1,678			9			2.13	%		1,968			11			2.22	%
Leases		80,629			966			4.75	%		70,088			747			4.23	%
Total Loans & Leases		2,205,074			26,491			4.77	%		2,075,308			23,523			4.50	%
Total Earning Assets		2,850,785		$	29,839			4.15	%		2,468,987		$	25,518			4.10	%
Unrealized (Loss) Gain on Securities Available-for-Sale		1,334									1,051
Allowance for Credit Losses		(49,889	)								(44,245	)
Cash and Due From Banks		45,084									45,559
All Other Assets		198,054									174,043
Total Assets	$	3,045,368								$	2,645,395
Liabilities & Shareholders' Equity
Interest Bearing Deposits:
Interest Bearing DDA	$	553,394		$	321			0.23	%	$	433,733		$	149			0.14	%
Savings and Money Market		812,749			340			0.17	%		714,597			269			0.15	%
Time Deposits		579,527			982			0.67	%		522,397			586			0.45	%
Total Interest Bearing Deposits		1,945,670			1,643			0.34	%		1,670,727			1,004			0.24	%
Federal Home Loan Bank Advances		-			-			0.00	%		11,814			14			0.47	%
Subordinated Debentures		10,310			115			4.43	%		10,310			92			3.54	%
Total Interest Bearing Liabilities		1,955,980		$	1,758			0.36	%		1,692,851		$	1,110			0.26	%
Interest Rate Spread								3.80	%								3.84	%
Demand Deposits (Non-Interest Bearing)		741,839									633,487
All Other Liabilities		50,210									50,291
Total Liabilities		2,748,029									2,376,629
Shareholders' Equity		297,339									268,766
Total Liabilities & Shareholders' Equity	$	3,045,368								$	2,645,395
Impact of Non-Interest Bearing Deposits and Other Liabilities								0.11	%								0.08	%
Net Interest Income and Margin on Total Earning Assets					28,081			3.91	%					24,408			3.92	%
Tax Equivalent Adjustment					(231	)								(256	)
Net Interest Income				$	27,850			3.88	%				$	24,152			3.88	%

Notes:  Yields on municipal securities have been calculated on a fully taxable equivalent basis.  Loan interest income includes fee income and unearned discount in the amount of $1.4 million and $1.6 million for the quarters ended September 30, 2017 and 2016, respectively. Yields on securities available-for-sale are based on historical cost.

38

Farmers & Merchants Bancorp

Year-to-Date Average Balances and Interest Rates

(Interest and Rates on a Taxable Equivalent Basis)

(in thousands)

	Nine Months Ended Sept. 30, 2017									Nine Months Ended Sept. 30, 2016
Assets	Balance			Interest			Rate			Balance			Interest			Rate
Interest Bearing Deposits with Banks	$	142,717		$	1,155			1.08	%	$	34,974		$	133			0.51	%
Investment Securities:
U.S. Treasuries		82,441			665			1.08	%		54,518			384			0.94	%
U.S. Govt SBA		34,125			412			1.61	%		-			-			0.00	%
Government Agency & Government-Sponsored Entities		3,109			66			2.83	%		27,191			166			0.81	%
Obligations of States and Political Subdivisions - Non-Taxable		56,945			2,026			4.74	%		61,067			2,222			4.85	%
Mortgage Backed Securities		291,179			5,013			2.30	%		215,878			3,551			2.19	%
Other		1,010			17			2.24	%		679			11			2.16	%
Total Investment Securities		468,809			8,199			2.33	%		359,333			6,334			2.35	%
Loans & Leases:
Real Estate		1,561,675			55,021			4.71	%		1,444,164			49,637			4.60	%
Home Equity Lines & Loans		32,109			1,217			5.07	%		31,931			1,181			4.95	%
Agricultural		266,205			9,015			4.53	%		264,346			8,100			4.10	%
Commercial		233,853			8,064			4.61	%		218,069			6,641			4.07	%
Consumer		5,592			221			5.28	%		4,977			211			5.67	%
Other		1,679			28			2.23	%		1,968			33			2.24	%
Leases		77,508			2,704			4.66	%		66,964			2,106			4.20	%
Total Loans & Leases		2,178,621			76,270			4.68	%		2,032,419			67,909			4.47	%
Total Earning Assets		2,790,147		$	85,624			4.10	%		2,426,726		$	74,376			4.10	%
Unrealized Gain on Securities Available-for-Sale		746									5,294
Allowance for Credit Losses		(48,887	)								(43,329	)
Cash and Due From Banks		44,896									43,274
All Other Assets		190,732									171,397
Total Assets	$	2,977,634								$	2,603,362
Liabilities & Shareholders' Equity
Interest Bearing Deposits:
Interest Bearing DDA	$	516,867		$	723			0.19	%	$	413,782		$	385			0.12	%
Savings and Money Market		802,778			954			0.16	%		723,480			811			0.15	%
Time Deposits		584,773			2,675			0.61	%		497,795			1,495			0.40	%
Total Interest Bearing Deposits		1,904,418			4,352			0.31	%		1,635,057			2,691			0.22	%
Federal Home Loan Bank Advances		1			-			0.00	%		5,235			18			0.46	%
Subordinated Debentures		10,310			320			4.15	%		10,310			272			3.53	%
Total Interest Bearing Liabilities		1,914,729		$	4,672			0.33	%		1,650,602		$	2,981			0.24	%
Interest Rate Spread								3.78	%								3.86	%
Demand Deposits (Non-Interest Bearing)		721,808									639,376
All Other Liabilities		50,394									49,992
Total Liabilities		2,686,931									2,339,970
Shareholders' Equity		290,703									263,392
Total Liabilities & Shareholders' Equity	$	2,977,634								$	2,603,362
Impact of Non-Interest Bearing Deposits and Other Liabilities								0.10	%								0.08	%
Net Interest Income and Margin on Total Earning Assets					80,952			3.88	%					71,395			3.93	%
Tax Equivalent Adjustment					(705	)								(774	)
Net Interest Income				$	80,247			3.85	%				$	70,621			3.89	%

Notes:  Yields on municipal securities have been calculated on a fully taxable equivalent basis.  Loan interest income includes fee income and unearned discount in the amount of $3.6 million and $3.8 million for the nine months ended September 30, 2017 and 2016, respectively. Yields on securities available-for-sale are based on historical cost.

39

Farmers & Merchants Bancorp

Volume and Rate Analysis of Net Interest Revenue

(in thousands)	Three Months Ended Sept. 30, 2017 compared to Sept. 30, 2016									Nine Months Ended Sept. 30, 2017 compared to Sept. 30, 2016
Interest Earning Assets	Volume			Rate			Net Chg.			Volume			Rate			Net Chg.
Interest Bearing Deposits with Banks	$	417		$	180		$	597			749			273		$	1,022
Investment Securities:
U.S. Treasuries		40			27			67			219			62			281
U.S. Govt SBA		162			-			162			412			-			412
Government Agency & Government-Sponsored Entities		(52	)		41			(11	)		(243	)		143			(100	)
Obligations of States and Political Subdivisions - Non-Taxable		(52	)		(21	)		(73	)		(148	)		(48	)		(196	)
Mortgage Backed Securities		488			121			609			1,289			173			1,462
Other		-			1			1			6			-			6
Total Investment Securities		586			169			755			1,535			330			1,865
Loans & Leases:
Real Estate		1,042			639			1,681			4,117			1,267			5,384
Home Equity Lines & Loans		9			20			29			8			29			36
Agricultural		(133	)		370			237			58			857			915
Commercial		481			314			795			503			920			1,423
Consumer		11			(2	)		9			25			(15	)		10
Other		(2	)		-			(2	)		(6	)		-			(5	)
Leases		120			99			219			353			245			598
Total Loans & Leases		1,528			1,440			2,968			5,058			3,303			8,361
Total Earning Assets		2,531			1,789			4,320			7,342			3,906			11,248
Interest Bearing Liabilities
Interest Bearing Deposits:
Interest Bearing DDA		49			123			172			112			226			338
Savings and Money Market		39			32			71			93			51			143
Time		70			326			396			296			884			1,180
Total Interest Bearing Deposits		158			481			639			501			1,161			1,661
Other Borrowed Funds		(7	)		(7	)		(14	)		(18	)		-			(18	)
Subordinated Debentures		-			23			23			-			48			48
Total Interest Bearing Liabilities		151			497			648			483			1,209			1,691
Total Change on a Tax Equivalent Basis	$	2,380		$	1,292		$	3,672		$	6,859		$	2,697		$	9,557

Notes:  Rate/volume variance is allocated based on the percentage relationship of changes in volume and changes in rate to the total "net change."  The above figures have been rounded to the nearest whole number.

40

Third Quarter 2017 vs. Third Quarter 2016

Net interest income for the third quarter of 2017 increased 15.3% or $3.7 million to $27.9 million. On a fully taxable equivalent basis, net interest income increased 15.1% and totaled $28.1 million for the third quarter of 2017. As more fully discussed below, the increase in net interest income was due primarily to a $381.8 million increase in average earning assets.

Net interest income on a taxable equivalent basis, expressed as a percentage of average total earning assets, is referred to as the net interest margin. For the quarter ended September 30, 2017, the Company’s net interest margin was 3.91% compared to 3.92% for the quarter ended September 30, 2016. This decrease in net interest margin was due primarily to mix changes that occurred from the Company’s deposit growth outstripping loan growth, thereby resulting in a decrease in loans as a percentage of average earning assets.

Average loans & leases totaled $2.2 billion for the quarter ended September 30, 2017; an increase of $129.8 million compared to the average balance for the quarter ended September 30, 2016. Loans & leases decreased from 84.1% of average earning assets at September 30, 2016 to 77.1% at September 30, 2017. The annualized yield on the Company’s loan & lease portfolio increased to 4.77% for the quarter ended September 30, 2017, compared to 4.50% for the quarter ended September 30, 2016. Overall, the positive impact on interest revenue from the increase in loan & lease balances and rising yields resulted in interest revenue from loans & leases increasing 12.6% to $26.5 million for quarter ended September 30, 2017. The Company has been experiencing aggressive competitor pricing for loans & leases to which it may need to continue to respond in order to retain key customers. This could place even greater negative pressure on future loan & lease yields and net interest margin.

The investment portfolio is the other main component of the Company’s earning assets. Since the risk factor for investments is typically lower than that of loans & leases, the yield earned on investments is generally less than that of loans & leases. Average investment securities totaled $456.1 million for the quarter ended September 30, 2017; an increase of $101.9 million compared to the average balance for the quarter ended September 30, 2016. Tax equivalent interest income on securities increased $755,000 to $2.7 million for the quarter ended September 30, 2017, compared to $1.9 million for the quarter ended September 30, 2016. The average investment portfolio yield, on a tax equivalent basis, was 2.37% for the quarter ended September 30, 2017, compared to 2.20% for the quarter ended September 30, 2016. See “Financial Condition – Investment Securities” for a discussion of the Company’s investment strategy in 2017. Net interest income on the Schedule of Year-to-Date Average Balances and Interest Rates is shown on a tax equivalent basis, which is higher than net interest income as reflected on the Consolidated Statement of Income because of adjustments that relate to income on securities that are exempt from federal income taxes.

Interest bearing deposits with banks and overnight investments in Federal Funds Sold are additional earning assets available to the Company. Average interest bearing deposits with banks consisted of FRB deposits. Balances with the FRB earn interest at the Fed Funds rate, which increased to 1.25% in June 2017. Average interest bearing deposits with banks for the quarter ended September 30, 2017, were $189.6 million, an increase of $150.1 million compared to the average balance for the quarter ended September 30, 2016. Interest income on interest bearing deposits with banks for the quarter ended September 30, 2017, increased $597,000 to $648,000 compared to the quarter ended September 30, 2016.

Average interest-bearing liabilities increased $263.1 million or 15.5% during the third quarter of 2017. Of that increase: (1) interest-bearing transaction deposits increased $119.7 million; (2) savings and money market deposits increased $98.2 million; (3) time deposits increased $57.1 million; (4) Federal Home Loan Bank (“FHLB”) Advances decreased $11.8 million (see “Financial Condition – Federal Home Loan Bank Advances and Federal Reserve Bank Borrowings”); and (5) subordinated debt remained unchanged (see “Financial Condition – Subordinated Debentures”).

Total interest expense on interest bearing deposits was $1.6 million for the third quarter of 2017 as compared to $1.0 million for the third quarter of 2016. The average rate paid on interest-bearing deposits was 0.34% for the third quarter of 2017 compared to 0.24% for the third quarter of 2016.

41

Nine Months Ending September 30, 2017 vs. Nine Months Ending September 30, 2016

During the first nine months of 2017, net interest income increased 13.6% to $80.2 million, compared to $70.6 million at September 30, 2016. On a fully taxable equivalent basis, net interest income increased 13.4% and totaled $81.0 million at September 30, 2017, compared to $71.4 million at September 30, 2016. The increase in net interest income was due primarily to a $363.4 million increase in average earning assets.

For the nine months ended September 30, 2017, the Company’s net interest margin was 3.88% compared to 3.93% for the same period in 2016. This decrease in net interest margin was due primarily to mix changes that occurred from the Company’s deposit growth outstripping loan growth, thereby resulting in a decrease in loans as a percentage of average earning assets.

The average balance of loans & leases increased by $146.2 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The yield on the loan & lease portfolio increased 21 basis points to 4.68% for the nine months ended September 30, 2017 compared to 4.47% for the nine months ended September 30, 2016. This increase in yield was enhanced by the increase in the average balance of loans resulting in interest income from loans & leases increasing 12.3% or $8.4 million for the first nine months of 2017.

Average investment securities were $468.8 million for the nine months ended September 30, 2017 compared to $359.3 million for the same period in 2016. The average tax equivalent yield for the nine months ended September 30, 2017 was 2.33% compared to 2.35% for the nine months ended September 30, 2016. Despite this decrease in yield, because of the increase in balances, interest income increased $1.9 million or 29.4%, for the nine months endedSeptember 30, 2017.

Average interest bearing deposits with banks consisted of FRB deposits. Deposits with the FRB earn interest at the Fed Funds rate, which increased to 1.25% in June 2017. Average interest bearing deposits with banks for the nine-months ended September 30, 2017, was $142.7 million, an increase of $107.7 million compared to the average balance for the nine-months ended September 30, 2016. Interest income on interest bearing deposits with banks for the nine-months ended September 30, 2017, increased $1.0 million to $1.2 million compared to the nine-months ended September 30, 2016.

Average interest-bearing liabilities increased $264.1 million or 16.0% during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. Of that increase: (1) interest-bearing deposits increased $269.4 million; (2) FHLB advances decreased $5.2 million; and (3) subordinated debentures remained unchanged.

Total interest expense on interest bearing deposits was $4.4 million for the first nine months of 2017 as compared to $2.7 million for the first nine months of 2016. The average rate paid on interest-bearing deposits was 0.31% in the first nine months of 2017 and 0.22% in the first nine months of 2016.

Provision and Allowance for Credit Losses

As a financial institution that assumes lending and credit risks as a principal element of its business, credit losses will be experienced in the normal course of business. The Company has established credit management policies and procedures that govern both the approval of new loans & leases and the monitoring of the existing portfolio. The Company manages and controls credit risk through comprehensive underwriting and approval standards, dollar limits on loans & leases to one borrower (the term “borrower” is used herein to describe a customer who has entered into either a loan or lease transaction), and by restricting loans & leases made primarily to its principal market area where management believes it is best able to assess the applicable risk. Additionally, management has established guidelines to ensure the diversification of the Company’s credit portfolio such that even within key portfolio sectors such as real estate or agriculture, the portfolio is diversified across factors such as location, building type, crop type, etc. Management reports regularly to the Board of Directors regarding trends and conditions in the loan & lease portfolio and regularly conducts credit reviews of individual loans & leases. Loans & leases that are performing but have shown some signs of weakness are subject to more stringent reporting and oversight.

42

Allowance for Credit Losses

The allowance for credit losses is an estimate of probable incurred credit losses inherent in the Company's loan & lease portfolio as of the balance sheet date. The allowance is established through a provision for credit losses, which is charged to expense. Additions to the allowance are expected to maintain the adequacy of the total allowance after credit losses and loan & lease growth. Credit exposures determined to be uncollectible are charged against the allowance. Cash received on previously charged off amounts is recorded as a recovery to the allowance. The overall allowance consists of three primary components: specific reserves related to impaired loans & leases; general reserves for inherent losses related to loans & leases that are not impaired; and an unallocated component that takes into account the imprecision in estimating and allocating allowance balances associated with macro factors.

A loan or lease is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the original agreement. Loans & leases determined to be impaired are individually evaluated for impairment. When a loan or lease is impaired, the Company measures impairment based on the present value of expected future cash flows discounted at the loan’s or lease's effective interest rate, except that as a practical expedient, it may measure impairment based on a loan’s or lease's observable market price, or the fair value of the collateral if the loan or lease is collateral dependent. A loan or lease is collateral dependent if the repayment of the loan or lease is expected to be provided solely by the underlying collateral.

A restructuring of a loan or lease constitutes a troubled debt restructuring (“TDR”) under ASC 310-40, if the Company for economic or legal reasons related to the borrower's financial difficulties grants a concession to the borrower that it would not otherwise consider. Restructured loans or leases typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms. If the restructured loan or lease was current on all payments at the time of restructure and management reasonably expects the borrower will continue to perform after the restructure, management may keep the loan or lease on accrual. Loans & leases that are on nonaccrual status at the time they become TDR, remain on nonaccrual status until the borrower demonstrates a sustained period of performance, which the Company generally believes to be six consecutive months of payments, or equivalent. A loan or lease can be removed from TDR status if it was restructured at a market rate in a prior calendar year and is currently in compliance with its modified terms. However, these loans or leases continue to be classified as impaired and are individually evaluated for impairment.

The determination of the general reserve for loans or leases that are collectively evaluated for impairment is based on estimates made by management, to include, but not limited to, consideration of historical losses by portfolio segment, internal asset classifications, and qualitative factors that include economic trends in the Company's service areas, industry experience and trends, geographic concentrations, estimated collateral values, the Company's underwriting policies, the character of the loan & lease portfolio, and probable losses inherent in the portfolio taken as a whole.

The Company maintains a separate allowance for each portfolio segment (loan & lease type). These portfolio segments include: (1) commercial real estate; (2) agricultural real estate; (3) real estate construction (including land and development loans); (4) residential 1^st mortgages; (5) home equity lines and loans; (6) agricultural; (7) commercial; (8) consumer & other; and (9) equipment leases. See “Financial Condition – Loans & Leases” for examples of loans & leases made by the Company. The allowance for credit losses attributable to each portfolio segment, which includes both impaired loans & leases and loans & leases that are not impaired, is combined to determine the Company's overall allowance, which is included on the consolidated balance sheet.

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

43

Pass – A pass loan or lease is a strong credit with no existing or known potential weaknesses deserving of management's close attention.

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

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

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

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

The general reserve component of the allowance for credit losses also consists of reserve factors that are based on management's assessment of the following for each portfolio segment: (1) inherent credit risk; (2) historical losses; and (3) other qualitative factors. These reserve factors are inherently subjective and are driven by the repayment risk associated with each portfolio segment described below:

Commercial Real Estate – Commercial real estate mortgage loans are generally considered to possess a higher inherent risk of loss than the Company’s commercial, agricultural and consumer loan types. Adverse economic developments or an overbuilt market impact commercial real estate projects and may result in troubled loans. Trends in vacancy rates of commercial properties impact the credit quality of these loans. High vacancy rates reduce operating revenues and the ability for properties to produce sufficient cash flow to service debt obligations.

Real Estate Construction – Real estate construction loans, including land loans, are generally considered to possess a higher inherent risk of loss than the Company’s commercial, agricultural and consumer loan types. A major risk arises from the necessity to complete projects within specified cost and time lines. Trends in the construction industry significantly impact the credit quality of these loans, as demand drives construction activity. In addition, trends in real estate values significantly impact the credit quality of these loans, as property values determine the economic viability of construction projects.

Commercial – These loans are generally considered to possess a moderate inherent risk of loss because they are shorter-term; typically made to relationship customers; generally underwritten to existing cash flows of operating businesses; and may be collateralized by fixed assets, inventory and/or accounts receivable. Debt coverage is provided by business cash flows and economic trends influenced by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans.

Agricultural Real Estate and Agricultural – These loans are generally considered to possess a moderate inherent risk of loss since they are typically made to relationship customers and are secured by crop production, livestock and related real estate.  These loans are vulnerable to two risk factors that are largely outside the control of Company and borrowers: commodity prices and weather conditions.

Leases – Equipment leases are generally considered to possess a moderate inherent risk of loss. As Lessor, the company is subject to both the credit risk of the borrower and the residual value risk of the equipment. Credit risks are underwritten using the same credit criteria the Company would use when making an equipment term loan.

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Residual value risk is managed through the use of qualified, independent appraisers that establish the residual values the Company uses in structuring a lease.

Residential 1st Mortgages and Home Equity Lines and Loans – These loans are generally considered to possess a low inherent risk of loss, although this is not always true as evidenced by the correction in residential real estate values that occurred between 2007 and 2012. The degree of risk in residential real estate lending depends primarily on the loan amount in relation to collateral value, the interest rate and the borrower's ability to repay in an orderly fashion. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate that the borrowers' capacity to repay their obligations may be deteriorating.

Consumer & Other – A consumer installment loan portfolio is usually comprised of a large number of small loans scheduled to be amortized over a specific period. Most installment loans are made for consumer purchases. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate that the borrowers' capacity to repay their obligations may be deteriorating.

Provision for Credit Losses

Changes in the provision for credit losses between years are the result of management’s evaluation, based upon information currently available, of the adequacy of the allowance for credit losses relative to factors such as the credit quality of the loan & lease portfolio, loan & lease growth, current credit losses, and the prevailing economic climate and its effect on borrowers’ ability to repay loans & leases in accordance with the terms of the notes.

The Central Valley of California was one of the hardest hit areas in the country during the recession. In many areas, housing prices declined as much as 60% and unemployment reached 15% or more. Although the economy has strengthened throughout most of the Central Valley, for the most part housing prices remain below peak levels and unemployment rates remain above those in other areas of the state and country. While, in management’s opinion, the Company’s levels of net charge-offs and non-performing assets as of September 30, 2017, compare very favorably to our peers at the present time, carefully managing credit risk remains a key focus of the Company.

The State of California experienced drought conditions from 2013 through most of 2016.  Although significant levels of rain and snow in late 2016 and early 2017 have alleviated drought conditions in many areas of California, including the Company’s primary service area, the long-term risks associated with the availability of water continue to exist.

The Company made a $2.9 million provision for credit losses during the first nine months of both 2017 and 2016. Net charge-offs during the first nine months of 2017 were $25,000 compared to net recoveries of $73,000 in the first nine months of 2016. See “Overview – Looking Forward: 2017 and Beyond”, “Critical Accounting Policies and Estimates – Allowance for Credit Losses” and “Item 7A. Quantitative and Qualitative Disclosures About Market Risk-Credit Risk” located in the Company’s 2016 Annual Report on Form 10-K.

After reviewing all factors above, based upon information currently available, management concluded that the allowance for credit losses as of September 30, 2017, was adequate.

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2017			2016			2017			2016
Balance at Beginning of Period	$	49,064		$	44,118		$	47,919		$	41,523
Charge-Offs		(54	)		(25	)		(230	)		(130	)
Recoveries		134			103			205			203
Provision		1,600			250			2,850			2,850
Balance at End of Period	$	50,744		$	44,446		$	50,744		$	44,446

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The table below breaks out current quarter activity by portfolio segment (in thousands):

September 30, 2017	Commercial Real Estate			Agricultural Real Estate		Real Estate Construction			Residential 1st Mortgages		Home Equity Lines & Loans		Agricultural			Commercial			Consumer & Other			Leases			Unallocated		Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2017	$	11,110		$	9,450	$	3,223		$	865	$	2,140	$	7,381		$	8,515		$	200		$	3,586		$	1,449	$	47,919
Charge-Offs		(109	)		-		-			-		-		(7	)		-			(114	)		-			-		(230	)
Recoveries		110			-		-			37		6		-			6			46			-			-		205
Provision		(14	)		1,946		(473	)		95		115		(14	)		539			77			(392	)		971		2,850
Ending Balance- September 30, 2017	$	11,097		$	11,396	$	2,750		$	997	$	2,261	$	7,360		$	9,060		$	209		$	3,194		$	2,420	$	50,744
Third Quarter Allowance for Credit Losses:
Beginning Balance- July 1, 2017	$	11,242		$	10,265	$	2,687		$	872	$	2,170	$	7,236		$	9,544		$	205		$	2,952		$	1,891	$	49,064
Charge-Offs		-			-		-			-		-		-			-			(54	)		-			-		(54	)
Recoveries		99			-		-			18		1		-			2			14			-			-		134
Provision		(244	)		1,131		63			107		90		124			(486	)		44			242			529		1,600
Ending Balance- September 30, 2017	$	11,097		$	11,396	$	2,750		$	997	$	2,261	$	7,360		$	9,060		$	209		$	3,194		$	2,420	$	50,744

The Allowance for Credit Losses at September 30, 2017 increased $2.8 million from December 31, 2016. The allowance allocated to the following portfolio segments changed materially during the first nine months of 2017:

· Agricultural and Agricultural Real Estate allowance balances increased $1.9 million due primarily to an increase of $6.8 million in substandard loans related to one borrower offset somewhat by a decrease in Agricultural loan balances.

· Real Estate Construction allowance balances decreased $473,000 due to a decrease in loan balances combined with a decline in the overall risk of the portfolio as several major projects moved out of the construction phase and into lease-up.

· Commercial allowance balances increased $545,000 million due to an increase in loan balances.

· Lease allowance balances decreased $392,000 due to the Company’s assessment that approximately five years of experience in this financing segment supported the elimination of the qualitative factor for “new market segments” in the loan loss allowance.

· Residential 1st mortgage and home equity balances increased $253,000 due to an increase in loan balances.

· The unallocated allowance balance increased $971,000 from December 31, 2016. The unallocated allowance is established to provide for probable losses that have been incurred as of the reporting date but not reflected in the allocated allowance. Included in the unallocated allowance is the Company’s estimate of the risk of losses that are attributable to national or local economic, political, or industry trends, which have occurred but have not yet been recognized in loan charge-off history.

See “Management’s Discussion and Analysis - Financial Condition – Classified Loans & Leases and Non-Performing Assets” for further discussion regarding these loan categories.

See “Note 3. Allowance for Credit Losses” for additional details regarding the provision and allowance for credit losses.

Non-Interest Income

Non-interest income includes: (1) service charges and fees from deposit accounts; (2) net gains and losses from investment securities; (3) increases in the cash surrender value of bank owned life insurance; (4) debit card and ATM fees; (5) net gains and losses on non-qualified deferred compensation plans; and (6) fees from other miscellaneous business services.

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Third Quarter 2017 vs. Third Quarter 2016

Non-interest income decreased $914,000 or 20.1% for the three months ended September 30, 2017, compared to the same period of 2016. This decrease was primarily due to a $1.1 million decrease in the net gain on deferred compensation investments for the third quarter of 2017 compared to the same period in 2016.

Balances in non-qualified deferred compensation plans may be invested in financial instruments whose market value fluctuates based upon trends in interest rates and stock prices. Although Generally Accepted Accounting Principles require these investment gains/losses be recorded in non-interest income, an offsetting entry is also required to be made to non-interest expense resulting in no effect on the Company’s net income.

Nine Months Ending September 30, 2017 vs. Nine Months Ending September 30, 2016

Non‑interest income increased $2.4 million or 24.0% for the nine months ended September 30, 2017 compared to the same period of 2016. This increase was primarily due to: (1) a $417,000 increase in the net gain on the sale of investment securities; (2) a $337,000 increase in debit card and ATM fees; (3) a $1.2 million increase in the gain on sale of fixed assets related to the disposition of one of the Company’s properties; and (4) $453,000 in non-recurring fees from certain loan customers. These increases were partially offset by a $266,000 decrease in the net gain on deferred compensation investments.

Non-Interest Expense

Non-interest expense for the Company includes expenses for: (1) salaries and employee benefits; (2) net gains and losses on non-qualified deferred compensation plan investments; (3) occupancy; (4) equipment; (5) supplies; (6) legal fees; (7) professional services; (8) data processing; (9) marketing; (10) deposit insurance; (11) ORE carrying costs and gains/losses on sale; and (12) other miscellaneous expenses.

Third Quarter 2017 vs. Third Quarter 2016

Overall, non-interest expense decreased $107,000 or 0.7% for the three months ended September 30, 2017, compared to the same period in 2016. This decrease was primarily comprised of a $1.1 million decrease in the net gain on deferred compensation investments offset by: (1) a $537,000 increase in salaries and employee benefits primarily related to salary increases that took place in July 2017 and increased contributions to retirement and profit sharing plans; (2) a $182,000 increase in occupancy and equipment; and (3) a $195,000 write-off of capitalized development costs for a branch construction project that has been postponed.

Balances in non-qualified deferred compensation plans may be invested in financial instruments whose market value fluctuates based upon trends in interest rates and stock prices. Although Generally Accepted Accounting Principles require these investment gains/losses be recorded in non-interest income, an offsetting entry is also required to be made to non-interest expense resulting in no effect on the Company’s net income.

Nine Months Ending September 30, 2017 vs. Nine Months Ending September 30, 2016

Non-interest expense increased $8.1 million or 18.7% for the nine months ended September 30, 2017, compared to the same period of 2016. This increase was primarily comprised of: (1) a $2.7 million increase in salaries and employee benefits primarily related to salary increases that took place in July 2017 and increased contributions to retirement and profit sharing plans; (2) occupancy and equipment increases in the amount of $758,000, which related to occupancy, repairs & maintenance for various locations; and (3) a $5.5 million gain on the sale of ORE property that took place in the prior year (2016) and was recorded as a reduction to non-interest expense. These increases were partially offset by: (1) a $266,000 decrease in the net gain on deferred compensation investments; (2) a $266,000 decrease in FDIC insurance expense; and (3) a $919,000 decrease in legal, consulting and other professional services related to the Delta Bancorp acquisition that took place in 2016.

Income Taxes

The provision for income taxes increased 11.0% to $5.0 million for the third quarter of 2017. The Company’s effective tax rate was 36.8% for the third quarter of 2017 and 37.4% for the third quarter of 2016.

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The provision for income taxes increased 11.2% to $14.1 million for the first nine months of 2017. The Company’s effective tax rate for the first nine months of 2017 was 36.5% compared to 36.6% for the same period in 2016.

The Company’s effective tax rate fluctuates from quarter to quarter due primarily to changes in the mix of taxable and tax-exempt earning sources. The effective rates were lower than the statutory rate of 42% due primarily to benefits regarding the cash surrender value of life insurance; credits associated with low income housing tax credit investments (LIHTC); and tax-exempt interest income on municipal securities and loans.

Current tax law causes the Company’s current taxes payable to approximate or exceed the current provision for taxes on the income statement. Three provisions have had a significant effect on the Company’s current income tax liability: (1) the restrictions on the deductibility of credit losses; (2) deductibility of retirement and other long-term employee benefits only when paid; and (3) the statutory deferral of deductibility of California franchise taxes on the Company’s federal return.

Financial Condition

This section discusses material changes in the Company’s balance sheet at September 30, 2017, as compared to December 31, 2016 and to September 30, 2016. As previously discussed (see “Overview”) the Company’s financial condition can be influenced by the seasonal banking needs of its agricultural customers.

Investment Securities and Federal Funds Sold

The investment portfolio provides the Company with an income alternative to loans & leases. The debt securities in the Company’s investment portfolio have historically been comprised primarily of: (1) mortgage-backed securities issued by federal government-sponsored entities; (2) debt securities issued by US Treasury, government agencies and government-sponsored entities; and (3) investment grade bank-qualified municipal bonds. However, at certain times, the Company has selectively added investment grade corporate securities (floating rate and fixed rate with maturities less than 5 years) to the portfolio in order to obtain yields that exceed government agency securities of equivalent maturity without subjecting the Company to the interest rate risk associated with mortgage-backed securities. Additionally, during the first nine months of 2017 the Company invested $11.9 million in the voting shares of Bank of Rio Vista.

The Company’s investment portfolio at September 30, 2017 was $511.9 million compared to $506.4 million at the end of 2016, an increase of $5.5 million or 1.1%. At September 30, 2016, the investment portfolio totaled $417.8 million. To protect against future increases in market interest rates, while at the same time generating some reasonable level of current yields, the Company currently invests most of its available funds in either shorter term U.S. Treasury, government agency & government-sponsored entity securities or shorter term (10, 15, and 20 year) mortgage-backed securities.  As part of the acquisition of Delta National Bancorp that took place in November 2016, the Company now owns $31.7 million of floating rate U.S. Government SBA securities.

The Company's total investment portfolio currently represents 16.7% of the Company’s total assets as compared to 17.3% at December 31, 2016, and 15.7% at September 30, 2016.

As of September 30, 2017, the Company held $55.5 million of municipal investments, of which $38.5 million were bank-qualified municipal bonds, all classified as HTM. In order to comply with Section 939A of the Dodd-Frank Act, the Company: (1) only invests in bonds rated AA or better; and (2) performs its own credit analysis on new purchases of municipal bonds. As of September 30, 2017, ninety-eight percent of the Company’s bank-qualified municipal bond portfolio is rated at either the issue or issuer level, and all of these ratings are “investment grade.” The Company monitors the status of all municipal investments with particular attention paid to the approximately two percent ($420,000) of the portfolio that is not rated, and at the current time does not believe any of them to be exhibiting financial problems that could result in a loss in any individual security.

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Not included in the investment portfolio are interest bearing deposits with banks and overnight investments in Federal Funds Sold. Interest bearing deposits with banks consisted of FRB deposits. The FRB currently pays interest on the deposits that banks maintain in their FRB accounts, whereas historically banks had to sell these Federal Funds to other banks in order to earn interest. Since balances at the FRB are effectively risk free, the Company elected to maintain its excess cash at the FRB. Interest bearing deposits with banks totaled $149.1 million at September 30, 2017, $44.0 million at December 31, 2016 and $42.9 million at September 30, 2016.

The Company classifies its investments as HTM, trading, or AFS. Securities are classified as HTM and are carried at amortized cost when the Company has the intent and ability to hold the securities to maturity. Trading securities are securities acquired for short-term appreciation and are carried at fair value, with unrealized gains and losses recorded in non-interest income. As of September 30, 2017, December 31, 2016 and September 30, 2016, there were no securities in the trading portfolio. Securities classified as AFS include securities, which may be sold to effectively manage interest rate risk exposure, prepayment risk, satisfy liquidity demands and other factors. These securities are reported at fair value with aggregate, unrealized gains or losses excluded from income and included as a separate component of shareholders’ equity, net of related income taxes.

Loans & Leases

Loans & leases can be categorized by borrowing purpose and use of funds. Common examples of loans & leases made by the Company include:

Commercial and Agricultural Real Estate - These are loans secured by farmland, commercial real estate, multifamily residential properties, and other non-farm, non-residential properties generally within our market area. Commercial mortgage term loans can be made if the property is either income producing or scheduled to become income producing based upon acceptable pre-leasing, and the income will be the Bank's primary source of repayment for the loan. Loans are made both on owner occupied and investor properties; generally, do not exceed 10 years (and may have pricing adjustments on a shorter timeframe); have debt service coverage ratios of 1.00 or better with a target of greater than 1.25; and fixed rates that are most often tied to treasury indices with an appropriate spread based on the amount of perceived risk in the loan.

Real Estate Construction - These are loans for development and construction (the Company generally requires the borrower to fund the land acquisition) and are secured by commercial or residential real estate. These loans are generally made only to experienced local developers with whom the Bank has a successful track record; for projects in our service area; with Loan To Value (LTV) below 75%; and where the property can be developed and sold within 2 years. Commercial construction loans are made only when there is a written take-out commitment from the Bank or an acceptable financial institution or government agency. Most acquisition, development and construction loans are tied to the prime rate or LIBOR with an appropriate spread based on the amount of perceived risk in the loan.

Residential 1^st Mortgages - These are loans primarily made on owner occupied residences; generally underwritten to income and LTV guidelines similar to those used by FNMA and FHLMC; however, we will make loans on rural residential properties up to 40 acres. Most residential loans have terms from ten to twenty years and carry fixed rates priced off of treasury rates. The Company has always underwritten mortgage loans based upon traditional underwriting criteria and does not make loans that are known in the industry as “subprime,” “no or low doc,” or “stated income.”

Home Equity Lines and Loans - These are loans made to individuals for home improvements and other personal needs. Generally, amounts do not exceed $250,000; Combined Loan To Value (CLTV) does not exceed 80%; FICO scores are at or above 670; Total Debt Ratios do not exceed 43%; and in some situations the Company is in a 1^st lien position.

Agricultural - These are loans and lines of credit made to farmers to finance agricultural production. Lines of credit are extended to finance the seasonal needs of farmers during peak growing periods; are usually established for periods no longer than 12 to 36 months; are often secured by general filing liens on livestock, crops, crop proceeds and equipment; and are most often tied to the prime rate with an appropriate spread based on the amount of perceived risk in the loan. Term loans are primarily made for the financing of equipment, expansion or modernization of a processing plant, or orchard/vineyard development; have maturities from five to seven years; and fixed rates that are most often tied to treasury indices with an appropriate spread based on the amount of perceived risk in the loan.

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Commercial - These are loans and lines of credit to businesses that are sole proprietorships, partnerships, LLC’s and corporations. Lines of credit are extended to finance the seasonal working capital needs of customers during peak business periods; are usually established for periods no longer than 12 to 24 months; are often secured by general filing liens on accounts receivable, inventory and equipment; and are most often tied to the prime rate with an appropriate spread based on the amount of perceived risk in the loan. Term loans are primarily made for the financing of equipment, expansion or modernization of a plant or purchase of a business; have maturities from five to seven years; and fixed rates that are most often tied to treasury indices with an appropriate spread based on the amount of perceived risk in the loan.

Consumer - These are loans to individuals for personal use, and primarily include loans to purchase automobiles or recreational vehicles, and unsecured lines of credit. The Company has a very minimal consumer loan portfolio, and loans are primarily made as an accommodation to deposit customers.

Leases –These are leases to businesses or individuals, for the purpose of financing the acquisition of equipment. They can be either “finance leases” where the lessee retains the tax benefits of ownership but obtains 100% financing on their equipment purchases; or “true tax leases” where the Company, as lessor, places reliance on equipment residual value and in doing so obtains the tax benefits of ownership. Leases typically have a maturity of three to ten years, and fixed rates that are most often tied to treasury indices with an appropriate spread based on the amount of perceived risk. Credit risks are underwritten using the same credit criteria the Company would use when making an equipment term loan. Residual value risk is managed through the use of qualified, independent appraisers that establish the residual values the Company uses in structuring a lease.

The Company accounts for leases with Investment Tax Credits (ITC) under the deferred method as established in ASC 740-10. ITC are viewed and accounted for as a reduction of the cost of the related assets and presented as deferred income on the Company’s financial statement.

See “Item 3. Quantitative and Qualitative Disclosures About Market Risk-Credit Risk” for a discussion about the credit risks the Company assumes and its overall credit risk management practices.

Each loan or lease type involves risks specific to the: (1) borrower; (2) collateral; and (3) loan & lease structure. See “Results of Operations - Provision and Allowance for Credit Losses” for a more detailed discussion of risks by loan & lease type. The Company’s current underwriting policies and standards are designed to mitigate the risks involved in each loan & lease type. The Company’s policies require that loans & leases are approved only to those borrowers exhibiting a clear source of repayment and the ability to service existing and proposed debt. The Company’s underwriting procedures for all loan & lease types require careful consideration of the borrower, the borrower’s financial condition, the borrower’s management capability, the borrower’s industry, and the economic environment affecting the loan or lease.

Most loans & leases made by the Company are secured, but collateral is the secondary or tertiary source of repayment; cash flow is our primary source of repayment. The quality and liquidity of collateral are important and must be confirmed before the loan is made.

In order to be responsive to borrower needs, the Company prices loans & leases: (1) on both a fixed rate and adjustable rate basis; (2) over different terms; and (3) based upon different rate indices; as long as these structures are consistent with the Company’s interest rate risk management policies and procedures (see Item 3. Quantitative and Qualitative Disclosures About Market Risk-Interest Rate Risk).

Overall, the Company's loan & lease portfolio at September 30, 2017 totaled $2.2 billion, an increase of $137.1 million or 6.6% over September 30, 2016. This increase has occurred as a result of: (1) the Company’s intensified business development efforts directed toward credit-qualified borrowers; (2) entry into the equipment leasing business; and (3) expansion of our service area into Walnut Creek and Concord.  No assurances can be made that this growth in the loan & lease portfolio will continue.

Loans & leases at September 30, 2017 increased $39.2 million from $2.2 billion at December 31, 2016, primarily as a result of growth in real estate and commercial segments offset to some extent by normal seasonal pay downs of loans made to the Company’s agricultural customer customers.

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The following table sets forth the distribution of the loan & lease portfolio by type and percent as of the periods indicated.

Loan & Lease Portfolio	September 30, 2017				December 31, 2016				September 30, 2016
(in thousands)	$		%		$		%		$		%
Commercial Real Estate	$	689,732	31.0	%	$	674,445	30.9	%	$	632,484	30.2	%
Agricultural Real Estate		470,738	21.2	%		467,685	21.4	%		439,972	21.1	%
Real Estate Construction		162,167	7.3	%		176,462	8.1	%		175,045	8.4	%
Residential 1st Mortgages		257,920	11.6	%		242,247	11.1	%		238,376	11.4	%
Home Equity Lines and Loans		33,350	1.5	%		31,625	1.4	%		32,513	1.6	%
Agricultural		259,127	11.7	%		295,325	13.5	%		274,704	13.2	%
Commercial		257,951	11.6	%		217,577	10.0	%		214,086	10.3	%
Consumer & Other		7,312	0.3	%		6,913	0.3	%		6,975	0.3	%
Leases		84,485	3.8	%		70,986	3.3	%		70,129	3.4	%
Total Gross Loans & Leases		2,222,782	100.0	%		2,183,265	100.0	%		2,084,284	100.0	%
Less: Unearned Income		6,003				5,664				4,614
Subtotal		2,216,779				2,177,601				2,079,670
Less: Allowance for Credit Losses		50,744				47,919				44,446
Net Loans & Leases	$	2,166,035			$	2,129,682			$	2,035,224

Classified Loans & Leases and Non-Performing Assets

All loans & leases are assigned a credit risk grade using grading standards developed by bank regulatory agencies. See “Results of Operations - Provision and Allowance for Credit Losses” for more detail on risk grades. The Company utilizes the services of a third-party independent loan review firm to perform evaluations of individual loans & leases and review the credit risk grades the Company places on loans & leases. Loans & leases that are judged to exhibit a higher risk profile are referred to as “classified loans & leases,” and these loans & leases receive increased management attention. As of September 30, 2017, classified loans totaled $9.8 million compared to $6.4 million at December 31, 2016 and $6.8 million at September 30, 2016.

Classified loans & leases with higher levels of credit risk can be further designated as “impaired” loans & leases. A loan or lease is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the original agreement. See “Results of Operations - Provision and Allowance for Credit Losses” for further details. Impaired loans & leases consist of: (1) non-accrual loans & leases; and/or (2) restructured loans & leases that are still performing (i.e., accruing interest).

Non-Accrual Loans & Leases - Accrual of interest on loans & leases is generally discontinued when a loan or lease becomes contractually past due by 90 days or more with respect to interest or principal. When loans & leases are 90 days past due, but in management's judgment are well secured and in the process of collection, they may not be classified as non-accrual. When a loan or lease is placed on non-accrual status, all interest previously accrued but not collected is reversed. Income on such loans & leases is then recognized only to the extent that cash is received and where the future collection of principal is probable. As of September 30, 2017, non-accrual loans & leases totaled $4,000. At December 31, 2016 and September 30, 2016, non-accrual loans & leases totaled $3.1 million and $3.1 million, respectively.

Restructured Loans & Leases - A restructuring of a loan or lease constitutes a TDR under ASC 310-40, if the Company for economic or legal reasons related to the debtor's financial difficulties grants a concession to the debtor that it would not otherwise consider. Restructured loans or leases typically present an elevated level of credit risk as the borrowers are not able to perform according to the original contractual terms. If the restructured loan or lease was current on all payments at the time of restructure and management reasonably expects the borrower will continue to perform after the restructure, management may keep the loan or lease on accrual. Loans & leases that are on nonaccrual status at the time they become TDR loans, remain on nonaccrual status until the borrower demonstrates a sustained period of performance, which the Company generally believes to be six consecutive months of payments, or equivalent. A loan or lease can be removed from TDR status if it was restructured at a market rate in a prior calendar year and is currently in compliance with its modified terms. However, these loans or leases continue to be classified as impaired and are individually evaluated for impairment.

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As of September 30, 2017, restructured loans & leases on accrual totaled $6.2 million as compared to $6.0 million at December 31, 2016. Restructured loans on accrual at September 30, 2016 were $4.6 million.

Other Real Estate - Loans where the collateral has been repossessed are classified as other real estate ("ORE") or, if the collateral is personal property, the loan is classified as other assets on the Company's financial statements.

The following table sets forth the amount of the Company's non-performing loans & leases (defined as non-accrual loans & leases plus accruing loans & leases past due 90 days or more) and ORE as of the dates indicated.

Non-Performing Assets

(in thousands)	September 30, 2017			Dec. 31, 2016			September 30, 2016
Non-Performing Loans & Leases	$	4		$	3,074		$	3,074
Other Real Estate		873			3,745			785
Total Non-Performing Assets	$	877		$	6,819		$	3,859
Non-Performing Loans & Leases as a % of Total Loans & Leases		0.00	%		0.14	%		0.15	%
Restructured Loans & Leases (Performing)	$	6,202		$	4,462		$	4,597

Although management believes that non-performing loans & leases are generally well-secured and that potential losses are provided for in the Company’s allowance for credit losses, there can be no assurance that future deterioration in economic conditions and/or collateral values will not result in future credit losses. Specific reserves of $4,000, $631,000, and $643,000 have been established for non-performing loans & leases at September 30, 2017, December 31, 2016 and September 30, 2016, respectively.

Foregone interest income on non-accrual loans & leases, which would have been recognized during the period, if all such loans & leases had been current in accordance with their original terms, totaled $483 for the nine months ended September 30, 2017, $127,000 for the year ended December 31, 2016, and $99,000 for the nine months ended September 30, 2016.

The Company reported $873,000 of ORE at September 30, 2017, $3.7 million at December 31, 2016, and $785,000 at September 30, 2016.

Except for those classified and non-performing loans & leases discussed above, the Company’s management is not aware of any loans & leases as of September 30, 2017, for which known financial problems of the borrower would cause serious doubts as to the ability of these borrowers to materially comply with their present loan or lease repayment terms, or any known events that would result in the loan or lease being designated as non-performing at some future date. However:

· The Central Valley was one of the hardest hit areas in the country during the recession. In many areas housing prices declined as much as 60% and unemployment reached 15% or more. Although the economy has strengthened throughout most of the Central Valley, for the most part housing prices remain below peak levels and unemployment levels remain above those in other areas of the state and country.

· The State of California experienced drought conditions from 2013 through most of 2016.  Although significant levels of rain and snow in late 2016 and early 2017 have alleviated drought conditions in many areas of California, including the Company’s primary service area, the long-term risks associated with the availability of water continue to exist.

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· The agricultural industry is facing challenges associated with: (1) weakness in export markets due to a stronger dollar and proposed changes in trade policies; (2) tight labor markets and higher wages due to legislative changes at the state and federal levels; and (3) proposed changes in immigration policy and the resulting impact on the labor pool.

In addition to the other information set forth in this report, readers should carefully consider the factors discussed in “Part I, Item 1A. Risk Factors” in the Company’s 2016 Annual Report on Form 10-K.

Deposits

One of the key sources of funds to support earning assets is the generation of deposits from the Company’s customer base. The ability to grow the customer base, and subsequently deposits, is a significant element in the performance of the Company.

The Company's deposit balances at September 30, 2017 have increased $353.8 million or 15.0% compared to September 30, 2016. In addition to the Company’s ongoing business development activities for deposits, the following factors positively impacted year-over-year deposit growth: (1) the Company’s strong financial results and position and F&M Bank’s reputation as one of the most safe and sound banks in its market area; (2) the Company’s expansion of its service area into Walnut Creek and Concord; and (3) $103.7 million in deposits from the acquisition of Delta National Bank. The Company expects that, at some point, deposit customers may begin to diversify how they invest their money (e.g., move funds back into the stock market or other investments) and this could impact future deposit growth.

Although total deposits have increased 15.0% since September 30, 2016, importantly, low cost transaction accounts continue to grow at a strong pace as well:

· Demand and interest-bearing transaction accounts increased $226.5 million or 20.5% since September 30, 2016.

· Savings and money market accounts have increased $125.1 million or 17.8% since September 30, 2016.

· Time deposit accounts have increased $2.1 million or 0.4% since September 30, 2016.

The Company's deposit balances at September 30, 2017 have increased $127.7 million or 5.0% compared to December 31, 2016. Savings and money market deposits increased 8.9% or $67.5 million while demand and interest-bearing transaction accounts increased by $80.7 million or 6.5% and time deposit accounts decreased by $20.5 million or 3.6%.  This decrease in time deposit accounts was due to the Company’s decision not to renew $35 million in high rate public funds time deposit accounts from the State of California. Deposit trends in the first nine months of the year can be impacted by the seasonal needs of our agricultural customers.

Federal Home Loan Bank Advances and Federal Reserve Bank Borrowings

Lines of credit with the Federal Reserve Bank and the Federal Home Loan Bank are other key sources of funds to support earning assets. These sources of funds are also used to manage the Company’s interest rate risk exposure, and as opportunities arise, to borrow and invest the proceeds at a positive spread through the investment portfolio. There were no FHLB Advances at September 30, 2017, December 31, 2016, or September 30, 2016. There were no Federal Funds purchased or advances from the FRB at September 30, 2017, December 31, 2016 or September 30, 2016.

As of September 30, 2017, the Company has additional borrowing capacity of $422.8 million with the Federal Home Loan Bank and $377.4 million with the Federal Reserve Bank. Any borrowings under these lines would be collateralized with loans that have been accepted for pledging at the FHLB and FRB.

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Long-Term Subordinated Debentures

On December 17, 2003, the Company raised $10 million through an offering of trust-preferred securities (“TPS”). See Note 14 located in “Item 8. Financial Statements and Supplementary Data” of the Company’s 2016 Annual Report on Form 10-K. Although this amount is reflected as subordinated debt on the Company’s balance sheet, under current regulatory guidelines, our TPS will continue to qualify as regulatory capital (See “Capital”). These securities accrue interest at a variable rate based upon 3-month LIBOR plus 2.85%. Interest rates reset quarterly and were 4.17% as of September 30, 2017, 3.84% at December 31, 2016 and 3.71% at September 30, 2016. The average rate paid for these securities for the first nine months of 2017 was 4.15% and 3.53% for the first nine months of 2016. Additionally, if the Company decided to defer interest on the subordinated debentures, the Company would be prohibited from paying cash dividends on the Company’s common stock.

Capital

The Company relies primarily on capital generated through the retention of earnings to satisfy its capital requirements. The Company engages in an ongoing assessment of its capital needs in order to support business growth and to insure depositor protection. Shareholders’ Equity totaled $302.6 million at September 30, 2017, $280.0 million at December 31, 2016, and $272.4 million at September 30, 2016.

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

The implementation of Basel III requirements will increase the required capital levels that the Company and the Bank must maintain. The final rules include new minimum risk-based capital and leverage ratios, which would be phased in over time. The new minimum capital level requirements applicable to the Company and the Bank under the final rules will be: (i) a common equity Tier 1 capital ratio of 4.5% of risk-weighted assets (“RWA”); (ii) a Tier 1 capital ratio of 6% of RWA; (iii) a total capital ratio of 8% of RWA; and (iv) a Tier 1 leverage ratio of 4% of total assets. The final rules also establish a "capital conservation buffer" of 2.5% above each of the new regulatory minimum capital ratios, which would result in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0% of RWA; (ii) a Tier 1 capital ratio of 8.5% of RWA; and (iii) a total capital ratio of 10.5% of RWA. An institution will be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. The final rules also permit the Company’s subordinated debentures issued in 2003 to continue to be counted as Tier 1 capital.

The final rules became effective as applied to the Company and the Bank on January 1, 2015, with a phase in period through January 1, 2019.  The Company believes that it is currently in compliance with all of these new capital requirements (as fully phased-in) and that they will not result in any restrictions on the Company’s business activity.

In addition, the most recent notification from the FDIC categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following tables. There are no conditions or events since that notification that management believes have changed the Bank’s category.

(in thousands)	Actual					Current Regulatory Capital Requirements					Well Capitalized Under Prompt Corrective Action
The Company:	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2017
Total Capital Ratio	$	343,361		13.19	%	$	208,312		8.0	%		N/A		N/A
Common Equity Tier 1 Capital Ratio	$	300,802		11.55	%	$	117,176		4.5	%		N/A		N/A
Tier 1 Capital Ratio	$	310,584		11.93	%	$	156,234		6.0	%		N/A		N/A
Tier 1 Leverage Ratio	$	310,584		10.20	%	$	121,790		4.0	%		N/A		N/A

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(in thousands)	Actual					Current Regulatory Capital Requirements					Well Capitalized Under Prompt Corrective Action
The Bank:	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of September 30, 2017
Total Capital Ratio	$	331,392		12.79	%	$	207,336		8.0	%	$	259,170		10.0	%
Common Equity Tier 1 Capital Ratio	$	298,766		11.53	%	$	116,627		4.5	%	$	168,461		6.5	%
Tier 1 Capital Ratio	$	298,766		11.53	%	$	155,502		6.0	%	$	207,336		8.0	%
Tier 1 Leverage Ratio	$	298,766		9.85	%	$	121,336		4.0	%	$	151,670		5.0	%

As previously discussed (see “Long-Term Subordinated Debentures”), in order to supplement its regulatory capital base, during December 2003 the Company issued $10 million of trust preferred securities. On March 1, 2005, the Federal Reserve Board issued its final rule effective April 11, 2005, concerning the regulatory capital treatment of trust preferred securities (“TPS”) by bank holding companies (“BHCs”). Under the final rule, BHCs may include TPS in Tier 1 capital in an amount equal to 25% of the sum of core capital net of goodwill. Any portion of trust-preferred securities not qualifying as Tier 1 capital would qualify as Tier 2 capital subject to certain limitations. The Company has received notification from the Federal Reserve Bank of San Francisco that all of the Company’s trust preferred securities currently qualify as Tier 1 capital.

The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability.

In 1998, the Board approved the Company’s first common stock repurchase program. This program has been extended and expanded several times since then, and most recently, on August 11, 2015, the Board of Directors approved an extension of the $20 million stock repurchase program over the three-year period ending September 30, 2018. See “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of the Company’s 2016 Annual Report on Form 10-K for additional information.

There were no stock repurchases during the first nine months of 2017 or 2016. The remaining dollar value of shares that may yet be purchased under the Company’s Common Stock Repurchase Plan is approximately $20 million.

On August 5, 2008, the Board of Directors approved a Share Purchase Rights Plan (the “Rights Plan”), pursuant to which the Company entered into a Rights Agreement dated August 5, 2008, with Computershare as Rights Agent. The Rights Plan was set to expire on August 5, 2018.  On November 19, 2015, the Board of Directors approved a seven-year extension of the term of the Rights Plan.  Pursuant to an Amendment to the Rights Agreement dated February 18, 2016, the term of the Rights Plan was extended from August 5, 2018 to August 5, 2025.  The extension of the term of the Rights Plan was intended as a means to continue to guard against abusive takeover tactics and was not in response to any particular proposal. See “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of the Company’s 2016 Annual Report on Form 10-K for further explanation.

During the first and third quarters of 2017, the Company issued a combined total 4,975 shares of common stock to the Bank’s non-qualified defined contribution retirement plans. These shares were issued at a prices ranging from $590.00 to $595.00 per share based upon valuations completed during the quarter of issuance by a nationally recognized bank consulting and advisory firm and in reliance upon the exemption in Section 4(a)(2) of the Securities Act of 1933, as amended, and the regulations promulgated thereunder. The proceeds were contributed to the Bank as equity capital.

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Critical Accounting Policies and Estimates

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” is based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. In preparing the Company’s financial statements management makes estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. These judgments govern areas such as the allowance for credit losses, the fair value of financial instruments and accounting for income taxes.

For a full discussion of the Company’s critical accounting policies and estimates see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2016 Annual Report on Form 10-K.

Off Balance Sheet Commitments

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

(in thousands)	September 30, 2017		December 31, 2016		September 30, 2016
Commitments to Extend Credit	$	700,747	$	609,653	$	618,102
Letters of Credit		19,225		20,444		15,595
Performance Guarantees Under Interest Rate Swap Contracts Entered Into Between Our Borrowing Customers and Third Parties		1,479		1,835		5,305

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

Standby letters of credit are conditional commitments issued by the Company to guarantee performance of or payment for a customer to a third party. Most standby letters of credit are issued for 12 months or less. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Additionally, the Company maintains a reserve for off balance sheet commitments, which totaled $267,000 at September 30, 2017, December 31, 2016, and September 30, 2016. We do not anticipate any material losses as a result of these transactions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Risk Management

The Company has adopted risk management policies and procedures, which aim to ensure the proper control and management of all risk factors inherent in the operation of the Company, most importantly credit risk, interest rate risk and liquidity risk. These risk factors are not mutually exclusive. It is recognized that any product or service offered by the Company may expose the Company to one or more of these risk factors.

Credit Risk

Credit risk is the risk to earnings or capital arising from an obligor’s failure to meet the terms of any contract or otherwise fail to perform as agreed. Credit risk is found in all activities where success depends on counterparty, issuer, or borrower performance.

Credit risk in the investment portfolio and correspondent bank accounts is addressed through defined limits in the Company’s policy statements. In addition, certain securities carry insurance to enhance credit quality of the bond.

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In order to control credit risk in the loan & lease portfolio the Company has established credit management policies and procedures that govern both the approval of new loans & leases and the monitoring of the existing portfolio. The Company manages and controls credit risk through comprehensive underwriting and approval standards, dollar limits on loans & leases to one borrower, and by restricting loans & leases made primarily to its principal market area where management believes it is best able to assess the applicable risk. Additionally, management has established guidelines to ensure the diversification of the Company’s credit portfolio such that even within key portfolio sectors such as real estate or agriculture, the portfolio is diversified across factors such as location, building type, crop type, etc. However, as a financial institution that assumes credit risks as a principal element of its business, credit losses will be experienced in the normal course of business. The allowance for credit losses is maintained at a level considered by management to be adequate to provide for risks inherent in the loan & lease portfolio. The allowance is increased by provisions charged to operating expense and reduced by net charge-offs.

The Company’s methodology for assessing the appropriateness of the allowance is applied on a regular basis and considers all loans & leases. The systematic methodology consists of three parts.

Part 1 - includes a detailed analysis of the loan & lease portfolio in two phases. The first phase is conducted in accordance with the “Receivables” topic of the FASB ASC. Individual loans & leases are reviewed to identify them for impairment. A loan or lease is impaired when principal and interest are deemed uncollectible in accordance with the original contractual terms of the loan or lease. Impairment is measured as either the expected future cash flows discounted at each loan’s or lease’s effective interest rate, the fair value of the loan’s or lease’s collateral if the loan or lease is collateral dependent, or an observable market price of the loan or lease, if one exists. Upon measuring the impairment, the Company will ensure an appropriate level of allowance is present or established.

Central to the first phase of the analysis of the loan & lease portfolio is the risk rating system. The originating credit officer assigns each borrower an initial risk rating, which is based primarily on a thorough analysis of that borrower’s financial position in conjunction with industry and economic trends. Approvals are made based upon the amount of inherent credit risk specific to the transaction and are reviewed for appropriateness by senior credit administration personnel. Credits are monitored by credit administration personnel for deterioration in a borrower’s financial condition, which would impact the ability of the borrower to perform under the contract. Risk ratings are adjusted as necessary. Risk ratings are reviewed by both the Company’s independent third-party credit examiners and bank examiners from the DBO and FDIC.

Based on the risk rating system, specific allowances are established in cases where management has identified significant conditions or circumstances related to a credit that management believes indicates that the loan or lease is impaired and there is a probability of loss. Management performs a detailed analysis of these loans & leases, including, but not limited to, cash flows, appraisals of the collateral, conditions of the marketplace for liquidating the collateral, and assessment of the guarantors. Management then determines the inherent loss potential and allocates a portion of the allowance for losses as a specific allowance for each of these credits.

The second phase is conducted by segmenting the loan & lease portfolio by risk rating and into groups of loans & leases with similar characteristics in accordance with the “Contingency” topic of the FASB ASC. In this second phase, groups of loans & leases with similar characteristics are reviewed and the appropriate allowance factor is applied based on the historical average charge-off rate for each particular group of loans or leases.

Part 2 - considers qualitative internal and external factors that may affect a loan or lease’s collectability, is based upon management’s evaluation of various conditions, the effects of which are not directly measured in the determination of the historical and specific allowances. The evaluation of the inherent loss with respect to these conditions is subject to a higher degree of uncertainty because they are not identified with specific problem credits or portfolio segments. The conditions evaluated in connection with the second element of the analysis of the allowance include, but are not limited to the following conditions that existed as of the balance sheet date:

§ general economic and business conditions affecting the key service areas of the Company;

§ credit quality trends (including trends in collateral values, delinquencies and non-performing loans & leases);

§ loan & lease volumes, growth rates and concentrations;

§ loan & lease portfolio seasoning;

§ specific industry and crop conditions;

§ recent loss experience; and

§ duration of the current business cycle.

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Part 3 - An unallocated allowance often occurs due to the imprecision in estimating and allocating allowance balances associated with macro factors such as: (1) the continuing sluggish economic conditions in the Central Valley; and (2) the long term impact of drought conditions currently being experienced in California.

Management reviews all of these conditions in discussion with the Company’s senior credit officers. To the extent that any of these conditions is evidenced by a specifically identifiable impaired credit or portfolio segment as of the evaluation date, management’s estimate of the effect of such condition may be reflected as a specific allowance applicable to such credit or portfolio segment. Where any of these conditions is not evidenced by a specifically identifiable impaired credit or portfolio segment as of the evaluation date, management’s evaluation of the inherent loss related to such condition is reflected in the second element of the allowance or in the unallocated allowance.

Management believes, that based upon the preceding methodology, and using information currently available, the allowance for credit losses at September 30, 2017 was adequate. No assurances can be given that future events may not result in increases in delinquencies, non-performing loans & leases, or net loan & lease charge-offs that would require increases in the provision for credit losses and thereby adversely affect the results of operations.

Interest Rate Risk

The mismatch between maturities of interest sensitive assets and liabilities results in uncertainty in the Company’s earnings and economic value and is referred to as interest rate risk. The Company does not attempt to predict interest rates and positions the balance sheet in a manner, which seeks to minimize, to the extent possible, the effects of changing interest rates.

The Company measures interest rate risk in terms of potential impact on both its economic value and earnings. The methods for governing the amount of interest rate risk include: (1) analysis of asset and liability mismatches (Gap analysis); (2) the utilization of a simulation model; and (3) limits on maturities of investment, loan & lease, and deposit products, which reduces the market volatility of those instruments.

The Gap analysis measures, at specific time intervals, the divergence between earning assets and interest bearing liabilities for which repricing opportunities will occur. A positive difference, or Gap, indicates that earning assets will reprice faster than interest-bearing liabilities. This will generally produce a greater net interest margin during periods of rising interest rates and a lower net interest margin during periods of declining interest rates. Conversely, a negative Gap will generally produce a lower net interest margin during periods of rising interest rates and a greater net interest margin during periods of decreasing interest rates.

The interest rates paid on deposit accounts do not always move in unison with the rates charged on loans & leases. In addition, the magnitude of changes in the rates charged on loans & leases is not always proportionate to the magnitude of changes in the rate paid for deposits. Consequently, changes in interest rates do not necessarily result in an increase or decrease in the net interest margin solely as a result of the differences between repricing opportunities of earning assets or interest bearing liabilities.

The Company also utilizes the results of a dynamic simulation model to quantify the estimated exposure of net interest income to sustained interest rate changes. The sensitivity of the Company’s net interest income is measured over a rolling one-year horizon.

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The simulation model estimates the impact of changing interest rates on interest income from all interest-earning assets and the interest expense paid on all interest-bearing liabilities reflected on the Company’s balance sheet. This sensitivity analysis is compared to policy limits, which specify a maximum tolerance level for net interest income exposure over a one-year horizon assuming no balance sheet growth, given a 200 basis point upward and a 100 basis point downward shift in interest rates. A shift in rates over a 12-month period is assumed. Results that exceed policy limits, if any, are analyzed for risk tolerance and reported to the Board with appropriate recommendations. At September 30, 2017, the Company’s estimated net interest income sensitivity to changes in interest rates, as a percent of net interest income was an increase in net interest income of 3.63% if rates increase by 200 basis points and a decrease in net interest income of 4.75% if rates decline 100 basis points. Comparatively, at December 31, 2016, the Company’s estimated net interest income sensitivity to changes in interest rates, as a percent of net interest income was an increase in net interest income of 5.26% if rates increase by 200 basis points and a decrease in net interest income of 3.22% if rates decline 100 basis points.

The estimated sensitivity does not necessarily represent a Company forecast and the results may not be indicative of actual changes to the Company’s net interest income. These estimates are based upon a number of assumptions including: the nature and timing of interest rate levels including yield curve shape; prepayments on loans & leases and securities; pricing strategies on loans & leases and deposits; replacement of asset and liability cash flows; and other assumptions. While the assumptions used are based on current economic and local market conditions, there is no assurance as to the predictive nature of these conditions including how customer preferences or competitor influences might change.

Liquidity Risk

Liquidity risk is the risk to earnings or capital resulting from the Company’s inability to meet its obligations when they come due without incurring unacceptable losses. It includes the ability to manage unplanned decreases or changes in funding sources and to recognize or address changes in market conditions that affect the Company’s ability to liquidate assets or acquire funds quickly and with minimum loss of value. The Company endeavors to maintain a cash flow adequate to fund operations, handle fluctuations in deposit levels, respond to the credit needs of borrowers, and to take advantage of investment opportunities as they arise.

The Company’s principal operating sources of liquidity include (see “Item 8. Financial Statements and Supplementary Data – Consolidated Statements of Cash Flows” of the Company’s 2016 Annual Report on Form 10-K) cash and cash equivalents, cash provided by operating activities, principal payments on loans & leases, proceeds from the maturity or sale of investments, and growth in deposits. To supplement these operating sources of funds the Company maintains Federal Funds credit lines of $77 million and repurchase lines of $130 million with major banks. As of September 30, 2017, the Company has additional borrowing capacity of $422.8 million with the FHLB and $377.4 million with the FRB. Borrowings under these lines are collateralized with loans or securities that have been accepted for pledging at the FHLB and FRB.

At September 30, 2017, the Company had available sources of liquidity, which included cash and cash equivalents and unpledged investment securities AFS of approximately $441 million, which represents 14.4% of total assets.

ITEM 4. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures designed to ensure that information is recorded and reported in all filings of financial reports. Such information is reported to the Company’s management, including its Chief Executive Officer and its Chief Financial Officer to allow timely and accurate disclosure based on the definition of “disclosure controls and procedures” in Rule 13a-15(e). In designing these controls and procedures, management recognizes that they can only provide reasonable assurance of achieving the desired control objectives. Management also evaluated the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by this report, the Company carried out an evaluation of the effectiveness of Company’s disclosure controls and procedures under the supervision and with the participation of the Chief Executive Officer, the Chief Financial Officer and other senior management of the Company. The evaluation was based, in part, upon reports and affidavits provided by a number of executives. Based on the foregoing, the Company’s Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect the internal controls over financial reporting subsequent to the date the Company completed its evaluation.

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PART II.  OTHER INFORMATION

ITEM 1. Legal Proceedings

Certain lawsuits and claims arising in the ordinary course of business have been filed or are pending against the Company or its subsidiaries. Based upon information available to the Company, its review of such lawsuits and claims and consultation with its counsel, the Company believes the liability relating to these actions, if any, would not have a material adverse effect on its consolidated financial statements.

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

ITEM 1A. Risk Factors

See “Item 1A. Risk Factors” in the Company’s 2016 Annual Report to Shareholders on Form 10-K. In management’s opinion, there have been no material changes in risk factors since the filing of the 2016 Form 10-K.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no shares repurchased by Farmers & Merchants Bancorp during the first nine months of 2017. The remaining dollar value of shares that may yet be purchased under the Company’s Stock Repurchase Plan is approximately $20.0 million.

The common stock of Farmers & Merchants Bancorp is not widely held or listed on any exchange. However, trades are reported on the OTCQX under the symbol “FMCB.” Additionally, management is aware that there are private transactions in the Company’s common stock.

During the first and third quarters of 2017, the Company issued a combined total 4,975 shares of common stock to the Bank’s non-qualified defined contribution retirement plans. These shares were issued at prices ranging from $590.00 to $595.00 per share based upon valuations completed during the quarter of issuance by a nationally recognized bank consulting and advisory firm and in reliance upon the exemption in Section 4(a)(2) of the Securities Act of 1933, as amended, and the regulations promulgated thereunder. The proceeds were contributed to the Bank as equity capital.

During the first quarter of 2016, the Company issued 1,600 shares of common stock to the Bank’s non-qualified defined contribution retirement plans. These shares were issued at a price of $525 per share based upon a valuation completed during the quarter of issuance by a nationally recognized bank consulting and advisory firm and in reliance upon the exemption in Section 4(2) of the Securities Act of 1933, as amended, the regulations promulgated thereunder. The proceeds were contributed to the Bank as equity capital.

ITEM 3. Defaults Upon Senior Securities

Not applicable

ITEM 4. Mine Safety Disclosures

Not applicable

ITEM 5. Other Information

None

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ITEM 6. Exhibits

See “Index to Exhibits”

SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FARMERS & MERCHANTS BANCORP
Date:  November 8, 2017	/s/ Kent A. Steinwert
	Kent A. Steinwert
	Chairman, President
	& Chief Executive Officer
	(Principal Executive Officer)

Date:  November 8, 2017	/s/ Stephen W. Haley
	Stephen W. Haley
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial & Accounting Officer)

Index to Exhibits

Exhibit No.		Description
	31(a)	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31(b)	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101.INS	XBRL Instance Document
	101.SCH	XBRL Schema Document
	101.CAL	XBRL Calculation Linkbase Document
	101.LAB	XBRL Label Linkbase Document
	101.PRE	XBRL Presentation Linkbase Document
	101.DEF	XBRL Definition Linkbase Document

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EX-31.(A)

Exhibit 31(a)

Certification Pursuant to Section 302

Of the Sarbanes-Oxley Act of 2002

For the Chief Executive Officer

I, Kent A. Steinwert, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Farmers & Merchants Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures  and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  November 8, 2017	/s/ Kent A. Steinwert
	Kent A. Steinwert
	Chairman, President & Chief Executive Officer

EX-31.(B)

Exhibit 31(b)

Certification Pursuant to Section 302

Of the Sarbanes-Oxley Act of 2002

For the Chief Financial Officer

I, Stephen W. Haley, certify that:

1. I have reviewed this quarterly  report on Form 10-Q of Farmers & Merchants Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures  and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 8, 2017	/s/ Stephen W. Haley
	Stephen W. Haley
	Executive Vice President & Chief Financial Officer

EX-32

Exhibit 32

 Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Farmers & Merchants Bancorp (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Kent A. Steinwert, Chairman, President and Chief Executive Officer, and Stephen W. Haley, Executive Vice President and Chief Financial Officer of the Company, certify pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange act of 1934 and Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. $ 1350), that:

1. the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. $ 78m or 78o(d)); and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

November 8, 2017

/s/ Kent A. Steinwert

Kent A. Steinwert

Chairman, President

 & Chief Executive Officer

/s/ Stephen W. Haley

Stephen W. Haley

Executive Vice President & Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Oct. 31, 2017
Document and Entity Information [Abstract]
Entity Registrant Name	FARMERS & MERCHANTS BANCORP
Entity Central Index Key	0001085913
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		812,304
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2017

XML

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
Cash and Cash Equivalents:
Cash and Due from Banks	$ 44,166	$ 54,896	$ 56,376
Interest Bearing Deposits with Banks	149,104	43,964	42,927
Total Cash and Cash Equivalents	193,270	98,860	99,303
Investment Securities:
Available-for-Sale	456,323	448,263	358,857
Held-to-Maturity	55,542	58,109	58,905
Total Investment Securities	511,865	506,372	417,762
Loans & Leases:	2,216,779	2,177,601	2,079,670
Less: Allowance for Credit Losses	50,744	47,919	44,446
Loans & Leases, Net	2,166,035	2,129,682	2,035,224
Premises and Equipment, Net	28,734	29,229	26,058
Bank Owned Life Insurance	59,128	57,761	57,320
Interest Receivable and Other Assets	112,743	100,217	91,899
Total Assets	3,071,775	2,922,121	2,727,566
Deposits:
Demand	767,162	756,236	672,351
Interest Bearing Transaction	564,904	495,063	433,220
Savings and Money Market	827,588	760,119	702,441
Time	549,773	570,293	547,625
Total Deposits	2,709,427	2,581,711	2,355,637
Subordinated Debentures	10,310	10,310	10,310
Interest Payable and Other Liabilities	49,409	50,119	89,221
Total Liabilities	2,769,146	2,642,140	2,455,168
Shareholders' Equity
Preferred Stock: No Par Value, 1,000,000 Shares Authorized, None Issued or Outstanding	0	0	0
Common Stock: Par Value $0.01, 7,500,000 Shares Authorized, 812,304, 807,329 and 792,387 Shares Issued and Outstanding at September 30, 2017, December 31, 2016 and September 30, 2016, Respectively	8	8	8
Additional Paid-In Capital	93,624	90,671	82,004
Retained Earnings	208,443	189,313	186,920
Accumulated Other Comprehensive (Loss) Income	554	(11)	3,466
Total Shareholders' Equity	302,629	279,981	272,398
Total Liabilities and Shareholders' Equity	$ 3,071,775	$ 2,922,121	$ 2,727,566

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Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
Shareholders' Equity
Preferred Stock, par value (in dollars per share)	$ 0	$ 0	$ 0
Preferred Stock, shares authorized (in shares)	1,000,000	1,000,000	1,000,000
Preferred Stock, shares issued (in shares)	0	0	0
Preferred Stock, shares outstanding (in shares)	0	0	0
Common Stock, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01
Common Stock, shares authorized (in shares)	7,500,000	7,500,000	7,500,000
Common Stock, shares issued (in shares)	812,304	807,329	792,387
Common Stock, shares outstanding (in shares)	812,304	807,329	792,387

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Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Interest Income
Interest and Fees on Loans & Leases	$ 26,491	$ 23,523	$ 76,270	$ 67,909
Interest on Deposits with Banks	648	51	1,155	133
Interest on Investment Securities:
Taxable	2,038	1,210	6,174	4,113
Exempt from Federal Tax	432	478	1,321	1,447
Total Interest Income	29,609	25,262	84,920	73,602
Interest Expense
Deposits	1,644	1,004	4,353	2,691
Borrowed Funds	0	14	0	18
Subordinated Debentures	115	92	320	272
Total Interest Expense	1,759	1,110	4,673	2,981
Net Interest Income	27,850	24,152	80,247	70,621
Provision for Credit Losses	1,600	250	2,850	2,850
Net Interest Income After Provision for Credit Losses	26,250	23,902	77,397	67,771
Non-Interest Income
Service Charges on Deposit Accounts	897	877	2,591	2,517
Net Gain (Loss) on Sale of Investment Securities	0	3	131	(286)
Increase in Cash Surrender Value of Life Insurance	458	474	1,367	1,422
Debit Card and ATM Fees	990	847	2,877	2,540
Net Gain on Deferred Compensation Investments	510	1,630	1,703	1,969
Other	783	722	3,914	1,987
Total Non-Interest Income	3,638	4,553	12,583	10,149
Non-Interest Expense
Salaries and Employee Benefits	10,809	10,272	34,751	32,061
Net Gain on Deferred Compensation Investments	510	1,630	1,703	1,969
Occupancy	864	786	2,580	2,240
Equipment	957	853	2,970	2,552
Marketing	329	267	867	929
FDIC	233	320	694	960
Gain on Sale of ORE	0	0	(414)	(5,941)
Other	2,605	2,286	8,103	8,400
Total Non-Interest Expense	16,307	16,414	51,254	43,170
Income Before Income Taxes	13,581	12,041	38,726	34,750
Provision for Income Taxes	5,000	4,503	14,137	12,708
Net Income	$ 8,581	$ 7,538	$ 24,589	$ 22,042
Basic Earnings Per Common Share (in dollars per share)	$ 10.59	$ 9.51	$ 30.39	$ 27.82

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Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Consolidated Statements of Comprehensive Income (Unaudited) [Abstract]
Net Income	$ 8,581	$ 7,538	$ 24,589	$ 22,042
Other Comprehensive Income
Change in Net Unrealized Gains (Loss) on Available-for-Sale Securities	322	(709)	1,106	4,667
Deferred Tax (Benefit) Expense Related to Unrealized Gains	(135)	299	(465)	(1,962)
Reclassification Adjustment for Realized (Gain) Loss on Available-for-Sale Securities Included in Net Income	0	(3)	(131)	286
Deferred Tax (Benefit) Expense Related to Reclassification Adjustment	0	(409)	55	(120)
Change in Net Unrealized Gains on Available-for-Sale Securities, Net of Tax	187	(822)	565	2,871
Total Other Comprehensive Income (Loss)	187	(822)	565	2,871
Comprehensive Income	$ 8,768	$ 6,716	$ 25,154	$ 24,913

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Consolidated Statements of Changes in Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income, Net [Member]	Total
Balance at Dec. 31, 2015	$ 8	$ 81,164	$ 170,068	$ 595	$ 251,835
Balance (in shares) at Dec. 31, 2015	790,787
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	$ 0	0	22,042	0	22,042
Cash Dividends Declared on Common Stock	0	0	(5,190)	0	(5,190)
Issuance of Common Stock	$ 0	840	0	0	840
Issuance of Common Stock (in shares)	1,600
Change in Net Unrealized Gain on Securities Available-for-Sale, Net of Tax	$ 0	0	0	2,871	2,871
Balance at Sep. 30, 2016	$ 8	82,004	186,920	3,466	$ 272,398
Balance (in shares) at Sep. 30, 2016	792,387				792,387
Balance at Dec. 31, 2016	$ 8	90,671	189,313	(11)	$ 279,981
Balance (in shares) at Dec. 31, 2016	807,329				807,329
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income		0	24,589	0	$ 24,589
Cash Dividends Declared on Common Stock	$ 0	0	(5,459)	0	(5,459)
Issuance of Common Stock	$ 0	2,953	0	0	2,953
Issuance of Common Stock (in shares)	4,975
Change in Net Unrealized Gain on Securities Available-for-Sale, Net of Tax	$ 0	0	0	565	565
Balance at Sep. 30, 2017	$ 8	$ 93,624	$ 208,443	$ 554	$ 302,629
Balance (in shares) at Sep. 30, 2017	812,304				812,304

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Consolidated Statements of Changes in Shareholders' Equity (Unaudited) (Parenthetical) - $ / shares	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cash Dividends Declared per Share of Common Stock (in dollars per share)	$ 6.75	$ 6.55

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Operating Activities:
Net Income	$ 24,589	$ 22,042
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for Credit Losses	2,850	2,850
Depreciation and Amortization	1,595	1,425
Net Amortization of Investment Security Premiums & Discounts	1,097	1,104
Amortization of Core Deposit Intangible	82	0
Accretion of Discount on Acquired Loans	(163)	0
Net (Gain) Loss on Sale of Investment Securities	(131)	286
Net (Gain) Loss on Sale of Property & Equipment	(1,189)	4
Net Gain on Sale of Other Real Estate	(414)	(5,941)
Net Change in Operating Assets & Liabilities:
Net Increase in Interest Receivable and Other Assets	(2,315)	(3,821)
Net (Decrease) Increase in Interest Payable and Other Liabilities	107	2,890
Net Cash Used in Operating Activities	26,108	20,839
Investing Activities:
Purchase of Investment Securities Available-for-Sale	(208,985)	(288,874)
Proceeds from Sold, Matured or Called Securities Available-for-Sale	201,001	314,726
Purchase of Investment Securities Held-to-Maturity	(1,070)	(1,807)
Proceeds from Matured or Called Securities Held-to-Maturity	3,592	4,260
Net Loans & Leases Paid, Originated or Acquired	(39,245)	(83,440)
Principal Collected on Loans & Leases Previously Charged Off	205	202
Additions to Premises and Equipment	(3,215)	(912)
Purchase of Other Investments	(12,728)	(6,334)
Proceeds from Sale of Property & Equipment	3,304	0
Proceeds from Sale of Other Real Estate	3,186	8,282
Net Cash Used in Investing Activities	(53,955)	(53,897)
Financing Activities:
Net Increase in Deposits	127,716	78,105
Cash Dividends	(5,459)	(5,190)
Net Cash Provided by Financing Activities	122,257	72,915
Increase in Cash and Cash Equivalents	94,410	39,857
Cash and Cash Equivalents at Beginning of Period	98,860	59,446
Cash and Cash Equivalents at End of Period	193,270	99,303
Supplementary Data
Loans Transferred to Foreclosed Assets (ORE)	0	538
Cash Payments Made for Income Taxes	13,142	9,591
Issuance of Common Stock to the Bank's Non-Qualified Retirement Plans	2,953	840
Interest Paid	$ 4,586	$ 2,813

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Significant Accounting Policies

9 Months Ended

Sep. 30, 2017

Significant Accounting Policies [Abstract]

Significant Accounting Policies

1. Significant Accounting Policies

Farmers & Merchants Bancorp (the “Company”) was organized March 10, 1999. Primary operations are related to traditional banking activities through its subsidiary Farmers & Merchants Bank of Central California (the “Bank”) which was established in 1916. The Bank’s wholly owned subsidiaries include Farmers & Merchants Investment Corporation and Farmers/Merchants Corp. Farmers & Merchants Investment Corporation has been dormant since 1991. Farmers/Merchants Corp. acts as trustee on deeds of trust originated by the Bank.

The Company’s other subsidiaries include F & M Bancorp, Inc. and FMCB Statutory Trust I. F & M Bancorp, Inc. was created in March 2002 to protect the name F & M Bank. During 2002, the Company completed a fictitious name filing in California to begin using the streamlined name “F & M Bank” as part of a larger effort to enhance the Company’s image and build brand name recognition. In December 2003, the Company formed a wholly owned subsidiary, FMCB Statutory Trust I, for the sole purpose of issuing Trust Preferred Securities and related subordinated debentures, in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). FMCB Statutory Trust I is a non-consolidated subsidiary.

On November 18, 2016, Farmers & Merchants Bancorp completed the acquisition of Delta National Bancorp, headquartered in Manteca, California, and the parent holding company for Delta Bank N.A., a locally owned and operated community bank established in 1973. As of the acquisition date, Delta National Bancorp had approximately $112 million in assets and four branch locations in the communities of Manteca, Riverbank, Modesto and Turlock. At the effective time of the acquisition, Delta National Bancorp was merged into Farmers & Merchants Bancorp and Delta Bank, N.A. was merged into Farmers & Merchants Bank of Central California.

The accounting and reporting policies of the Company conform to U.S. GAAP and prevailing practice within the banking industry. The following is a summary of the significant accounting and reporting policies used in preparing the consolidated financial statements.

Basis of Presentation

The accompanying consolidated financial statements and notes thereto have been prepared in accordance with accounting principles generally accepted in the United States of America for financial information.

These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting on Form 10-Q. Accordingly, certain disclosures normally presented in the notes to the annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The results of operations for the three-month and nine-month periods ended September 30, 2017 may not necessarily be indicative of future operating results.

The accompanying consolidated financial statements include the accounts of the Company and the Company’s wholly owned subsidiaries, F & M Bancorp, Inc. and the Bank, along with the Bank’s wholly owned subsidiaries, Farmers & Merchants Investment Corporation and Farmers/Merchants Corp. Significant inter-company transactions have been eliminated in consolidation.

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

Certain amounts in the prior years' financial statements and related footnote disclosures have been reclassified to conform to the current-year presentation. These reclassifications had no effect on previously reported net income or total shareholders’ equity.

Cash and Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, the Company has defined cash and cash equivalents as those amounts included in the balance sheet captions Cash and Due from Banks, Interest Bearing Deposits with Banks, Federal Funds Sold and Securities Purchased Under Agreements to Resell. For these instruments, the carrying amount is a reasonable estimate of fair value.

Investment Securities

Investment securities are classified at the time of purchase as held-to-maturity (“HTM”) if it is management’s intent and the Company has the ability to hold the securities until maturity. These securities are carried at cost, adjusted for amortization of premium and accretion of discount using a level yield of interest over the estimated remaining period until maturity. Losses, reflecting a decline in value judged by the Company to be other than temporary, are recognized in the period in which they occur.

Securities are classified as available-for-sale (“AFS”) if it is management’s intent, at the time of purchase, to hold the securities for an indefinite period of time and/or to use the securities as part of the Company’s asset/liability management strategy. These securities are reported at fair value with aggregate unrealized gains or losses excluded from income and included as a separate component of shareholders’ equity, net of related income taxes. Fair values are based on quoted market prices or broker/dealer price quotations on a specific identification basis. Gains or losses on the sale of these securities are computed using the specific identification method.

Trading securities, if any, are acquired for short-term appreciation and are recorded in a trading portfolio and are carried at fair value, with unrealized gains and losses recorded in non-interest income.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement; and (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans & Leases

Loans & leases are reported at the principal amount outstanding net of unearned discounts and deferred loan & lease fees and costs. Interest income on loans & leases is accrued daily on the outstanding balances using the simple interest method. Loan & lease origination fees are deferred and recognized over the contractual life of the loan or lease as an adjustment to the yield. Loans & leases are placed on non-accrual status when the collection of principal or interest is in doubt or when they become past due for 90 days or more unless they are both well-secured and in the process of collection. For this purpose, a loan or lease is considered well secured if it is collateralized by property having a net realizable value in excess of the amount of the loan or lease or is guaranteed by a financially capable party. When a loan or lease is placed on non-accrual status, the accrued and unpaid interest receivable is reversed and charged against current income; thereafter, interest income is recognized only as it is collected in cash. Additionally, cash would be applied to principal if all principal was not expected to be collected. Loans & leases placed on non-accrual status are returned to accrual status when the loans or leases are paid current as to principal, interest, and future payments are expected to be made in accordance with the contractual terms of the loan or lease.

A loan or lease is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the original agreement. Impaired loans & leases are either: (1) non-accrual loans & leases; or (2) restructured loans & leases that are still accruing interest. Loans or leases determined to be impaired are individually evaluated for impairment. When a loan or lease is impaired, the Company measures impairment based on the present value of expected future cash flows discounted at the loan or lease's effective interest rate, except that as a practical expedient, it may measure impairment based on a loan or lease's observable market price, or the fair value of the collateral if the loan or lease is collateral dependent. A loan or lease is collateral dependent if the repayment of the loan or lease is expected to be provided solely by the underlying collateral.

A restructuring of a loan or lease constitutes a troubled debt restructuring (TDR) if the Company for economic or legal reasons related to the borrower’s (the term “borrower” is used herein to describe a customer who has entered into either a loan or lease transaction) financial difficulties grants a concession to the borrower that it would not otherwise consider. Restructured loans & leases typically present an elevated level of credit risk, as the borrowers are not able to perform according to the original contractual terms. If the restructured loan or lease was current on all payments at the time of restructure and management reasonably expects the borrower will continue to perform after the restructure, management may keep the loan or lease on accrual. Loans & leases that are on nonaccrual status at the time they become TDR, remain on nonaccrual status until the borrower demonstrates a sustained period of performance, which the Company generally believes to be six consecutive months of payments, or equivalent. A loan or lease can be removed from TDR status if it was restructured at a market rate in a prior calendar year and is currently in compliance with its modified terms. However, these loans or leases continue to be classified as impaired and are individually evaluated for impairment as described above.

Generally, the Company will not restructure loans or leases for borrowers unless: (1) the existing loan or lease is brought current as to principal and interest payments; and (2) the restructured loan or lease can be underwritten to reasonable underwriting standards. If these standards are not met other actions will be pursued (e.g., foreclosure) to collect outstanding loan or lease amounts. After restructure, a determination is made whether the loan or lease will be kept on accrual status based upon the underwriting and historical performance of the restructured credit.

Allowance for Credit Losses

The allowance for credit losses is an estimate of probable incurred credit losses inherent in the Company's loan & lease portfolio as of the balance sheet date. The allowance is established through a provision for credit losses, which is charged to expense. Additions to the allowance are expected to maintain the adequacy of the total allowance after credit losses and loan & lease growth. Credit exposures determined to be uncollectible are charged against the allowance. Cash received on previously charged off amounts is recorded as a recovery to the allowance. The overall allowance consists of three primary components: specific reserves related to impaired loans & leases; general reserves for inherent losses related to loans & leases that are not impaired; and an unallocated component that takes into account the imprecision in estimating and allocating allowance balances associated with macro factors.

The determination of the general reserve for loans & leases that are collectively evaluated for impairment is based on estimates made by management, to include, but not limited to, consideration of historical losses by portfolio segment, internal asset classifications, qualitative factors that include economic trends in the Company's service areas, industry experience and trends, geographic concentrations, estimated collateral values, the Company's underwriting policies, the character of the loan & lease portfolio, and probable losses inherent in the portfolio taken as a whole.

The Company maintains a separate allowance for each portfolio segment (loan & lease type). These portfolio segments include: (1) commercial real estate; (2) agricultural real estate; (3) real estate construction (including land and development loans); (4) residential 1^st mortgages; (5) home equity lines and loans; (6) agricultural; (7) commercial; (8) consumer and other; and (9) equipment leases. The allowance for credit losses attributable to each portfolio segment, which includes both individually evaluated impaired loans & leases and loans & leases that are collectively evaluated for impairment, is combined to determine the Company's overall allowance, which is included on the consolidated balance sheet.

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

Pass – A pass loan or lease is a strong credit with no existing or known potential weaknesses deserving of management's close attention.

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

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

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

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

The general reserve component of the allowance for credit losses also consists of reserve factors that are based on management's assessment of the following for each portfolio segment: (1) inherent credit risk; (2) historical losses; and (3) other qualitative factors. These reserve factors are inherently subjective and are driven by the repayment risk associated with each portfolio segment described below:

Commercial Real Estate – Commercial real estate mortgage loans are generally considered to possess a higher inherent risk of loss than the Company’s commercial, agricultural and consumer loan types. Adverse economic developments or an overbuilt market impact commercial real estate projects and may result in troubled loans. Trends in vacancy rates of commercial properties impact the credit quality of these loans. High vacancy rates reduce operating revenues and the ability for properties to produce sufficient cash flow to service debt obligations.

Real Estate Construction – Real estate construction loans, including land loans, are generally considered to possess a higher inherent risk of loss than the Company’s commercial, agricultural and consumer loan types. A major risk arises from the necessity to complete projects within specified cost and time lines. Trends in the construction industry significantly impact the credit quality of these loans, as demand drives construction activity. In addition, trends in real estate values significantly impact the credit quality of these loans, as property values determine the economic viability of construction projects.

Commercial – These loans are generally considered to possess a moderate inherent risk of loss because they are shorter-term; typically made to relationship customers; generally underwritten to existing cash flows of operating businesses; and may be collateralized by fixed assets, inventory and/or accounts receivable. Debt coverage is provided by business cash flows and economic trends influenced by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans.

Agricultural Real Estate and Agricultural – These loans are generally considered to possess a moderate inherent risk of loss since they are typically made to relationship customers and are secured by crop production, livestock and related real estate.  These loans are vulnerable to two risk factors that are largely outside the control of Company and borrowers: commodity prices and weather conditions.

Leases – Equipment leases are generally considered to possess a moderate inherent risk of loss. As lessor, the Company is subject to both the credit risk of the borrower and the residual value risk of the equipment. Credit risks are underwritten using the same credit criteria the Company would use when making an equipment term loan. Residual value risk is managed through the use of qualified, independent appraisers that establish the residual values the Company uses in structuring a lease.

Residential 1st Mortgages and Home Equity Lines and Loans – These loans are generally considered to possess a low inherent risk of loss, although this is not always true as evidenced by the correction in residential real estate values that occurred between 2007 and 2012. The degree of risk in residential real estate lending depends primarily on the loan amount in relation to collateral value, the interest rate and the borrower's ability to repay in an orderly fashion. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate that the borrowers' capacity to repay their obligations may be deteriorating.

Consumer & Other – A consumer installment loan portfolio is usually comprised of a large number of small loans scheduled to be amortized over a specific period. Most installment loans are made for consumer purchases. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate that the borrowers' capacity to repay their obligations may be deteriorating.

At least quarterly, the Board of Directors reviews the adequacy of the allowance, including consideration of the relative risks in the portfolio, current economic conditions and other factors. If the Board of Directors and management determine that changes are warranted based on those reviews, the allowance is adjusted. In addition, the Company's and Bank's regulators, including the Federal Reserve Board (“FRB”), the California Department of Business Oversight (“DBO”) and the Federal Deposit Insurance Corporation (“FDIC”), as an integral part of their examination process, review the adequacy of the allowance. These regulatory agencies may require additions to the allowance based on their judgment about information available at the time of their examinations.

Acquired Loans

Loans acquired through purchase or through a business combination are recorded at their fair value at the acquisition date. Credit discounts, which reflect estimates of credit losses, expected to be incurred over the life of the loan, are included in the determination of fair value; therefore, an allowance for loan losses is not recorded at the acquisition date.

Allowance for Credit Losses on Off-Balance-Sheet Credit Exposures

The Company also maintains a separate allowance for off-balance-sheet commitments. Management estimates anticipated losses using historical data and utilization assumptions. The allowance for off-balance-sheet commitments is included in Interest Payable and Other Liabilities on the Company’s Consolidated Balance Sheet.

Premises and Equipment

Premises, equipment, and leasehold improvements are stated at cost, less accumulated depreciation and amortization. Depreciation is computed principally by the straight-line method over the estimated useful lives of the assets. Estimated useful lives of buildings range from 30 to 40 years, and for furniture and equipment from 3 to 7 years. Leasehold improvements are amortized over the lesser of the terms of the respective leases, or their useful lives, which are generally 5 to 10 years. Remodeling and capital improvements are capitalized while maintenance and repairs are charged directly to occupancy expense.

Other Real Estate

Other real estate, which is included in other assets, is expected to be sold and is comprised of properties no longer utilized for business operations and property acquired through foreclosure in satisfaction of indebtedness. These properties are recorded at fair value less estimated selling costs upon acquisition. Revised estimates to the fair value less cost to sell are reported as adjustments to the carrying amount of the asset, provided that such adjusted value is not in excess of the carrying amount at acquisition. Initial losses on properties acquired through full or partial satisfaction of debt are treated as credit losses and charged to the allowance for credit losses at the time of acquisition. Subsequent declines in value from the recorded amounts, routine holding costs, and gains or losses upon disposition, if any, are included in non-interest expense as incurred.

Income Taxes

The Company uses the liability method of accounting for income taxes. This method results in the recognition of deferred tax assets and liabilities that are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. The deferred provision for income taxes is the result of the net change in the deferred tax asset and deferred tax liability balances during the year. This amount combined with the current taxes payable or refundable results in the income tax expense for the current year.

The Company follows the standards set forth in the “Income Taxes” topic of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. This standard prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

The Company accounts for leases with Investment Tax Credits (ITC) under the deferred method as established in ASC 740-10. ITC are viewed and accounted for as a reduction of the cost of the related assets and presented as deferred income on the Company’s financial statement.

When tax returns are filed, it is certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Interest expense and penalties associated with unrecognized tax benefits, if any, are included in the provision for income taxes in the Consolidated Statements of Income.

Basic Earnings Per Common Share

The Company’s common stock is not traded on any exchange. The shares are primarily held by local residents and are not actively traded. Basic earnings per common share amounts are computed by dividing net income by the weighted average number of common shares outstanding for the period. There are no common stock equivalent shares. Therefore, there is no presentation of diluted basic earnings per common share. See Note 6 for additional information.

Segment Reporting

The “Segment Reporting” topic of the FASB ASC requires that public companies report certain information about operating segments. It also requires that public companies report certain information about their products and services, the geographic areas in which they operate, and their major customers. The Company is a holding company for a community bank, which offers a wide array of products and services to its customers. Pursuant to its banking strategy, emphasis is placed on building relationships with its customers, as opposed to building specific lines of business. As a result, the Company is not organized around discernible lines of business and prefers to work as an integrated unit to customize solutions for its customers, with business line emphasis and product offerings changing over time as needs and demands change. Therefore, the Company only reports one segment.

Low Income Housing Tax Credit Investments (LIHTC)

The Company accounts for its interest in LIHTC using the cost method as established in ASC 323-740. As an investor, the Company obtains income tax credits and deductions from the operating losses of these tax credit entities. The income tax credits and deductions are allocated to the investors based on their ownership percentages and are recorded as a reduction of income tax expense (or an increase to income tax benefit) and a reduction of federal income taxes payable.

Comprehensive Income

The “Comprehensive Income” topic of the FASB ASC establishes standards for the reporting and display of comprehensive income and its components in the financial statements. Other comprehensive income (loss) refers to revenues, expenses, gains, and losses that U.S. GAAP recognize as changes in value to an enterprise but are excluded from net income. For the Company, comprehensive income includes net income and changes in fair value of its available-for-sale investment securities.

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.

Business Combinations And Related Matters

Business combinations are accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations. Under the acquisition method, the acquiring entity in a business combination recognizes 100 percent of the acquired assets and assumed liabilities, regardless of the percentage owned, at their estimated fair values as of the date of acquisition. Any excess of the fair value over the purchase price of net assets and other identifiable intangible assets acquired is recorded as bargain purchase gain. Assets acquired and liabilities assumed from contingencies must also be recognized at fair value, if the fair value can be determined during the measurement period. Results of operations of an acquired business are included in the statement of operations from the date of acquisition. Acquisition-related costs, including conversion charges, are expensed as incurred. The Company applied this guidance to the acquisition of Delta National Bancorp, which was consummated on November 18, 2016. The Company's consolidated financial statements reflect the operations of Delta National Bancorp beginning November 19, 2016.

Intangible Assets

Intangible assets are comprised of core deposit intangibles acquired in the Delta National Bancorp acquisition and included in other assets. Intangible assets with definite useful lives are amortized over their respective estimated useful lives. If an event occurs that indicates the carrying amount of an intangible asset may not be recoverable, management reviews the asset for impairment.

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Investment Securities

9 Months Ended

Sep. 30, 2017

Investment Securities [Abstract]

Investment Securities

2. Investment Securities

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

(in thousands):

	Amortized		Gross Unrealized				Fair/Book
September 30, 2017	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	3,091	$	78	$	-	$	3,169
US Treasury Notes		144,657		2		249		144,410
US Govt SBA		31,732		45		86		31,691
Mortgage Backed Securities (1)		274,877		1,985		819		276,043
Other		1,010		-		-		1,010
Total	$	455,367	$	2,110	$	1,154	$	456,323

	Amortized		Gross Unrealized				Fair/Book
December 31, 2016	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	3,127	$	114	$	-	$	3,241
US Treasury Notes		134,755		5		332		134,428
US Govt SBA		36,532		42		260		36,314
Mortgage Backed Securities (1)		272,858		1,725		1,313		273,270
Other		1,010		-		-		1,010
Total	$	448,282	$	1,886	$	1,905	$	448,263

	Amortized		Gross Unrealized				Fair/Book
September 30, 2016	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	83,129	$	165	$	1	$	83,293
US Treasury Notes		85,470		211		-		85,681
Mortgage Backed Securities (1)		183,268		5,605		-		188,873
Other		1,010		-		-		1,010
Total	$	352,877	$	5,981	$	1	$	358,857

⁽¹⁾ All Mortgage Backed Securities consist of securities collateralized by residential real estate and were issued by an agency or government sponsored entity of the U.S. government.

The book values, estimated fair values and unrealized gains and losses of investments classified as held-to-maturity are as follows (in thousands):

	Book		Gross Unrealized				Fair
September 30, 2017	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	55,542	$	749	$	-	$	56,291
Total	$	55,542	$	749	$	-	$	56,291

	Book		Gross Unrealized				Fair
December 31, 2016	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	58,109	$	339	$	40	$	58,408
Total	$	58,109	$	339	$	40	$	58,408

	Book		Gross Unrealized				Fair
September 30, 2016	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	58,905	$	1,549	$	-	$	60,454
Total	$	58,905	$	1,549	$	-	$	60,454

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

The amortized cost and estimated fair values of investment securities at September 30, 2017 by contractual maturity are shown in the following table (in thousands):

	Available-for-Sale				Held-to-Maturity
September 30, 2017	Amortized Cost		Fair/Book Value		Book Value		Fair Value
Within one year	$	111,092	$	111,024	$	1,985	$	1,989
After one year through five years		30,477		30,394		9,221		9,238
After five years through ten years		13,429		13,408		13,694		13,887
After ten years		25,492		25,454		30,642		31,177
		180,490		180,280		55,542		56,291
Investment securities not due at a single maturity date:
Mortgage-backed securities		274,877		276,043		-		-
Total	$	455,367	$	456,323	$	55,542	$	56,291

Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The following tables show those investments with gross unrealized losses and their market value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at the dates indicated (in thousands):

	Less Than 12 Months				12 Months or More				Total
September 30, 2017	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Securities Available-for-Sale
US Treasury Notes	$	74,414	$	249	$	-	$	-	$	74,414	$	249
US Govt SBA		18,669		86		-		-		18,669		86
Mortgage Backed Securities		122,887		819		-		-		122,887		819
Total	$	215,970	$	1,154	$	-	$	-	$	215,970	$	1,154

	Less Than 12 Months				12 Months or More				Total
December 31, 2016	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Securities Available-for-Sale
US Treasury Notes	$	99,429	$	332	$	-	$	-	$	99,429	$	332
US Govt SBA		27,483		260		-		-		27,483		260
Mortgage Backed Securities		123,157		1,313		-		-		123,157		1,313
Total	$	250,069	$	1,905	$	-	$	-	$	250,069	$	1,905
Securities Held-to-Maturity
Obligations of States and Political Subdivisions	$	7,251	$	40	$	-	$	-	$	7,251	$	40
Total	$	7,251	$	40	$	-	$	-	$	7,251	$	40

	Less Than 12 Months				12 Months or More				Total
September 30, 2016	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Securities Available-for-Sale
Government Agency & Government-Sponsored Entities	$	59,993	$	1	$	-	$	-	$	59,993	$	1
Total	$	59,993	$	1	$	-	$	-	$	59,993	$	1

As of September 30, 2017, the Company held 485 investment securities of which 156 were in a loss position for less than twelve months. No securities were in a loss position for twelve months or more. Management periodically evaluates each investment security for other-than-temporary impairment relying primarily on industry analyst reports and observations of market conditions and interest rate fluctuations. Management believes it will be able to collect all amounts due according to the contractual terms of the underlying investment securities.

Securities of Government Agency and Government Sponsored Entities – The unrealized losses on the Company’s investment in securities of government agency and government sponsored entities were $0, $0, and $1,000 at September 30, 2017, December 31, 2016 and September 30, 2016, respectively. The unrealized losses were caused by interest rate fluctuations. Repayment of these investments is guaranteed by an agency or government sponsored entity of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company's investment. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at September 30, 2017, December 31, 2016, and September 30, 2016.

U.S. Treasury Notes – At September 30, 2017, six U.S. Treasury Note security investments were in a loss position for less than 12 months and none were in a loss position for 12 months or more. The unrealized losses on the Company's investment in U.S. Treasury Notes were $249,000 at September 30, 2017 and $332,000 at December 31, 2016. There were no U.S. Treasury Notes in a loss position at September 30, 2016. The unrealized losses were caused by interest rate fluctuations. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at September 30, 2017 and December 31, 2016.

U.S. Government SBA – At September 30, 2017, 94 U.S. Government SBA security investments were in a loss position for less than 12 months and none were in a loss position for 12 months or more. The unrealized losses on the Company's investment in U.S. Government SBA securities were $86,000 at September 30, 2017 and $260,000 at December 31, 2016. The unrealized losses were caused by interest rate fluctuations. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at September 30, 2017 and December 31, 2016. The Company did not own any U.S. Government SBA securities prior to December 2016.

Mortgage Backed Securities – At September 30, 2017, 55 mortgage backed security investments were in a loss position for less than 12 months and none were in a loss position for 12 months or more. The unrealized losses on the Company's investment in mortgage backed securities were $819,000, $1.3 million, and $0 at September 30, 2017, December 31, 2016, and September 30, 2016, respectively. The unrealized losses on the Company’s investment in mortgage-backed securities were caused by interest rate fluctuations. The contractual cash flows of these investments are guaranteed by an agency or government sponsored entity of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company's investment. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2017, December 31, 2016 and September 30, 2016, respectively.

Obligations of States and Political Subdivisions - At September 30, 2017, no obligations of states and political subdivisions were in a loss position for less than 12 months. None were in a loss position for 12 months or more. As of September 30, 2017, over ninety-eight percent of the Company’s bank-qualified municipal bond portfolio is rated at either the issue or issuer level, and all of these ratings are “investment grade.” The Company monitors the status of the two percent of the portfolio that is not rated and at the current time does not believe any of them to be exhibiting financial problems that could result in a loss in any individual security.

The unrealized losses on the Company’s investment in obligations of states and political subdivisions were $0, $40,000 and $0 at September 30, 2017, December 31, 2016 and September 30, 2016, respectively. Management believes that any unrealized losses on the Company's investments in obligations of states and political subdivisions were primarily caused by interest rate fluctuations. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at December 31, 2016 and September 30, 2016.

Proceeds from sales and calls of securities were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2017		2016		2017		2016
Proceeds	$	-	$	1,855	$	7,831	$	104,750
Gains		-		3		143		248
Losses		-		-		12		534

Pledged Securities

As of September 30, 2017, securities carried at $201.8 million were pledged to secure public deposits, Federal Home Loan Bank (“FHLB”) borrowings, and other government agency deposits as required by law. This amount was $171.9 million at December 31, 2016, and $185.1 million at September 30, 2016.

Investment in Unconsolidated Subsidiary

On April 5, 2017, the Company purchased 4.9% of the voting shares of Bank of Rio Vista, Rio Vista, California for $1.4 million.  On July 3, 2017, the Federal Reserve Bank of San Francisco approved the Company’s application to acquire an additional 34.55% of the voting shares for $10.5 million.  The purchase of the additional shares closed on July 20, 2017. The Company, as per requirements outlined in ASC 323-10-15-6, does not have the ability to exercise significant influence over BORV’s operating and financial policies. Accordingly, the investment in BORV is accounted for under the cost method of accounting as Other Assets.

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Loans & Leases and Allowance for Credit Losses

9 Months Ended

Sep. 30, 2017

Loans & Leases and Allowance for Credit Losses [Abstract]

Loans & Leases and Allowance for Credit Losses

3. Loans & Leases and Allowance for Credit Losses

The following tables show the allocation of the allowance for credit losses by portfolio segment and by impairment methodology at the dates indicated (in thousands):

September 30, 2017	Commercial Real Estate			Agricultural Real Estate		Real Estate Construction			Residential 1st Mortgages		Home Equity Lines & Loans		Agricultural			Commercial			Consumer & Other			Leases			Unallocated		Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2017	$	11,110		$	9,450	$	3,223		$	865	$	2,140	$	7,381		$	8,515		$	200		$	3,586		$	1,449	$	47,919
Charge-Offs		(109	)		-		-			-		-		(7	)		-			(114	)		-			-		(230	)
Recoveries		110			-		-			37		6		-			6			46			-			-		205
Provision		(14	)		1,946		(473	)		95		115		(14	)		539			77			(392	)		971		2,850
Ending Balance- September 30, 2017	$	11,097		$	11,396	$	2,750		$	997	$	2,261	$	7,360		$	9,060		$	209		$	3,194		$	2,420	$	50,744
Third Quarter Allowance for Credit Losses:
Beginning Balance- July 1, 2017	$	11,242		$	10,265	$	2,687		$	872	$	2,170	$	7,236		$	9,544		$	205		$	2,952		$	1,891	$	49,064
Charge-Offs		-			-		-			-		-		-			-			(54	)		-			-		(54	)
Recoveries		99			-		-			18		1		-			2			14			-			-		134
Provision		(244	)		1,131		63			107		90		124			(486	)		44			242			529		1,600
Ending Balance- September 30, 2017	$	11,097		$	11,396	$	2,750		$	997	$	2,261	$	7,360		$	9,060		$	209		$	3,194		$	2,420	$	50,744
Ending Balance Individually Evaluated for Impairment		385			-		-			61		17		69			231			5			-			-		768
Ending Balance Collectively Evaluated for Impairment		10,712			11,396		2,750			936		2,244		7,291			8,829			204			3,194			2,420		49,976
Loans & Leases:
Ending Balance	$	683,037		$	470,738	$	162,167		$	257,920	$	33,350	$	259,127		$	257,951		$	7,312		$	85,177		$	-	$	2,216,779
Ending Balance Individually Evaluated for Impairment		4,855			-		-			1,887		369		368			1,752			7			-			-		9,238
Ending Balance Collectively Evaluated for Impairment	$	678,182		$	470,738	$	162,167		$	256,033	$	32,981	$	258,759		$	256,199		$	7,305		$	85,177		$	-	$	2,207,541

December 31, 2016	Commercial Real Estate		Agricultural Real Estate		Real Estate Construction		Residential 1st Mortgages			Home Equity Lines & Loans			Agricultural		Commercial		Consumer & Other			Leases		Unallocated			Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2016	$	10,063	$	6,881	$	2,485	$	789		$	2,146		$	6,308	$	7,836	$	175		$	3,294	$	1,546		$	41,523
Charge-Offs		-		-		-		(21	)		(46	)		-		-		(105	)		-		-			(172	)
Recoveries		2		-		-		26			103			-		47		55			-		-			233
Provision		1,045		2,569		738		71			(63	)		1,073		632		75			292		(97	)		6,335
Ending Balance- December 31, 2016	$	11,110	$	9,450	$	3,223	$	865		$	2,140		$	7,381	$	8,515	$	200		$	3,586	$	1,449		$	47,919
Ending Balance Individually Evaluated for Impairment		-		-		-		70			18			128		608		7			-		-			831
Ending Balance Collectively Evaluated for Impairment		11,110		9,450		3,223		795			2,122			7,253		7,907		193			3,586		1,449			47,088
Loans & Leases:
Ending Balance	$	668,046	$	467,685	$	176,462	$	242,247		$	31,625		$	295,325	$	217,577	$	6,913		$	71,721	$	-		$	2,177,601
Ending Balance Individually Evaluated for Impairment		1,932		1,304		-		2,126			402			625		4,464		10			-		-			10,863
Ending Balance Collectively Evaluated for Impairment	$	666,114	$	466,381	$	176,462	$	240,121		$	31,223		$	294,700	$	213,113	$	6,903		$	71,721	$	-		$	2,166,738

September 30, 2016	Commercial Real Estate			Agricultural Real Estate			Real Estate Construction			Residential 1st Mortgages			Home Equity Lines & Loans			Agricultural			Commercial			Consumer & Other			Leases		Unallocated		Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2016	$	10,063		$	6,881		$	2,485		$	789		$	2,146		$	6,308		$	7,836		$	175		$	3,294	$	1,546	$	41,523
Charge-Offs		-			-			-			(7	)		(46	)		-			-			(77	)		-		-		(130	)
Recoveries		2			-			-			13			102			-			45			41			-		-		203
Provision		57			2,490			(27	)		34			(7	)		(86	)		(281	)		40			250		380		2,850
Ending Balance- September 30, 2016	$	10,122		$	9,371		$	2,458		$	829		$	2,195		$	6,222		$	7,600		$	179		$	3,544	$	1,926	$	44,446
Third Quarter Allowance for Credit Losses:
Beginning Balance- July 1, 2016	$	10,236		$	9,501		$	2,442		$	837		$	2,149		$	6,223		$	7,849		$	170		$	3,442	$	1,269	$	44,118
Charge-Offs		-			-			-			-			-			-			-			(25	)		-		-		(25	)
Recoveries		-			-			-			4			69			-			16			14			-		-		103
Provision		(114	)		(130	)		16			(12	)		(23	)		(1	)		(265	)		20			102		657		250
Ending Balance- September 30, 2016	$	10,122		$	9,371		$	2,458		$	829		$	2,195		$	6,222		$	7,600		$	179		$	3,544	$	1,926	$	44,446
Ending Balance Individually Evaluated for Impairment		-			-			-			74			18			129			620			7			-		-		848
Ending Balance Collectively Evaluated for Impairment		10,122			9,371			2,458			755			2,177			6,093			6,980			172			3,544		1,926		43,598
Loans & Leases:
Ending Balance	$	627,114		$	439,972		$	175,045		$	238,376		$	32,513		$	274,704		$	214,086		$	6,975		$	70,885	$	-	$	2,079,670
Ending Balance Individually Evaluated for Impairment		4,324			513			-			2,173			409			640			4,509			11			-		-		12,579
Ending Balance Collectively Evaluated for Impairment	$	622,790		$	439,459		$	175,045		$	236,203		$	32,104		$	274,064		$	209,577		$	6,964		$	70,885	$	-	$	2,067,091

The ending balance of loans individually evaluated for impairment includes restructured loans in the amount of $3.0 million at September 30, 2017, $3.3 million at December 31, 2016 and $4.9 million at September 30, 2016, which are no longer classified as TDRs.

The following tables show the loan & lease portfolio allocated by management’s internal risk ratings at the dates indicated (in thousands):

September 30, 2017	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	678,083	$	4,458	$	496	$	683,037
Agricultural Real Estate		465,427		1,281		4,030		470,738
Real Estate Construction		152,989		9,178		-		162,167
Residential 1st Mortgages		256,906		43		971		257,920
Home Equity Lines & Loans		33,297		-		53		33,350
Agricultural		250,372		5,331		3,424		259,127
Commercial		253,144		4,184		623		257,951
Consumer & Other		7,142		-		170		7,312
Leases		82,889		2,288		-		85,177
Total	$	2,180,249	$	26,763	$	9,767	$	2,216,779

December 31, 2016	Pass		Special Mention		Substandard		Total Loans
Loans & Leases:
Commercial Real Estate	$	659,694	$	6,817	$	1,535	$	668,046
Agricultural Real Estate		464,997		1,384		1,304		467,685
Real Estate Construction		176,462		-		-		176,462
Residential 1st Mortgages		241,816		47		384		242,247
Home Equity Lines and Loans		31,558		-		67		31,625
Agricultural		283,525		11,366		434		295,325
Commercial		208,172		6,974		2,431		217,577
Consumer & Other		6,705		-		208		6,913
Leases		71,721		-		-		71,721
Total	$	2,144,650	$	26,588	$	6,363	$	2,177,601

September 30, 2016	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	618,975	$	7,141	$	998	$	627,114
Agricultural Real Estate		437,059		1,418		1,495		439,972
Real Estate Construction		173,556		1,489		-		175,045
Residential 1st Mortgages		237,254		404		718		238,376
Home Equity Lines & Loans		32,408		-		105		32,513
Agricultural		273,184		1,070		450		274,704
Commercial		204,119		7,105		2,862		214,086
Consumer & Other		6,816		-		159		6,975
Leases		70,885		-		-		70,885
Total	$	2,054,256	$	18,627	$	6,787	$	2,079,670

See “Note 1. Significant Accounting Policies - Allowance for Credit Losses” for a description of the internal risk ratings used by the Company. There were no loans or leases outstanding at September 30, 2017, December 31, 2016, and September 30, 2016, rated doubtful or loss.

The following tables show an aging analysis of the loan & lease portfolio by the time past due at the dates indicated (in thousands):

September 30, 2017	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	-	$	-	$	-	$	-	$	-	$	683,037	$	683,037
Agricultural Real Estate		-		-		-		-		-		470,738		470,738
Real Estate Construction		-		-		-		-		-		162,167		162,167
Residential 1st Mortgages		-		-		-		-		-		257,920		257,920
Home Equity Lines & Loans		-		-		-		-		-		33,350		33,350
Agricultural		-		-		-		-		-		259,127		259,127
Commercial		-		3		-		-		3		257,948		257,951
Consumer & Other		16		-		-		4		20		7,292		7,312
Leases		-		-		-		-		-		85,177		85,177
Total	$	16	$	3	$	-	$	4	$	23	$	2,216,756	$	2,216,779

December 31, 2016	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	-	$	-	$	-	$	-	$	-	$	668,046	$	668,046
Agricultural Real Estate		-		-		-		1,304		1,304		466,381		467,685
Real Estate Construction		-		-		-		-		-		176,462		176,462
Residential 1st Mortgages		-		-		-		95		95		242,152		242,247
Home Equity Lines and Loans		-		-		-		-		-		31,625		31,625
Agricultural		-		-		-		243		243		295,082		295,325
Commercial		-		-		-		1,425		1,425		216,152		217,577
Consumer & Other		10		-		-		7		17		6,896		6,913
Leases		-		-		-		-		-		71,721		71,721
Total	$	10	$	-	$	-	$	3,074	$	3,084	$	2,174,517	$	2,177,601

September 30, 2016	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	-	$	-	$	-	$	998	$	998	$	626,116	$	627,114
Agricultural Real Estate		-		983		-		322		1,305		438,667		439,972
Real Estate Construction		-		-		-		-		-		175,045		175,045
Residential 1st Mortgages		-		-		-		55		55		238,321		238,376
Home Equity Lines & Loans		-		-		-		-		-		32,513		32,513
Agricultural		-		-		-		243		243		274,461		274,704
Commercial		-		-		-		1,450		1,450		212,636		214,086
Consumer & Other		5		-		-		7		12		6,963		6,975
Leases		-		-		-		-		-		70,885		70,885
Total	$	5	$	983	$	-	$	3,075	$	4,063	$	2,075,607	$	2,079,670

The following tables show information related to impaired loans & leases for the periods indicated (in thousands):

							Three Months Ended September 30, 2017				Nine Months Ended September 30, 2017
September 30, 2017	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	106	$	107	$	-	$	107	$	2	$	121	$	9
Agricultural Real Estate		-		-		-		488		-		868		-
Residential 1st Mortgages		399		456		-		403		3		415		6
Home Equity Lines & Loans		-		-		-		-		-		21		-
Agricultural		-		-		-		30		-		40		-
Commercial		-		-		-		-		-		504		-
	$	505	$	563	$	-	$	1,028	$	5	$	1,969	$	15
With an allowance recorded:
Commercial Real Estate	$	2,991	$	2,977	$	384	$	3,000	$	25		2,509	$	80
Residential 1st Mortgages		519		574		26		472		3		442		12
Home Equity Lines & Loans		83		90		4		67		-		76		2
Agricultural		367		367		69		499		7		588		21
Commercial		1,760		1,752		234		1,696		14		1,624		44
Consumer & Other		4		11		4		14		-		12		-
	$	5,724	$	5,771	$	721	$	5,748	$	49		5,251	$	159
Total	$	6,229	$	6,334	$	721	$	6,776	$	54	$	7,220	$	174

December 31, 2016	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	184	$	184	$	-	$	354	$	7
Residential 1st Mortgages		451		504		-		404		10
Home Equity Lines and Loans		-		-		-		181		-
Agricultural		-		-		-		144		5
Commercial		3,023		3,023		-		3,053		133
	$	4,963	$	5,016	$	-	$	4,705	$	158
With an allowance recorded:
Residential 1st Mortgages	$	430	$	469	$	21	$	336	$	13
Home Equity Lines and Loans		90		97		5		123		4
Agricultural		625		625		128		581		22
Commercial		1,441		1,640		608		1,536		8
Consumer & Other		6		13		6		12		-
	$	2,592	$	2,844	$	768	$	2,588	$	47
Total	$	7,555	$	7,860	$	768	$	7,293	$	205

							Three Months Ended September 30, 2016				Nine Months Ended September 30, 2016
September 30, 2016	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	1,074	$	1,071	$	-	$	575	$	2	$	248	$	6
Agricultural Real Estate		322		322		-		404		-		270		3
Residential 1st Mortgages		414		466		-		417		3		411		7
Home Equity Lines & Loans		-		-		-		-		-		339		-
Agricultural		191		191		-		192		2		193		5
Commercial		3,042		3,043		-		3,053		33		3,073		100
Consumer & Other		-		-				1		-		1		-
	$	5,043	$	5,093	$	-	$	4,642	$	40	$	4,535	$	121
With an allowance recorded:
Residential 1st Mortgages	$	430	$	471	$	21	$	335	$	3	$	290	$	9
Home Equity Lines & Loans		92		98		5		93		1		142		3
Agricultural		640		640		137		644		6		529		18
Commercial		1,466		1,648		620		1,536		-		1,599		8
Consumer & Other		7		13		7		8		-		18		-
	$	2,635	$	2,870	$	790	$	2,616	$	10	$	2,578	$	38
Total	$	7,678	$	7,963	$	790	$	7,258	$	50	$	7,113	$	159

Total recorded investment shown in the prior tables will not equal the total ending balance of loans & leases individually evaluated for impairment on the allocation of allowance tables. This is because the calculation of recorded investment takes into account charge-offs, net unamortized loan & lease fees & costs, unamortized premium or discount, and accrued interest. This table also excludes impaired loans that were previously modified in a troubled debt restructuring, are currently performing and are no longer classified as TDRs.

At September 30, 2017, the Company allocated $721,000 of specific reserves to $6.2 million of troubled debt restructured loans & leases, all of which were performing. The Company had no commitments at September 30, 2017 to lend additional amounts to customers with outstanding loans or leases that are classified as TDRs.

During the three and nine-month periods ending September 30, 2017, there were four loans & leases modified as a troubled debt restructuring. When a loan is restructured, the modification of the terms can include one or a combination of the following: a reduction of the stated interest rate; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate were for 5 years. Modifications involving an extension of the maturity date ranged from 7 to 10 years.

The following table presents loans or leases by class modified as troubled debt restructured loans or leases during the three and nine-month periods ended September 30, 2017 (in thousands):

	Three Months Ended September 30, 2017						Nine Months Ended September 30, 2017
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Residential 1st Mortgages		1	$	112	$	112		1	$	112	$	112
Home Equity Lines & Loans		1		32		32		1		32		32
Commercial		2		138		138		2		138		138
Total		4	$	282	$	282		4	$	282	$	282

The TDRs described above increased the allowance for credit losses by $13,000 for the three and nine-month periods ending September 30, 2017.

During the three and nine-months ended September 30, 2017, the twelve months ended December 31, 2016, and the three and nine-month periods ending September 30, 2016 there were no payment defaults on loans or leases modified as troubled debt restructurings within twelve months following the modification. The Company considers a loan or lease to be in payment default once it is greater than 90 days contractually past due under the modified terms.

The following table presents loans by class modified as troubled debt restructured loans for the period ended December 31, 2016 (in thousands):

	December 31, 2016
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial Real Estate		1	$	112	$	112
Residential 1st Mortgages		2		289		281
Home Equity Lines and Loans		2		305		286
Total		5	$	706	$	679

The troubled debt restructurings described above had no impact on the allowance for credit losses and resulted in charge-offs of $27,000 for the twelve months ended December 31, 2016.

At December 31, 2016, the Company allocated $736,000 of specific reserves to $5.9 million of troubled debt restructured loans, of which $4.5 million were performing. The Company had no commitments at December 31, 2016, to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

During the period ending December 31, 2016, the terms of certain loans were modified as troubled debt restructurings. Modifications involving a reduction of the stated interest rate of the loan were for 5 years. Modifications involving an extension of the maturity date were for 10 years.

The following table presents loans or leases by class modified as troubled debt restructured loans or leases during the three and nine-month periods ended September 30, 2016 (in thousands):

	Three Months Ended September 30, 2016						Nine Months Ended September 30, 2016
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Residential 1st Mortgages		1	$	192	$	192		2	$	289	$	281
Home Equity Lines & Loans		-		-		-		2		305		286
Total		1	$	192	$	192		4	$	594	$	567

The TDRs described above had no impact on the allowance for credit losses for the three and nine-month periods ending September 30, 2016, and resulted in charge-offs of $0 and $27,000 for the three and nine-month periods ended September 30, 2016.

At September 30, 2016, the Company allocated $758,000 of specific reserves to $6.1 million of troubled debt restructured loans & leases, of which $4.6 million were performing. The Company had no commitments at September 30, 2016 to lend additional amounts to customers with outstanding loans or leases that are classified as troubled debt restructurings.

During the three-month period ending September 30, 2016, there was one loan modified as a troubled debt restructuring. During the nine-month period ending September 30, 2016, the terms of certain loans & leases were modified as troubled debt restructurings. The modification of the terms of such loans & leases can include one or a combination of the following: a reduction of the stated interest rate; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate were for 5 years. Modifications involving an extension of the maturity date were for 10 years.

XML

Fair Value Measurements

9 Months Ended

Sep. 30, 2017

Fair Value Measurements [Abstract]

Fair Value Measurements

4. Fair Value Measurements

The Company follows the “Fair Value Measurement and Disclosures” topic of the FASB ASC, which establishes a framework for measuring fair value in U.S. GAAP and expands disclosures about fair value measurements. This standard applies whenever other standards require, or permit, assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. In this standard, the FASB clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, this standard establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy is as follows:

Level 1 inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date.

Level 2 inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

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

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

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

The Company does not record all loans & leases at fair value on a recurring basis. However, from time to time, a loan or lease is considered impaired and an allowance for credit losses is established. Once a loan or lease is identified as individually impaired, management measures impairment in accordance with the “Receivable” topic of the FASB ASC. The fair value of impaired loans or leases is estimated using one of several methods, including collateral value when the loan is collateral dependent, market value of similar debt, enterprise value, and discounted cash flows. Impaired loans & leases not requiring an allowance represent loans & leases for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans & leases. Impaired loans & leases where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. The fair value of collateral dependent impaired loans is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including sales comparison, cost and the income approach. Adjustments are often made in the appraisal process by the appraisers to take into account differences between the comparable sales and income and other available data. Such adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value. The valuation technique used for Level 3 nonrecurring impaired loans is primarily the sales comparison approach less selling costs of 10%.

Other Real Estate (“ORE”) is reported at fair value on a non-recurring basis. Fair values are based on recent real estate appraisals. These appraisals may use a single valuation approach or a combination of approaches including sales comparison, cost and the income approach. Adjustments are often made in the appraisal process by the appraisers to take into account differences between the comparable sales and income and other available data. Such adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value. The valuation technique used for Level 3 nonrecurring ORE is primarily the sales comparison approach less selling costs of 10%.

At September 30, 2017, there were no formal foreclosure proceedings in process for consumer mortgage loans secured by residential real estate properties.

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

			Fair Value Measurements At September 30, 2017, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	3,169	$	-	$	3,169	$	-
US Treasury Notes		144,410		144,410		-		-
US Govt SBA		31,691		-		31,691		-
Mortgage Backed Securities		276,043		-		276,043		-
Other		1,010		200		310		500
Total Assets Measured at Fair Value On a Recurring Basis	$	456,323	$	144,610	$	311,213	$	500

			Fair Value Measurements At December 31, 2016, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	3,241	$	-	$	3,241	$	-
US Treasury Notes		134,428		134,428		-		-
US Govt SBA		36,314		-		36,314		-
Mortgage Backed Securities		273,270		-		273,270		-
Other		1,010		200		310		500
Total Assets Measured at Fair Value On a Recurring Basis	$	448,263	$	134,628	$	313,135	$	500

			Fair Value Measurements At September 30, 2016, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	83,293	$	-	$	83,293	$	-
US Treasury Notes		85,681		85,681		-		-
Mortgage Backed Securities		188,873		-		188,873		-
Other		1,010		200		310		500
Total Assets Measured at Fair Value On a Recurring Basis	$	358,857	$	85,881	$	272,476	$	500

Fair values for Level 2 available-for-sale investment securities are based on quoted market prices for similar securities. During the three and nine-months ended September 30, 2017 and 2016, there were no transfers in or out of Level 1, 2, or 3.

Available for sale investment securities categorized as Level 3 assets for the period ended September 30, 2017, December 31, 2016, and September 30, 2016, consisted of a $500,000 investment in a limited liability company that purchases SBA loans. There were no gains or losses or transfers in or out of level 3 during the periods ended September 30, 2017, December 31, 2016, and September 30, 2016.

The following tables present information about the Company’s other real estate and impaired loans or leases, classes of assets or liabilities that the Company carries at fair value on a non-recurring basis, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value for the periods indicated. Not all impaired loans or leases are carried at fair value. Impaired loans or leases are only included in the following tables when their fair value is based upon a current appraisal of the collateral, and if that appraisal results in a partial charge-off or the establishment of a specific reserve.

			Fair Value Measurements At September 30, 2017, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired Loans
Commercial Real Estate	$	2,594	$	-	$	-	$	2,594
Residential 1st Mortgage		491		-		-		491
Home Equity Lines and Loans		78		-		-		78
Agricultural		298		-		-		298
Commercial		1,519		-		-		1,519
Total Impaired Loans		4,980		-		-		4,980
Other Real Estate
Real Estate Construction		873		-		-		873
Total Other Real Estate		873		-		-		873
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	5,853	$	-	$	-	$	5,853

			Fair Value Measurements At December 31, 2016, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired Loans:
Residential 1st Mortgage	$	480	$	-	$	-	$	480
Home Equity Lines and Loans		83		-		-		83
Agricultural		497		-		-		497
Commercial		833		-		-		833
Total Impaired Loans		1,893		-		-		1,893
Other Real Estate:
Home Equity Lines and Loans		785		-		-		785
Real Estate Construction		2,960		-		-		2,960
Total Other Real Estate		3,745		-		-		3,745
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	5,638	$	-	$	-	$	5,638

			Fair Value Measurements At September 30, 2016, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired Loans
Residential 1st Mortgage	$	496	$	-	$	-	$	496
Home Equity Lines and Loans		84		-		-		84
Agricultural		503		-		-		503
Commercial		847		-		-		847
Total Impaired Loans		1,930		-		-		1,930
Other Real Estate
Home Equity Lines and Loans		785		-		-		785
Total Other Real Estate		785		-		-		785
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	2,715	$	-	$	-	$	2,715

The Company’s property appraisals are primarily based on the sales comparison approach and the income approach methodologies, which consider recent sales of comparable properties, including their income generating characteristics, and then make adjustments to reflect the general assumptions that a market participant would make when analyzing the property for purchase. These adjustments may increase or decrease an appraised value and can vary significantly depending on the location, physical characteristics and income producing potential of each property. Additionally, the quality and volume of market information available at the time of the appraisal can vary from period to period and cause significant changes to the nature and magnitude of comparable sale adjustments. Given these variations, comparable sale adjustments are generally not a reliable indicator for how fair value will increase or decrease from period to period. Under certain circumstances, management discounts are applied based on specific characteristics of an individual property.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at September 30, 2017:

(in thousands)	Fair Value		Valuation Technique	Unobservable Inputs	Range, Weighted Avg.
Impaired Loans
Commercial Real Estate	$	2,594	Income Approach	Discount Rate	3.25% - 3.25%, 3.25 %
Residential 1st Mortgage	$	491	Sales Comparison Approach	Adjustment for Difference Between Comparable Sales	1% - 4%, 3 %
Home Equity Lines and Loans	$	78	Sales Comparison Approach	Adjustment for Difference Between Comparable Sales	1% - 2%, 2 %
Agricultural	$	298	Income Approach	Discount Rate	7.50% - 7.50%, 7.50 %
Commercial	$	1,519	Income Approach	Discount Rate	2.00% - 9.00%, 3.00 %
Other Real Estate
Real Estate Construction	$	873	Sales Comparison Approach	Adjustment for Difference Between Comparable Sales	10% - 10%, 10 %

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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2017

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

5. Fair Value of Financial Instruments

U.S. GAAP requires disclosure of fair value information about financial instruments, whether or not recognized on the balance sheet, for which it is practical to estimate that value. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. The use of assumptions and various valuation techniques, as well as the absence of secondary markets for certain financial instruments, will likely reduce the comparability of fair value disclosures between financial institutions. In some cases, book value is a reasonable estimate of fair value due to the relatively short period of time between origination of the instrument and its expected realization.

The following tables summarize the book value and estimated fair value of financial instruments for the periods indicated:

				Fair Value of Financial Instruments Using
September 30, 2017 (in thousands)	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Estimated Fair Value
Assets:
Cash and Cash Equivalents	$	193,270		$	193,270	$	-	$	-		$	193,270
Investment Securities Available-for-Sale:
Government Agency & Government-Sponsored Entities		3,169			-		3,169		-			3,169
U.S. Govt SBA		31,691			-		31,691		-			31,691
U.S. Treasury Notes		144,410			144,410		-		-			144,410
Mortgage Backed Securities		276,043			-		276,043		-			276,043
Other		1,010			200		310		500			1,010
Total Investment Securities Available-for-Sale		456,323			144,610		311,213		500			456,323
Investment Securities Held-to-Maturity:
Obligations of States and Political Subdivisions		55,542			-		39,254		17,037			56,292
Total Investment Securities Held-to-Maturity		55,542			-		39,254		17,037			56,292
FHLB Stock		10,342			N/A		N/A		N/A			N/A
Loans & Leases, Net of Deferred Fees & Allowance:
Commercial Real Estate		671,940			-		-		665,566			665,566
Agricultural Real Estate		459,342			-		-		446,684			446,684
Real Estate Construction		159,417			-		-		159,131			159,131
Residential 1st Mortgages		256,923			-		-		258,256			258,256
Home Equity Lines and Loans		31,089			-		-		31,869			31,869
Agricultural		251,767			-		-		249,995			249,995
Commercial		248,891			-		-		247,344			247,344
Consumer & Other		7,103			-		-		7,067			7,067
Leases		81,983			-		-		85,032			85,032
Unallocated Allowance		(2,420	)		-		-		(2,420	)		(2,420	)
Total Loans & Leases, Net of Deferred Fees & Allowance		2,166,035			-		-		2,148,524			2,148,524
Accrued Interest Receivable		11,498			-		11,498		-			11,498
Liabilities:
Deposits:
Demand		767,162			767,162		-		-			767,162
Interest Bearing Transaction		564,904			564,904		-		-			564,904
Savings and Money Market		827,588			827,588		-		-			827,588
Time		549,773			-		547,796		-			547,796
Total Deposits		2,709,427			2,159,654		547,796		-			2,707,450
Subordinated Debentures		10,310			-		6,589		-			6,589
Accrued Interest Payable		939			-		939		-			939

				Fair Value of Financial Instruments Using
December 31, 2016 (in thousands)	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Estimated Fair Value
Assets:
Cash and Cash Equivalents	$	98,960		$	98,960	$	-	$	-		$	98,960
Investment Securities Available-for-Sale:
Government Agency & Government-Sponsored Entities		3,241			-		3,241		-			3,241
U.S. Govt SBA		36,314			-		36,314		-			36,314
U.S. Treasury Notes		134,428			134,428		-		-			134,428
Mortgage Backed Securities		273,270			-		273,270		-			273,270
Other		1,010			200		310		500			1,010
Total Investment Securities Available-for-Sale		448,263			134,628		313,135		500			448,263
Investment Securities Held-to-Maturity:
Obligations of States and Political Subdivisions		58,109			-		40,415		17,993			58,408
Total Investment Securities Held-to-Maturity		58,109			-		40,415		17,993			58,408
FHLB Stock		8,872			N/A		N/A		N/A			N/A
Loans & Leases, Net of Deferred Fees & Allowance:
Commercial Real Estate		656,936			-		-		651,877			651,877
Agricultural Real Estate		458,235			-		-		444,393			444,393
Real Estate Construction		173,239			-		-		172,682			172,682
Residential 1st Mortgages		241,382			-		-		241,174			241,174
Home Equity Lines and Loans		29,485			-		-		30,495			30,495
Agricultural		287,944			-		-		286,074			286,074
Commercial		209,062			-		-		207,215			207,215
Consumer & Other		6,713			-		-		6,706			6,706
Leases		68,135			-		-		67,893			67,893
Unallocated Allowance		(1,449	)		-		-		(1,449	)		(1,449	)
Total Loans & Leases, Net of Deferred Fees & Allowance		2,129,682			-		-		2,107,060			2,107,060
Accrued Interest Receivable		10,047			-		10,047		-			10,047
Liabilities:
Deposits:
Demand		756,236			756,236		-		-			756,236
Interest Bearing Transaction		495,063			495,063		-		-			495,063
Savings and Money Market		760,119			760,119		-		-			760,119
Time		570,293			-		569,183		-			569,183
Total Deposits		2,581,711			2,011,418		569,183		-			2,580,601
Subordinated Debentures		10,310			-		6,578		-			6,578
Accrued Interest Payable		852			-		852		-			852

				Fair Value of Financial Instruments Using
September 30, 2016 (in thousands)	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Estimated Fair Value
Assets:
Cash and Cash Equivalents	$	99,303		$	99,303	$	-	$	-		$	99,303
Investment Securities Available-for-Sale:
Government Agency & Government-Sponsored Entities		83,293			-		83,293		-			83,293
US Treasury Notes		85,681			85,681		-		-			85,681
Mortgage Backed Securities		188,873			-		188,873		-			188,873
Other		1,010			200		310		500			1,010
Total Investment Securities Available-for-Sale		358,857			85,881		272,476		500			358,857
Investment Securities Held-to-Maturity:
Obligations of States and Political Subdivisions		58,905			-		42,675		17,779			60,454
Total Investment Securities Held-to-Maturity		58,905			-		42,675		17,779			60,454
FHLB Stock		8,872			N/A		N/A		N/A			N/A
Loans & Leases, Net of Deferred Fees & Allowance:
Commercial Real Estate		616,992			-		-		620,655			620,655
Agricultural Real Estate		430,601			-		-		422,056			422,056
Real Estate Construction		172,587			-		-		172,358			172,358
Residential 1st Mortgages		237,547			-		-		241,703			241,703
Home Equity Lines and Loans		30,318			-		-		31,397			31,397
Agricultural		268,482			-		-		267,101			267,101
Commercial		206,486			-		-		205,769			205,769
Consumer & Other		6,796			-		-		6,832			6,832
Leases		67,341							69,408			69,408
Unallocated Allowance		(1,926	)		-		-		(1,926	)		(1,926	)
Total Loans & Leases, Net of Deferred Fees & Allowance		2,035,224			-		-		2,035,353			2,035,353
Accrued Interest Receivable		10,116			-		10,116		-			10,116
Liabilities:
Deposits:
Demand		672,351			672,351		-		-			672,351
Interest Bearing Transaction		433,220			433,220		-		-			433,220
Savings and Money Market		702,441			702,441		-		-			702,441
Time		547,625			-		547,145		-			547,145
Total Deposits		2,355,637			1,808,012		547,145		-			2,355,157
Subordinated Debentures		10,310			-		6,606		-			6,606
Accrued Interest Payable		681			-		681		-			681

Fair value estimates presented herein are based on pertinent information available to management as of September 30, 2017, December 31, 2016, and September 30, 2016. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purpose of these financial statements since that date, and; therefore, current estimates of fair value may differ significantly from the amounts presented above. The methods and assumptions used to estimate the fair value of each class of financial instrument listed in the table above are explained below.

Cash and Cash Equivalents - The carrying amounts reported in the balance sheet for cash and due from banks, interest-bearing deposits with banks, federal funds sold, and securities purchased under agreements to resell are a reasonable estimate of fair value. All cash and cash equivalents are classified as Level 1.

Investment Securities - Fair values for investment securities consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond's terms and conditions, among other things. Based on the available market information the classification level could be 1, 2, or 3.

Federal Home Loan Bank Stock - It is not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability.

Loans & Leases, Net of Deferred Loan & Lease Fees & Allowance - Fair values of loans & leases are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans & leases are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans & leases are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans & leases do not necessarily represent an exit price.

Deposit Liabilities - The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. Fair values for fixed-maturity certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

Subordinated Debentures - The fair values of the Company’s Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

Accrued Interest Receivable and Payable - The carrying amount of accrued interest receivable and payable approximates their fair value resulting in a Level 2 classification.

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Dividends and Basic Earnings Per Common Share

9 Months Ended

Sep. 30, 2017

Dividends and Basic Earnings Per Common Share [Abstract]

Dividends and Basic Earnings Per Common Share

6. Dividends and Basic Earnings Per Common Share

Farmers & Merchants Bancorp common stock is not traded on any exchange. The shares are primarily held by local residents and are not actively traded. On May 9, 2017, the Board of Directors of Farmers & Merchants Bancorp announced a mid-year cash dividend of $6.75 per share, a 3.1% increase over the $6.55 per share paid on July 1, 2016. The cash dividend was paid on July 1, 2017, to shareholders of record on June 9, 2017.

Basic earnings per common share amounts are computed by dividing net income by the weighted average number of common shares outstanding for the period. The Company has no securities or other contracts, such as stock options, that could require the issuance of common stock.   Accordingly, diluted earnings per share are not presented. The following table calculates the basic earnings per common share for the three and nine months ended September 30, 2017 and 2016.

	Three Months Ended September 30,				Nine Months Ended September 30,
(net income in thousands)	2017		2016		2017		2016
Net Income	$	8,581	$	7,538	$	24,589	$	22,042
Weighted Average Number of Common Shares Outstanding		810,291		792,387		809,002		792,223
Basic Earnings Per Common Share Amount	$	10.59	$	9.51	$	30.39	$	27.82

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Shareholders' Equity

9 Months Ended

Sep. 30, 2017

Shareholders' Equity [Abstract]

Shareholders' Equity

7. Shareholders’ Equity

During the first and third quarters of 2017, the Company issued a combined total 4,975 shares of common stock to the Bank’s non-qualified defined contribution retirement plans. These shares were issued at prices ranging from $590.00 to $595.00 per share based upon valuations completed during the quarter of issuance by a nationally recognized bank consulting and advisory firm and in reliance upon the exemption in Section 4(a)(2) of the Securities Act of 1933, as amended, and the regulations promulgated thereunder. The proceeds were contributed to the Bank as equity capital.

During the first quarter of 2016, the Company issued 1,600 shares of common stock to the Bank’s non-qualified defined contribution retirement plans. These shares were issued at a price of $525 per share based upon a valuation completed during the quarter of issuance by a nationally recognized bank consulting and advisory firm and in reliance upon the exemption in Section 4(2) of the Securities Act of 1933, as amended, the regulations promulgated thereunder. The proceeds were contributed to the Bank as equity capital.

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Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2017

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

8. Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU will require the earlier recognition of credit losses on loans and other financial instruments based on an expected loss model, replacing the incurred loss model that is currently in use. Under the new guidance, an entity will measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The expected loss model will apply to loans and leases, unfunded lending commitments, held-to maturity debt securities and other debt instruments measured at amortized cost. The impairment model for available-for-sale debt securities will require the recognition of credit losses through a valuation allowance when fair value is less than amortized cost, regardless of whether the impairment is considered to be other-than-temporary. The new guidance is effective on January 1, 2020, with early adoption permitted on January 1, 2019. The Company is currently evaluating the provisions of this ASU and has created a cross-functional team to begin its implementation efforts of this new guidance. While the Company has not quantified the impact of this ASU, it is evaluating historical loan level data requirements necessary for the implementation of the model, consulting with outside professionals, evaluating our current IT system, as well as various methodologies for determining expected credit losses. The Company does not intend to early adopt this ASU.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new standard is being issued to increase the transparency and comparability around lease obligations. Previously unrecorded off-balance sheet obligations will now be brought more prominently to light by presenting lease liabilities on the face of the balance sheet, accompanied by enhanced qualitative and quantitative disclosures in the notes to the financial statements. This ASU applies to leasing arrangements exceeding a twelve-month term. ASU 2016-02 is effective for annual periods, including interim periods within those annual periods beginning after December 15, 2018 and requires a modified retrospective method upon adoption. Early application of the amendments is permitted. The Company is currently evaluating the provisions of this ASU to determine the potential impact the new standard will have on the Company’s consolidated financial statements. While the Company has not quantified the impact to its balance sheet, it does expect the adoption of this ASU will result in a gross-up in its balance sheet as a result of recording a right-of-use asset and a lease liability for these leases. The Company does not intend to early adopt this ASU.

In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09, Revenue from Contracts with Customers (Topic 606).  As a result of the deferral, the guidance in ASU 2014-09 will be effective for the Company for reporting periods beginning after December 15, 2017. The Update modifies the guidance companies use to recognize revenue from contracts with customers for transfers of goods or services and transfers of nonfinancial assets, unless those contracts are within the scope of other standards. The guidance also requires new qualitative and quantitative disclosures, including information about contract balances and performance obligations. The Company is currently evaluating the impact the adoption of this update will have on the consolidated financial statements. As a financial institution, the Company’s largest component of revenue, interest income, is excluded from the scope of this ASU. The Company is currently performing an overall assessment of revenue streams potentially affected by the ASU, including certain deposit related fees and interchange fees, to determine the potential impact of this guidance on our consolidated financial statements. The Company does not intend to early adopt this ASU.

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Significant Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements and notes thereto have been prepared in accordance with accounting principles generally accepted in the United States of America for financial information.

These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting on Form 10-Q. Accordingly, certain disclosures normally presented in the notes to the annual consolidated financial statements prepared in accordance with U.S. GAAP have been omitted. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The results of operations for the three-month and nine-month periods ended September 30, 2017 may not necessarily be indicative of future operating results.

The accompanying consolidated financial statements include the accounts of the Company and the Company’s wholly owned subsidiaries, F & M Bancorp, Inc. and the Bank, along with the Bank’s wholly owned subsidiaries, Farmers & Merchants Investment Corporation and Farmers/Merchants Corp. Significant inter-company transactions have been eliminated in consolidation.

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

Certain amounts in the prior years' financial statements and related footnote disclosures have been reclassified to conform to the current-year presentation. These reclassifications had no effect on previously reported net income or total shareholders’ equity.

Cash and Cash Equivalents

Cash and Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, the Company has defined cash and cash equivalents as those amounts included in the balance sheet captions Cash and Due from Banks, Interest Bearing Deposits with Banks, Federal Funds Sold and Securities Purchased Under Agreements to Resell. For these instruments, the carrying amount is a reasonable estimate of fair value.

Investment Securities

Investment Securities

Investment securities are classified at the time of purchase as held-to-maturity (“HTM”) if it is management’s intent and the Company has the ability to hold the securities until maturity. These securities are carried at cost, adjusted for amortization of premium and accretion of discount using a level yield of interest over the estimated remaining period until maturity. Losses, reflecting a decline in value judged by the Company to be other than temporary, are recognized in the period in which they occur.

Securities are classified as available-for-sale (“AFS”) if it is management’s intent, at the time of purchase, to hold the securities for an indefinite period of time and/or to use the securities as part of the Company’s asset/liability management strategy. These securities are reported at fair value with aggregate unrealized gains or losses excluded from income and included as a separate component of shareholders’ equity, net of related income taxes. Fair values are based on quoted market prices or broker/dealer price quotations on a specific identification basis. Gains or losses on the sale of these securities are computed using the specific identification method.

Trading securities, if any, are acquired for short-term appreciation and are recorded in a trading portfolio and are carried at fair value, with unrealized gains and losses recorded in non-interest income.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement; and (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans & Leases

Loans & Leases

Loans & leases are reported at the principal amount outstanding net of unearned discounts and deferred loan & lease fees and costs. Interest income on loans & leases is accrued daily on the outstanding balances using the simple interest method. Loan & lease origination fees are deferred and recognized over the contractual life of the loan or lease as an adjustment to the yield. Loans & leases are placed on non-accrual status when the collection of principal or interest is in doubt or when they become past due for 90 days or more unless they are both well-secured and in the process of collection. For this purpose, a loan or lease is considered well secured if it is collateralized by property having a net realizable value in excess of the amount of the loan or lease or is guaranteed by a financially capable party. When a loan or lease is placed on non-accrual status, the accrued and unpaid interest receivable is reversed and charged against current income; thereafter, interest income is recognized only as it is collected in cash. Additionally, cash would be applied to principal if all principal was not expected to be collected. Loans & leases placed on non-accrual status are returned to accrual status when the loans or leases are paid current as to principal, interest, and future payments are expected to be made in accordance with the contractual terms of the loan or lease.

A loan or lease is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the original agreement. Impaired loans & leases are either: (1) non-accrual loans & leases; or (2) restructured loans & leases that are still accruing interest. Loans or leases determined to be impaired are individually evaluated for impairment. When a loan or lease is impaired, the Company measures impairment based on the present value of expected future cash flows discounted at the loan or lease's effective interest rate, except that as a practical expedient, it may measure impairment based on a loan or lease's observable market price, or the fair value of the collateral if the loan or lease is collateral dependent. A loan or lease is collateral dependent if the repayment of the loan or lease is expected to be provided solely by the underlying collateral.

A restructuring of a loan or lease constitutes a troubled debt restructuring (TDR) if the Company for economic or legal reasons related to the borrower’s (the term “borrower” is used herein to describe a customer who has entered into either a loan or lease transaction) financial difficulties grants a concession to the borrower that it would not otherwise consider. Restructured loans & leases typically present an elevated level of credit risk, as the borrowers are not able to perform according to the original contractual terms. If the restructured loan or lease was current on all payments at the time of restructure and management reasonably expects the borrower will continue to perform after the restructure, management may keep the loan or lease on accrual. Loans & leases that are on nonaccrual status at the time they become TDR, remain on nonaccrual status until the borrower demonstrates a sustained period of performance, which the Company generally believes to be six consecutive months of payments, or equivalent. A loan or lease can be removed from TDR status if it was restructured at a market rate in a prior calendar year and is currently in compliance with its modified terms. However, these loans or leases continue to be classified as impaired and are individually evaluated for impairment as described above.

Generally, the Company will not restructure loans or leases for borrowers unless: (1) the existing loan or lease is brought current as to principal and interest payments; and (2) the restructured loan or lease can be underwritten to reasonable underwriting standards. If these standards are not met other actions will be pursued (e.g., foreclosure) to collect outstanding loan or lease amounts. After restructure, a determination is made whether the loan or lease will be kept on accrual status based upon the underwriting and historical performance of the restructured credit.

Allowance for Credit Losses

Allowance for Credit Losses

The allowance for credit losses is an estimate of probable incurred credit losses inherent in the Company's loan & lease portfolio as of the balance sheet date. The allowance is established through a provision for credit losses, which is charged to expense. Additions to the allowance are expected to maintain the adequacy of the total allowance after credit losses and loan & lease growth. Credit exposures determined to be uncollectible are charged against the allowance. Cash received on previously charged off amounts is recorded as a recovery to the allowance. The overall allowance consists of three primary components: specific reserves related to impaired loans & leases; general reserves for inherent losses related to loans & leases that are not impaired; and an unallocated component that takes into account the imprecision in estimating and allocating allowance balances associated with macro factors.

The determination of the general reserve for loans & leases that are collectively evaluated for impairment is based on estimates made by management, to include, but not limited to, consideration of historical losses by portfolio segment, internal asset classifications, qualitative factors that include economic trends in the Company's service areas, industry experience and trends, geographic concentrations, estimated collateral values, the Company's underwriting policies, the character of the loan & lease portfolio, and probable losses inherent in the portfolio taken as a whole.

The Company maintains a separate allowance for each portfolio segment (loan & lease type). These portfolio segments include: (1) commercial real estate; (2) agricultural real estate; (3) real estate construction (including land and development loans); (4) residential 1^st mortgages; (5) home equity lines and loans; (6) agricultural; (7) commercial; (8) consumer and other; and (9) equipment leases. The allowance for credit losses attributable to each portfolio segment, which includes both individually evaluated impaired loans & leases and loans & leases that are collectively evaluated for impairment, is combined to determine the Company's overall allowance, which is included on the consolidated balance sheet.

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

Pass – A pass loan or lease is a strong credit with no existing or known potential weaknesses deserving of management's close attention.

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

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

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

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

The general reserve component of the allowance for credit losses also consists of reserve factors that are based on management's assessment of the following for each portfolio segment: (1) inherent credit risk; (2) historical losses; and (3) other qualitative factors. These reserve factors are inherently subjective and are driven by the repayment risk associated with each portfolio segment described below:

Commercial Real Estate – Commercial real estate mortgage loans are generally considered to possess a higher inherent risk of loss than the Company’s commercial, agricultural and consumer loan types. Adverse economic developments or an overbuilt market impact commercial real estate projects and may result in troubled loans. Trends in vacancy rates of commercial properties impact the credit quality of these loans. High vacancy rates reduce operating revenues and the ability for properties to produce sufficient cash flow to service debt obligations.

Real Estate Construction – Real estate construction loans, including land loans, are generally considered to possess a higher inherent risk of loss than the Company’s commercial, agricultural and consumer loan types. A major risk arises from the necessity to complete projects within specified cost and time lines. Trends in the construction industry significantly impact the credit quality of these loans, as demand drives construction activity. In addition, trends in real estate values significantly impact the credit quality of these loans, as property values determine the economic viability of construction projects.

Commercial – These loans are generally considered to possess a moderate inherent risk of loss because they are shorter-term; typically made to relationship customers; generally underwritten to existing cash flows of operating businesses; and may be collateralized by fixed assets, inventory and/or accounts receivable. Debt coverage is provided by business cash flows and economic trends influenced by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans.

Agricultural Real Estate and Agricultural – These loans are generally considered to possess a moderate inherent risk of loss since they are typically made to relationship customers and are secured by crop production, livestock and related real estate.  These loans are vulnerable to two risk factors that are largely outside the control of Company and borrowers: commodity prices and weather conditions.

Leases – Equipment leases are generally considered to possess a moderate inherent risk of loss. As lessor, the Company is subject to both the credit risk of the borrower and the residual value risk of the equipment. Credit risks are underwritten using the same credit criteria the Company would use when making an equipment term loan. Residual value risk is managed through the use of qualified, independent appraisers that establish the residual values the Company uses in structuring a lease.

Residential 1st Mortgages and Home Equity Lines and Loans – These loans are generally considered to possess a low inherent risk of loss, although this is not always true as evidenced by the correction in residential real estate values that occurred between 2007 and 2012. The degree of risk in residential real estate lending depends primarily on the loan amount in relation to collateral value, the interest rate and the borrower's ability to repay in an orderly fashion. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate that the borrowers' capacity to repay their obligations may be deteriorating.

Consumer & Other – A consumer installment loan portfolio is usually comprised of a large number of small loans scheduled to be amortized over a specific period. Most installment loans are made for consumer purchases. Economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans. Weak economic trends indicate that the borrowers' capacity to repay their obligations may be deteriorating.

At least quarterly, the Board of Directors reviews the adequacy of the allowance, including consideration of the relative risks in the portfolio, current economic conditions and other factors. If the Board of Directors and management determine that changes are warranted based on those reviews, the allowance is adjusted. In addition, the Company's and Bank's regulators, including the Federal Reserve Board (“FRB”), the California Department of Business Oversight (“DBO”) and the Federal Deposit Insurance Corporation (“FDIC”), as an integral part of their examination process, review the adequacy of the allowance. These regulatory agencies may require additions to the allowance based on their judgment about information available at the time of their examinations.

Acquired Loans

Acquired Loans

Loans acquired through purchase or through a business combination are recorded at their fair value at the acquisition date. Credit discounts, which reflect estimates of credit losses, expected to be incurred over the life of the loan, are included in the determination of fair value; therefore, an allowance for loan losses is not recorded at the acquisition date.

Allowance for Credit Losses on Off-Balance-Sheet Credit Exposures

Allowance for Credit Losses on Off-Balance-Sheet Credit Exposures

The Company also maintains a separate allowance for off-balance-sheet commitments. Management estimates anticipated losses using historical data and utilization assumptions. The allowance for off-balance-sheet commitments is included in Interest Payable and Other Liabilities on the Company’s Consolidated Balance Sheet.

Premises and Equipment

Premises and Equipment

Premises, equipment, and leasehold improvements are stated at cost, less accumulated depreciation and amortization. Depreciation is computed principally by the straight-line method over the estimated useful lives of the assets. Estimated useful lives of buildings range from 30 to 40 years, and for furniture and equipment from 3 to 7 years. Leasehold improvements are amortized over the lesser of the terms of the respective leases, or their useful lives, which are generally 5 to 10 years. Remodeling and capital improvements are capitalized while maintenance and repairs are charged directly to occupancy expense.

Other Real Estate

Other Real Estate

Other real estate, which is included in other assets, is expected to be sold and is comprised of properties no longer utilized for business operations and property acquired through foreclosure in satisfaction of indebtedness. These properties are recorded at fair value less estimated selling costs upon acquisition. Revised estimates to the fair value less cost to sell are reported as adjustments to the carrying amount of the asset, provided that such adjusted value is not in excess of the carrying amount at acquisition. Initial losses on properties acquired through full or partial satisfaction of debt are treated as credit losses and charged to the allowance for credit losses at the time of acquisition. Subsequent declines in value from the recorded amounts, routine holding costs, and gains or losses upon disposition, if any, are included in non-interest expense as incurred.

Income Taxes

Income Taxes

The Company uses the liability method of accounting for income taxes. This method results in the recognition of deferred tax assets and liabilities that are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. The deferred provision for income taxes is the result of the net change in the deferred tax asset and deferred tax liability balances during the year. This amount combined with the current taxes payable or refundable results in the income tax expense for the current year.

The Company follows the standards set forth in the “Income Taxes” topic of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. This standard prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

The Company accounts for leases with Investment Tax Credits (ITC) under the deferred method as established in ASC 740-10. ITC are viewed and accounted for as a reduction of the cost of the related assets and presented as deferred income on the Company’s financial statement.

When tax returns are filed, it is certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Interest expense and penalties associated with unrecognized tax benefits, if any, are included in the provision for income taxes in the Consolidated Statements of Income.

Basic Earnings Per Common Share

Basic Earnings Per Common Share

The Company’s common stock is not traded on any exchange. The shares are primarily held by local residents and are not actively traded. Basic earnings per common share amounts are computed by dividing net income by the weighted average number of common shares outstanding for the period. There are no common stock equivalent shares. Therefore, there is no presentation of diluted basic earnings per common share. See Note 6 for additional information.

Segment Reporting

Segment Reporting

The “Segment Reporting” topic of the FASB ASC requires that public companies report certain information about operating segments. It also requires that public companies report certain information about their products and services, the geographic areas in which they operate, and their major customers. The Company is a holding company for a community bank, which offers a wide array of products and services to its customers. Pursuant to its banking strategy, emphasis is placed on building relationships with its customers, as opposed to building specific lines of business. As a result, the Company is not organized around discernible lines of business and prefers to work as an integrated unit to customize solutions for its customers, with business line emphasis and product offerings changing over time as needs and demands change. Therefore, the Company only reports one segment.

Low Income Housing Tax Credit Investments (LIHTC)

Low Income Housing Tax Credit Investments (LIHTC)

The Company accounts for its interest in LIHTC using the cost method as established in ASC 323-740. As an investor, the Company obtains income tax credits and deductions from the operating losses of these tax credit entities. The income tax credits and deductions are allocated to the investors based on their ownership percentages and are recorded as a reduction of income tax expense (or an increase to income tax benefit) and a reduction of federal income taxes payable.

Comprehensive Income

Comprehensive Income

The “Comprehensive Income” topic of the FASB ASC establishes standards for the reporting and display of comprehensive income and its components in the financial statements. Other comprehensive income (loss) refers to revenues, expenses, gains, and losses that U.S. GAAP recognize as changes in value to an enterprise but are excluded from net income. For the Company, comprehensive income includes net income and changes in fair value of its available-for-sale investment securities.

Loss Contingencies

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.

Business Combinations And Related Matters

Business Combinations And Related Matters

Business combinations are accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations. Under the acquisition method, the acquiring entity in a business combination recognizes 100 percent of the acquired assets and assumed liabilities, regardless of the percentage owned, at their estimated fair values as of the date of acquisition. Any excess of the fair value over the purchase price of net assets and other identifiable intangible assets acquired is recorded as bargain purchase gain. Assets acquired and liabilities assumed from contingencies must also be recognized at fair value, if the fair value can be determined during the measurement period. Results of operations of an acquired business are included in the statement of operations from the date of acquisition. Acquisition-related costs, including conversion charges, are expensed as incurred. The Company applied this guidance to the acquisition of Delta National Bancorp, which was consummated on November 18, 2016. The Company's consolidated financial statements reflect the operations of Delta National Bancorp beginning November 19, 2016.

Intangible Assets

Intangible Assets

Intangible assets are comprised of core deposit intangibles acquired in the Delta National Bancorp acquisition and included in other assets. Intangible assets with definite useful lives are amortized over their respective estimated useful lives. If an event occurs that indicates the carrying amount of an intangible asset may not be recoverable, management reviews the asset for impairment.

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Recent Accounting Pronouncements (Policies)

9 Months Ended

Sep. 30, 2017

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU will require the earlier recognition of credit losses on loans and other financial instruments based on an expected loss model, replacing the incurred loss model that is currently in use. Under the new guidance, an entity will measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The expected loss model will apply to loans and leases, unfunded lending commitments, held-to maturity debt securities and other debt instruments measured at amortized cost. The impairment model for available-for-sale debt securities will require the recognition of credit losses through a valuation allowance when fair value is less than amortized cost, regardless of whether the impairment is considered to be other-than-temporary. The new guidance is effective on January 1, 2020, with early adoption permitted on January 1, 2019. The Company is currently evaluating the provisions of this ASU and has created a cross-functional team to begin its implementation efforts of this new guidance. While the Company has not quantified the impact of this ASU, it is evaluating historical loan level data requirements necessary for the implementation of the model, consulting with outside professionals, evaluating our current IT system, as well as various methodologies for determining expected credit losses. The Company does not intend to early adopt this ASU.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new standard is being issued to increase the transparency and comparability around lease obligations. Previously unrecorded off-balance sheet obligations will now be brought more prominently to light by presenting lease liabilities on the face of the balance sheet, accompanied by enhanced qualitative and quantitative disclosures in the notes to the financial statements. This ASU applies to leasing arrangements exceeding a twelve-month term. ASU 2016-02 is effective for annual periods, including interim periods within those annual periods beginning after December 15, 2018 and requires a modified retrospective method upon adoption. Early application of the amendments is permitted. The Company is currently evaluating the provisions of this ASU to determine the potential impact the new standard will have on the Company’s consolidated financial statements. While the Company has not quantified the impact to its balance sheet, it does expect the adoption of this ASU will result in a gross-up in its balance sheet as a result of recording a right-of-use asset and a lease liability for these leases. The Company does not intend to early adopt this ASU.

In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09, Revenue from Contracts with Customers (Topic 606).  As a result of the deferral, the guidance in ASU 2014-09 will be effective for the Company for reporting periods beginning after December 15, 2017. The Update modifies the guidance companies use to recognize revenue from contracts with customers for transfers of goods or services and transfers of nonfinancial assets, unless those contracts are within the scope of other standards. The guidance also requires new qualitative and quantitative disclosures, including information about contract balances and performance obligations. The Company is currently evaluating the impact the adoption of this update will have on the consolidated financial statements. As a financial institution, the Company’s largest component of revenue, interest income, is excluded from the scope of this ASU. The Company is currently performing an overall assessment of revenue streams potentially affected by the ASU, including certain deposit related fees and interchange fees, to determine the potential impact of this guidance on our consolidated financial statements. The Company does not intend to early adopt this ASU.

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Investment Securities (Tables)

9 Months Ended

Sep. 30, 2017

Investment Securities [Abstract]

Amortized Cost, Fair Values, and Unrealized Gains and Losses of Securities Available-for-Sale

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

(in thousands):

	Amortized		Gross Unrealized				Fair/Book
September 30, 2017	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	3,091	$	78	$	-	$	3,169
US Treasury Notes		144,657		2		249		144,410
US Govt SBA		31,732		45		86		31,691
Mortgage Backed Securities (1)		274,877		1,985		819		276,043
Other		1,010		-		-		1,010
Total	$	455,367	$	2,110	$	1,154	$	456,323

	Amortized		Gross Unrealized				Fair/Book
December 31, 2016	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	3,127	$	114	$	-	$	3,241
US Treasury Notes		134,755		5		332		134,428
US Govt SBA		36,532		42		260		36,314
Mortgage Backed Securities (1)		272,858		1,725		1,313		273,270
Other		1,010		-		-		1,010
Total	$	448,282	$	1,886	$	1,905	$	448,263

	Amortized		Gross Unrealized				Fair/Book
September 30, 2016	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	83,129	$	165	$	1	$	83,293
US Treasury Notes		85,470		211		-		85,681
Mortgage Backed Securities (1)		183,268		5,605		-		188,873
Other		1,010		-		-		1,010
Total	$	352,877	$	5,981	$	1	$	358,857

⁽¹⁾ All Mortgage Backed Securities consist of securities collateralized by residential real estate and were issued by an agency or government sponsored entity of the U.S. government.

Book Values, Estimated Fair Values and Unrealized Gains and Losses of Investments Classified as Held-to-Maturity

The book values, estimated fair values and unrealized gains and losses of investments classified as held-to-maturity are as follows (in thousands):

	Book		Gross Unrealized				Fair
September 30, 2017	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	55,542	$	749	$	-	$	56,291
Total	$	55,542	$	749	$	-	$	56,291

	Book		Gross Unrealized				Fair
December 31, 2016	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	58,109	$	339	$	40	$	58,408
Total	$	58,109	$	339	$	40	$	58,408

	Book		Gross Unrealized				Fair
September 30, 2016	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	58,905	$	1,549	$	-	$	60,454
Total	$	58,905	$	1,549	$	-	$	60,454

Amortized Cost and Estimated Fair Values of Investment Securities by Contractual Maturity

The amortized cost and estimated fair values of investment securities at September 30, 2017 by contractual maturity are shown in the following table (in thousands):

	Available-for-Sale				Held-to-Maturity
September 30, 2017	Amortized Cost		Fair/Book Value		Book Value		Fair Value
Within one year	$	111,092	$	111,024	$	1,985	$	1,989
After one year through five years		30,477		30,394		9,221		9,238
After five years through ten years		13,429		13,408		13,694		13,887
After ten years		25,492		25,454		30,642		31,177
		180,490		180,280		55,542		56,291
Investment securities not due at a single maturity date:
Mortgage-backed securities		274,877		276,043		-		-
Total	$	455,367	$	456,323	$	55,542	$	56,291

Investments with Gross Unrealized Losses and Their Market Value Aggregated by Investment Category and Length of Time that Individual Securities Have Been in a Continuous Unrealized Loss Position

The following tables show those investments with gross unrealized losses and their market value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at the dates indicated (in thousands):

	Less Than 12 Months				12 Months or More				Total
September 30, 2017	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Securities Available-for-Sale
US Treasury Notes	$	74,414	$	249	$	-	$	-	$	74,414	$	249
US Govt SBA		18,669		86		-		-		18,669		86
Mortgage Backed Securities		122,887		819		-		-		122,887		819
Total	$	215,970	$	1,154	$	-	$	-	$	215,970	$	1,154

	Less Than 12 Months				12 Months or More				Total
December 31, 2016	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Securities Available-for-Sale
US Treasury Notes	$	99,429	$	332	$	-	$	-	$	99,429	$	332
US Govt SBA		27,483		260		-		-		27,483		260
Mortgage Backed Securities		123,157		1,313		-		-		123,157		1,313
Total	$	250,069	$	1,905	$	-	$	-	$	250,069	$	1,905
Securities Held-to-Maturity
Obligations of States and Political Subdivisions	$	7,251	$	40	$	-	$	-	$	7,251	$	40
Total	$	7,251	$	40	$	-	$	-	$	7,251	$	40

	Less Than 12 Months				12 Months or More				Total
September 30, 2016	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Securities Available-for-Sale
Government Agency & Government-Sponsored Entities	$	59,993	$	1	$	-	$	-	$	59,993	$	1
Total	$	59,993	$	1	$	-	$	-	$	59,993	$	1

Proceeds from Sales and Calls of Securities

Proceeds from sales and calls of securities were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2017		2016		2017		2016
Proceeds	$	-	$	1,855	$	7,831	$	104,750
Gains		-		3		143		248
Losses		-		-		12		534

XML

Loans & Leases and Allowance for Credit Losses (Tables)

9 Months Ended

Sep. 30, 2017

Loans & Leases and Allowance for Credit Losses [Abstract]

Allocation of Allowance for Credit Losses by Portfolio Segment and by Impairment Methodology

The following tables show the allocation of the allowance for credit losses by portfolio segment and by impairment methodology at the dates indicated (in thousands):

September 30, 2017	Commercial Real Estate			Agricultural Real Estate		Real Estate Construction			Residential 1st Mortgages		Home Equity Lines & Loans		Agricultural			Commercial			Consumer & Other			Leases			Unallocated		Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2017	$	11,110		$	9,450	$	3,223		$	865	$	2,140	$	7,381		$	8,515		$	200		$	3,586		$	1,449	$	47,919
Charge-Offs		(109	)		-		-			-		-		(7	)		-			(114	)		-			-		(230	)
Recoveries		110			-		-			37		6		-			6			46			-			-		205
Provision		(14	)		1,946		(473	)		95		115		(14	)		539			77			(392	)		971		2,850
Ending Balance- September 30, 2017	$	11,097		$	11,396	$	2,750		$	997	$	2,261	$	7,360		$	9,060		$	209		$	3,194		$	2,420	$	50,744
Third Quarter Allowance for Credit Losses:
Beginning Balance- July 1, 2017	$	11,242		$	10,265	$	2,687		$	872	$	2,170	$	7,236		$	9,544		$	205		$	2,952		$	1,891	$	49,064
Charge-Offs		-			-		-			-		-		-			-			(54	)		-			-		(54	)
Recoveries		99			-		-			18		1		-			2			14			-			-		134
Provision		(244	)		1,131		63			107		90		124			(486	)		44			242			529		1,600
Ending Balance- September 30, 2017	$	11,097		$	11,396	$	2,750		$	997	$	2,261	$	7,360		$	9,060		$	209		$	3,194		$	2,420	$	50,744
Ending Balance Individually Evaluated for Impairment		385			-		-			61		17		69			231			5			-			-		768
Ending Balance Collectively Evaluated for Impairment		10,712			11,396		2,750			936		2,244		7,291			8,829			204			3,194			2,420		49,976
Loans & Leases:
Ending Balance	$	683,037		$	470,738	$	162,167		$	257,920	$	33,350	$	259,127		$	257,951		$	7,312		$	85,177		$	-	$	2,216,779
Ending Balance Individually Evaluated for Impairment		4,855			-		-			1,887		369		368			1,752			7			-			-		9,238
Ending Balance Collectively Evaluated for Impairment	$	678,182		$	470,738	$	162,167		$	256,033	$	32,981	$	258,759		$	256,199		$	7,305		$	85,177		$	-	$	2,207,541

December 31, 2016	Commercial Real Estate		Agricultural Real Estate		Real Estate Construction		Residential 1st Mortgages			Home Equity Lines & Loans			Agricultural		Commercial		Consumer & Other			Leases		Unallocated			Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2016	$	10,063	$	6,881	$	2,485	$	789		$	2,146		$	6,308	$	7,836	$	175		$	3,294	$	1,546		$	41,523
Charge-Offs		-		-		-		(21	)		(46	)		-		-		(105	)		-		-			(172	)
Recoveries		2		-		-		26			103			-		47		55			-		-			233
Provision		1,045		2,569		738		71			(63	)		1,073		632		75			292		(97	)		6,335
Ending Balance- December 31, 2016	$	11,110	$	9,450	$	3,223	$	865		$	2,140		$	7,381	$	8,515	$	200		$	3,586	$	1,449		$	47,919
Ending Balance Individually Evaluated for Impairment		-		-		-		70			18			128		608		7			-		-			831
Ending Balance Collectively Evaluated for Impairment		11,110		9,450		3,223		795			2,122			7,253		7,907		193			3,586		1,449			47,088
Loans & Leases:
Ending Balance	$	668,046	$	467,685	$	176,462	$	242,247		$	31,625		$	295,325	$	217,577	$	6,913		$	71,721	$	-		$	2,177,601
Ending Balance Individually Evaluated for Impairment		1,932		1,304		-		2,126			402			625		4,464		10			-		-			10,863
Ending Balance Collectively Evaluated for Impairment	$	666,114	$	466,381	$	176,462	$	240,121		$	31,223		$	294,700	$	213,113	$	6,903		$	71,721	$	-		$	2,166,738

September 30, 2016	Commercial Real Estate			Agricultural Real Estate			Real Estate Construction			Residential 1st Mortgages			Home Equity Lines & Loans			Agricultural			Commercial			Consumer & Other			Leases		Unallocated		Total
Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2016	$	10,063		$	6,881		$	2,485		$	789		$	2,146		$	6,308		$	7,836		$	175		$	3,294	$	1,546	$	41,523
Charge-Offs		-			-			-			(7	)		(46	)		-			-			(77	)		-		-		(130	)
Recoveries		2			-			-			13			102			-			45			41			-		-		203
Provision		57			2,490			(27	)		34			(7	)		(86	)		(281	)		40			250		380		2,850
Ending Balance- September 30, 2016	$	10,122		$	9,371		$	2,458		$	829		$	2,195		$	6,222		$	7,600		$	179		$	3,544	$	1,926	$	44,446
Third Quarter Allowance for Credit Losses:
Beginning Balance- July 1, 2016	$	10,236		$	9,501		$	2,442		$	837		$	2,149		$	6,223		$	7,849		$	170		$	3,442	$	1,269	$	44,118
Charge-Offs		-			-			-			-			-			-			-			(25	)		-		-		(25	)
Recoveries		-			-			-			4			69			-			16			14			-		-		103
Provision		(114	)		(130	)		16			(12	)		(23	)		(1	)		(265	)		20			102		657		250
Ending Balance- September 30, 2016	$	10,122		$	9,371		$	2,458		$	829		$	2,195		$	6,222		$	7,600		$	179		$	3,544	$	1,926	$	44,446
Ending Balance Individually Evaluated for Impairment		-			-			-			74			18			129			620			7			-		-		848
Ending Balance Collectively Evaluated for Impairment		10,122			9,371			2,458			755			2,177			6,093			6,980			172			3,544		1,926		43,598
Loans & Leases:
Ending Balance	$	627,114		$	439,972		$	175,045		$	238,376		$	32,513		$	274,704		$	214,086		$	6,975		$	70,885	$	-	$	2,079,670
Ending Balance Individually Evaluated for Impairment		4,324			513			-			2,173			409			640			4,509			11			-		-		12,579
Ending Balance Collectively Evaluated for Impairment	$	622,790		$	439,459		$	175,045		$	236,203		$	32,104		$	274,064		$	209,577		$	6,964		$	70,885	$	-	$	2,067,091

Loan & Lease Portfolio Allocated by Management's Internal Risk Ratings

The following tables show the loan & lease portfolio allocated by management’s internal risk ratings at the dates indicated (in thousands):

September 30, 2017	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	678,083	$	4,458	$	496	$	683,037
Agricultural Real Estate		465,427		1,281		4,030		470,738
Real Estate Construction		152,989		9,178		-		162,167
Residential 1st Mortgages		256,906		43		971		257,920
Home Equity Lines & Loans		33,297		-		53		33,350
Agricultural		250,372		5,331		3,424		259,127
Commercial		253,144		4,184		623		257,951
Consumer & Other		7,142		-		170		7,312
Leases		82,889		2,288		-		85,177
Total	$	2,180,249	$	26,763	$	9,767	$	2,216,779

December 31, 2016	Pass		Special Mention		Substandard		Total Loans
Loans & Leases:
Commercial Real Estate	$	659,694	$	6,817	$	1,535	$	668,046
Agricultural Real Estate		464,997		1,384		1,304		467,685
Real Estate Construction		176,462		-		-		176,462
Residential 1st Mortgages		241,816		47		384		242,247
Home Equity Lines and Loans		31,558		-		67		31,625
Agricultural		283,525		11,366		434		295,325
Commercial		208,172		6,974		2,431		217,577
Consumer & Other		6,705		-		208		6,913
Leases		71,721		-		-		71,721
Total	$	2,144,650	$	26,588	$	6,363	$	2,177,601

September 30, 2016	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	618,975	$	7,141	$	998	$	627,114
Agricultural Real Estate		437,059		1,418		1,495		439,972
Real Estate Construction		173,556		1,489		-		175,045
Residential 1st Mortgages		237,254		404		718		238,376
Home Equity Lines & Loans		32,408		-		105		32,513
Agricultural		273,184		1,070		450		274,704
Commercial		204,119		7,105		2,862		214,086
Consumer & Other		6,816		-		159		6,975
Leases		70,885		-		-		70,885
Total	$	2,054,256	$	18,627	$	6,787	$	2,079,670

Aging Analysis of Loan & Lease Portfolio by Time Past Due

The following tables show an aging analysis of the loan & lease portfolio by the time past due at the dates indicated (in thousands):

September 30, 2017	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	-	$	-	$	-	$	-	$	-	$	683,037	$	683,037
Agricultural Real Estate		-		-		-		-		-		470,738		470,738
Real Estate Construction		-		-		-		-		-		162,167		162,167
Residential 1st Mortgages		-		-		-		-		-		257,920		257,920
Home Equity Lines & Loans		-		-		-		-		-		33,350		33,350
Agricultural		-		-		-		-		-		259,127		259,127
Commercial		-		3		-		-		3		257,948		257,951
Consumer & Other		16		-		-		4		20		7,292		7,312
Leases		-		-		-		-		-		85,177		85,177
Total	$	16	$	3	$	-	$	4	$	23	$	2,216,756	$	2,216,779

December 31, 2016	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	-	$	-	$	-	$	-	$	-	$	668,046	$	668,046
Agricultural Real Estate		-		-		-		1,304		1,304		466,381		467,685
Real Estate Construction		-		-		-		-		-		176,462		176,462
Residential 1st Mortgages		-		-		-		95		95		242,152		242,247
Home Equity Lines and Loans		-		-		-		-		-		31,625		31,625
Agricultural		-		-		-		243		243		295,082		295,325
Commercial		-		-		-		1,425		1,425		216,152		217,577
Consumer & Other		10		-		-		7		17		6,896		6,913
Leases		-		-		-		-		-		71,721		71,721
Total	$	10	$	-	$	-	$	3,074	$	3,084	$	2,174,517	$	2,177,601

September 30, 2016	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	-	$	-	$	-	$	998	$	998	$	626,116	$	627,114
Agricultural Real Estate		-		983		-		322		1,305		438,667		439,972
Real Estate Construction		-		-		-		-		-		175,045		175,045
Residential 1st Mortgages		-		-		-		55		55		238,321		238,376
Home Equity Lines & Loans		-		-		-		-		-		32,513		32,513
Agricultural		-		-		-		243		243		274,461		274,704
Commercial		-		-		-		1,450		1,450		212,636		214,086
Consumer & Other		5		-		-		7		12		6,963		6,975
Leases		-		-		-		-		-		70,885		70,885
Total	$	5	$	983	$	-	$	3,075	$	4,063	$	2,075,607	$	2,079,670

Impaired Loans & Leases

The following tables show information related to impaired loans & leases for the periods indicated (in thousands):

							Three Months Ended September 30, 2017				Nine Months Ended September 30, 2017
September 30, 2017	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	106	$	107	$	-	$	107	$	2	$	121	$	9
Agricultural Real Estate		-		-		-		488		-		868		-
Residential 1st Mortgages		399		456		-		403		3		415		6
Home Equity Lines & Loans		-		-		-		-		-		21		-
Agricultural		-		-		-		30		-		40		-
Commercial		-		-		-		-		-		504		-
	$	505	$	563	$	-	$	1,028	$	5	$	1,969	$	15
With an allowance recorded:
Commercial Real Estate	$	2,991	$	2,977	$	384	$	3,000	$	25		2,509	$	80
Residential 1st Mortgages		519		574		26		472		3		442		12
Home Equity Lines & Loans		83		90		4		67		-		76		2
Agricultural		367		367		69		499		7		588		21
Commercial		1,760		1,752		234		1,696		14		1,624		44
Consumer & Other		4		11		4		14		-		12		-
	$	5,724	$	5,771	$	721	$	5,748	$	49		5,251	$	159
Total	$	6,229	$	6,334	$	721	$	6,776	$	54	$	7,220	$	174

December 31, 2016	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	184	$	184	$	-	$	354	$	7
Residential 1st Mortgages		451		504		-		404		10
Home Equity Lines and Loans		-		-		-		181		-
Agricultural		-		-		-		144		5
Commercial		3,023		3,023		-		3,053		133
	$	4,963	$	5,016	$	-	$	4,705	$	158
With an allowance recorded:
Residential 1st Mortgages	$	430	$	469	$	21	$	336	$	13
Home Equity Lines and Loans		90		97		5		123		4
Agricultural		625		625		128		581		22
Commercial		1,441		1,640		608		1,536		8
Consumer & Other		6		13		6		12		-
	$	2,592	$	2,844	$	768	$	2,588	$	47
Total	$	7,555	$	7,860	$	768	$	7,293	$	205

							Three Months Ended September 30, 2016				Nine Months Ended September 30, 2016
September 30, 2016	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	1,074	$	1,071	$	-	$	575	$	2	$	248	$	6
Agricultural Real Estate		322		322		-		404		-		270		3
Residential 1st Mortgages		414		466		-		417		3		411		7
Home Equity Lines & Loans		-		-		-		-		-		339		-
Agricultural		191		191		-		192		2		193		5
Commercial		3,042		3,043		-		3,053		33		3,073		100
Consumer & Other		-		-				1		-		1		-
	$	5,043	$	5,093	$	-	$	4,642	$	40	$	4,535	$	121
With an allowance recorded:
Residential 1st Mortgages	$	430	$	471	$	21	$	335	$	3	$	290	$	9
Home Equity Lines & Loans		92		98		5		93		1		142		3
Agricultural		640		640		137		644		6		529		18
Commercial		1,466		1,648		620		1,536		-		1,599		8
Consumer & Other		7		13		7		8		-		18		-
	$	2,635	$	2,870	$	790	$	2,616	$	10	$	2,578	$	38
Total	$	7,678	$	7,963	$	790	$	7,258	$	50	$	7,113	$	159

Loans & Leases by Class Modified as Troubled Debt Restructured Loans

The following table presents loans or leases by class modified as troubled debt restructured loans or leases during the three and nine-month periods ended September 30, 2017 (in thousands):

	Three Months Ended September 30, 2017						Nine Months Ended September 30, 2017
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Residential 1st Mortgages		1	$	112	$	112		1	$	112	$	112
Home Equity Lines & Loans		1		32		32		1		32		32
Commercial		2		138		138		2		138		138
Total		4	$	282	$	282		4	$	282	$	282

The following table presents loans by class modified as troubled debt restructured loans for the period ended December 31, 2016 (in thousands):

	December 31, 2016
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial Real Estate		1	$	112	$	112
Residential 1st Mortgages		2		289		281
Home Equity Lines and Loans		2		305		286
Total		5	$	706	$	679

The following table presents loans or leases by class modified as troubled debt restructured loans or leases during the three and nine-month periods ended September 30, 2016 (in thousands):

	Three Months Ended September 30, 2016						Nine Months Ended September 30, 2016
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Residential 1st Mortgages		1	$	192	$	192		2	$	289	$	281
Home Equity Lines & Loans		-		-		-		2		305		286
Total		1	$	192	$	192		4	$	594	$	567

XML

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value Measurements [Abstract]

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

			Fair Value Measurements At September 30, 2017, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	3,169	$	-	$	3,169	$	-
US Treasury Notes		144,410		144,410		-		-
US Govt SBA		31,691		-		31,691		-
Mortgage Backed Securities		276,043		-		276,043		-
Other		1,010		200		310		500
Total Assets Measured at Fair Value On a Recurring Basis	$	456,323	$	144,610	$	311,213	$	500

			Fair Value Measurements At December 31, 2016, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	3,241	$	-	$	3,241	$	-
US Treasury Notes		134,428		134,428		-		-
US Govt SBA		36,314		-		36,314		-
Mortgage Backed Securities		273,270		-		273,270		-
Other		1,010		200		310		500
Total Assets Measured at Fair Value On a Recurring Basis	$	448,263	$	134,628	$	313,135	$	500

			Fair Value Measurements At September 30, 2016, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-Sale Securities:
Government Agency & Government-Sponsored Entities	$	83,293	$	-	$	83,293	$	-
US Treasury Notes		85,681		85,681		-		-
Mortgage Backed Securities		188,873		-		188,873		-
Other		1,010		200		310		500
Total Assets Measured at Fair Value On a Recurring Basis	$	358,857	$	85,881	$	272,476	$	500

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The following tables present information about the Company’s other real estate and impaired loans or leases, classes of assets or liabilities that the Company carries at fair value on a non-recurring basis, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value for the periods indicated. Not all impaired loans or leases are carried at fair value. Impaired loans or leases are only included in the following tables when their fair value is based upon a current appraisal of the collateral, and if that appraisal results in a partial charge-off or the establishment of a specific reserve.

			Fair Value Measurements At September 30, 2017, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired Loans
Commercial Real Estate	$	2,594	$	-	$	-	$	2,594
Residential 1st Mortgage		491		-		-		491
Home Equity Lines and Loans		78		-		-		78
Agricultural		298		-		-		298
Commercial		1,519		-		-		1,519
Total Impaired Loans		4,980		-		-		4,980
Other Real Estate
Real Estate Construction		873		-		-		873
Total Other Real Estate		873		-		-		873
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	5,853	$	-	$	-	$	5,853

			Fair Value Measurements At December 31, 2016, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired Loans:
Residential 1st Mortgage	$	480	$	-	$	-	$	480
Home Equity Lines and Loans		83		-		-		83
Agricultural		497		-		-		497
Commercial		833		-		-		833
Total Impaired Loans		1,893		-		-		1,893
Other Real Estate:
Home Equity Lines and Loans		785		-		-		785
Real Estate Construction		2,960		-		-		2,960
Total Other Real Estate		3,745		-		-		3,745
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	5,638	$	-	$	-	$	5,638

			Fair Value Measurements At September 30, 2016, Using
(in thousands)	Fair Value Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired Loans
Residential 1st Mortgage	$	496	$	-	$	-	$	496
Home Equity Lines and Loans		84		-		-		84
Agricultural		503		-		-		503
Commercial		847		-		-		847
Total Impaired Loans		1,930		-		-		1,930
Other Real Estate
Home Equity Lines and Loans		785		-		-		785
Total Other Real Estate		785		-		-		785
Total Assets Measured at Fair Value On a Non-Recurring Basis	$	2,715	$	-	$	-	$	2,715

Quantitative Information about Level 3 Fair Value Measurements for Financial Instruments Measured at Fair Value on a Nonrecurring Basis

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a nonrecurring basis at September 30, 2017:

(in thousands)	Fair Value		Valuation Technique	Unobservable Inputs	Range, Weighted Avg.
Impaired Loans
Commercial Real Estate	$	2,594	Income Approach	Discount Rate	3.25% - 3.25%, 3.25 %
Residential 1st Mortgage	$	491	Sales Comparison Approach	Adjustment for Difference Between Comparable Sales	1% - 4%, 3 %
Home Equity Lines and Loans	$	78	Sales Comparison Approach	Adjustment for Difference Between Comparable Sales	1% - 2%, 2 %
Agricultural	$	298	Income Approach	Discount Rate	7.50% - 7.50%, 7.50 %
Commercial	$	1,519	Income Approach	Discount Rate	2.00% - 9.00%, 3.00 %
Other Real Estate
Real Estate Construction	$	873	Sales Comparison Approach	Adjustment for Difference Between Comparable Sales	10% - 10%, 10 %

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value of Financial Instruments [Abstract]

Book Value and Estimated Fair Value of Financial Instruments

The following tables summarize the book value and estimated fair value of financial instruments for the periods indicated:

				Fair Value of Financial Instruments Using
September 30, 2017 (in thousands)	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Estimated Fair Value
Assets:
Cash and Cash Equivalents	$	193,270		$	193,270	$	-	$	-		$	193,270
Investment Securities Available-for-Sale:
Government Agency & Government-Sponsored Entities		3,169			-		3,169		-			3,169
U.S. Govt SBA		31,691			-		31,691		-			31,691
U.S. Treasury Notes		144,410			144,410		-		-			144,410
Mortgage Backed Securities		276,043			-		276,043		-			276,043
Other		1,010			200		310		500			1,010
Total Investment Securities Available-for-Sale		456,323			144,610		311,213		500			456,323
Investment Securities Held-to-Maturity:
Obligations of States and Political Subdivisions		55,542			-		39,254		17,037			56,292
Total Investment Securities Held-to-Maturity		55,542			-		39,254		17,037			56,292
FHLB Stock		10,342			N/A		N/A		N/A			N/A
Loans & Leases, Net of Deferred Fees & Allowance:
Commercial Real Estate		671,940			-		-		665,566			665,566
Agricultural Real Estate		459,342			-		-		446,684			446,684
Real Estate Construction		159,417			-		-		159,131			159,131
Residential 1st Mortgages		256,923			-		-		258,256			258,256
Home Equity Lines and Loans		31,089			-		-		31,869			31,869
Agricultural		251,767			-		-		249,995			249,995
Commercial		248,891			-		-		247,344			247,344
Consumer & Other		7,103			-		-		7,067			7,067
Leases		81,983			-		-		85,032			85,032
Unallocated Allowance		(2,420	)		-		-		(2,420	)		(2,420	)
Total Loans & Leases, Net of Deferred Fees & Allowance		2,166,035			-		-		2,148,524			2,148,524
Accrued Interest Receivable		11,498			-		11,498		-			11,498
Liabilities:
Deposits:
Demand		767,162			767,162		-		-			767,162
Interest Bearing Transaction		564,904			564,904		-		-			564,904
Savings and Money Market		827,588			827,588		-		-			827,588
Time		549,773			-		547,796		-			547,796
Total Deposits		2,709,427			2,159,654		547,796		-			2,707,450
Subordinated Debentures		10,310			-		6,589		-			6,589
Accrued Interest Payable		939			-		939		-			939

				Fair Value of Financial Instruments Using
December 31, 2016 (in thousands)	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Estimated Fair Value
Assets:
Cash and Cash Equivalents	$	98,960		$	98,960	$	-	$	-		$	98,960
Investment Securities Available-for-Sale:
Government Agency & Government-Sponsored Entities		3,241			-		3,241		-			3,241
U.S. Govt SBA		36,314			-		36,314		-			36,314
U.S. Treasury Notes		134,428			134,428		-		-			134,428
Mortgage Backed Securities		273,270			-		273,270		-			273,270
Other		1,010			200		310		500			1,010
Total Investment Securities Available-for-Sale		448,263			134,628		313,135		500			448,263
Investment Securities Held-to-Maturity:
Obligations of States and Political Subdivisions		58,109			-		40,415		17,993			58,408
Total Investment Securities Held-to-Maturity		58,109			-		40,415		17,993			58,408
FHLB Stock		8,872			N/A		N/A		N/A			N/A
Loans & Leases, Net of Deferred Fees & Allowance:
Commercial Real Estate		656,936			-		-		651,877			651,877
Agricultural Real Estate		458,235			-		-		444,393			444,393
Real Estate Construction		173,239			-		-		172,682			172,682
Residential 1st Mortgages		241,382			-		-		241,174			241,174
Home Equity Lines and Loans		29,485			-		-		30,495			30,495
Agricultural		287,944			-		-		286,074			286,074
Commercial		209,062			-		-		207,215			207,215
Consumer & Other		6,713			-		-		6,706			6,706
Leases		68,135			-		-		67,893			67,893
Unallocated Allowance		(1,449	)		-		-		(1,449	)		(1,449	)
Total Loans & Leases, Net of Deferred Fees & Allowance		2,129,682			-		-		2,107,060			2,107,060
Accrued Interest Receivable		10,047			-		10,047		-			10,047
Liabilities:
Deposits:
Demand		756,236			756,236		-		-			756,236
Interest Bearing Transaction		495,063			495,063		-		-			495,063
Savings and Money Market		760,119			760,119		-		-			760,119
Time		570,293			-		569,183		-			569,183
Total Deposits		2,581,711			2,011,418		569,183		-			2,580,601
Subordinated Debentures		10,310			-		6,578		-			6,578
Accrued Interest Payable		852			-		852		-			852

				Fair Value of Financial Instruments Using
September 30, 2016 (in thousands)	Carrying Amount			Quoted Prices in Active Markets for Identical Assets (Level 1)		Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Estimated Fair Value
Assets:
Cash and Cash Equivalents	$	99,303		$	99,303	$	-	$	-		$	99,303
Investment Securities Available-for-Sale:
Government Agency & Government-Sponsored Entities		83,293			-		83,293		-			83,293
US Treasury Notes		85,681			85,681		-		-			85,681
Mortgage Backed Securities		188,873			-		188,873		-			188,873
Other		1,010			200		310		500			1,010
Total Investment Securities Available-for-Sale		358,857			85,881		272,476		500			358,857
Investment Securities Held-to-Maturity:
Obligations of States and Political Subdivisions		58,905			-		42,675		17,779			60,454
Total Investment Securities Held-to-Maturity		58,905			-		42,675		17,779			60,454
FHLB Stock		8,872			N/A		N/A		N/A			N/A
Loans & Leases, Net of Deferred Fees & Allowance:
Commercial Real Estate		616,992			-		-		620,655			620,655
Agricultural Real Estate		430,601			-		-		422,056			422,056
Real Estate Construction		172,587			-		-		172,358			172,358
Residential 1st Mortgages		237,547			-		-		241,703			241,703
Home Equity Lines and Loans		30,318			-		-		31,397			31,397
Agricultural		268,482			-		-		267,101			267,101
Commercial		206,486			-		-		205,769			205,769
Consumer & Other		6,796			-		-		6,832			6,832
Leases		67,341							69,408			69,408
Unallocated Allowance		(1,926	)		-		-		(1,926	)		(1,926	)
Total Loans & Leases, Net of Deferred Fees & Allowance		2,035,224			-		-		2,035,353			2,035,353
Accrued Interest Receivable		10,116			-		10,116		-			10,116
Liabilities:
Deposits:
Demand		672,351			672,351		-		-			672,351
Interest Bearing Transaction		433,220			433,220		-		-			433,220
Savings and Money Market		702,441			702,441		-		-			702,441
Time		547,625			-		547,145		-			547,145
Total Deposits		2,355,637			1,808,012		547,145		-			2,355,157
Subordinated Debentures		10,310			-		6,606		-			6,606
Accrued Interest Payable		681			-		681		-			681

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Dividends and Basic Earnings Per Common Share (Tables)

9 Months Ended

Sep. 30, 2017

Dividends and Basic Earnings Per Common Share [Abstract]

Calculation of Basic Earnings per Share

The following table calculates the basic earnings per common share for the three and nine months ended September 30, 2017 and 2016.

	Three Months Ended September 30,				Nine Months Ended September 30,
(net income in thousands)	2017		2016		2017		2016
Net Income	$	8,581	$	7,538	$	24,589	$	22,042
Weighted Average Number of Common Shares Outstanding		810,291		792,387		809,002		792,223
Basic Earnings Per Common Share Amount	$	10.59	$	9.51	$	30.39	$	27.82

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Significant Accounting Policies (Details) $ in Thousands		9 Months Ended
	Nov. 18, 2016 USD ($) Branch	Sep. 30, 2017 USD ($) Component Category Factor Segment	Dec. 31, 2016 USD ($)	Sep. 30, 2016 USD ($)
Business Acquisition [Line Items]
Assets | $		$ 3,071,775	$ 2,922,121	$ 2,727,566
Investment Securities [Abstract]
Number of components into which amount of impairment is split | Component		2
Loans & Leases [Abstract]
Consecutive months of payments to demonstrate sustained period of performance		6 months
Allowance for Credit Losses [Abstract]
Number of primary components of overall allowance for credit losses | Component		3
Number of categories into which risk ratings are grouped | Category		5
Segment Reporting [Abstract]
Number of reportable segments | Segment		1
Minimum [Member]
Loans & Leases [Abstract]
Period after which loans are placed on non accrual status		90 days
Buildings [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives		30 years
Buildings [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives		40 years
Furniture and Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives		3 years
Furniture and Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives		7 years
Leasehold Improvements [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives		5 years
Leasehold Improvements [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives		10 years
Agricultural Real Estate [Member]
Allowance for Credit Losses [Abstract]
Number of risk factors on loans | Factor		2
Agricultural [Member]
Allowance for Credit Losses [Abstract]
Number of risk factors on loans | Factor		2
Delta National Bancorp [Member]
Business Acquisition [Line Items]
Assets | $	$ 112,000
Number of branches | Branch	4

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Investment Securities, Amortized Cost, Fair Values, and Unrealized Gains and Losses of Securities (Details) - USD ($) $ in Thousands		Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
Amortized cost, fair values, and unrealized gains and losses of securities available-for-sale [Abstract]
Amortized cost		$ 455,367	$ 448,282	$ 352,877
Gross unrealized gains		2,110	1,886	5,981
Gross unrealized losses		1,154	1,905	1
Fair/Book value		456,323	448,263	358,857
Book values, estimated fair values and unrealized gains and losses of investments classified as held-to-maturity [Abstract]
Book value		55,542	58,109	58,905
Gross unrealized gains		749	339	1,549
Gross unrealized losses		0	40	0
Fair value		56,291	58,408	60,454
Government Agency & Government-Sponsored Entities [Member]
Amortized cost, fair values, and unrealized gains and losses of securities available-for-sale [Abstract]
Amortized cost		3,091	3,127	83,129
Gross unrealized gains		78	114	165
Gross unrealized losses		0	0	1
Fair/Book value		3,169	3,241	83,293
US Treasury Notes [Member]
Amortized cost, fair values, and unrealized gains and losses of securities available-for-sale [Abstract]
Amortized cost		144,657	134,755	85,470
Gross unrealized gains		2	5	211
Gross unrealized losses		249	332	0
Fair/Book value		144,410	134,428	85,681
US Govt SBA [Member]
Amortized cost, fair values, and unrealized gains and losses of securities available-for-sale [Abstract]
Amortized cost		31,732	36,532
Gross unrealized gains		45	42
Gross unrealized losses		86	260
Fair/Book value		31,691	36,314
Mortgage Backed Securities [Member]
Amortized cost, fair values, and unrealized gains and losses of securities available-for-sale [Abstract]
Amortized cost	[1]	274,877	272,858	183,268
Gross unrealized gains	[1]	1,985	1,725	5,605
Gross unrealized losses	[1]	819	1,313	0
Fair/Book value	[1]	276,043	273,270	188,873
Other [Member]
Amortized cost, fair values, and unrealized gains and losses of securities available-for-sale [Abstract]
Amortized cost		1,010	1,010	1,010
Gross unrealized gains		0	0	0
Gross unrealized losses		0	0	0
Fair/Book value		1,010	1,010	1,010
Obligations of States and Political Subdivisions [Member]
Book values, estimated fair values and unrealized gains and losses of investments classified as held-to-maturity [Abstract]
Book value		55,542	58,109	58,905
Gross unrealized gains		749	339	1,549
Gross unrealized losses		0	40	0
Fair value		$ 56,291	$ 58,408	$ 60,454

[1] All Mortgage Backed Securities consist of securities collateralized by residential real estate and were issued by an agency or government sponsored entity of the U.S. government.

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Investment Securities, Contractual Maturity (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
Amortized Cost [Abstract]
Within one year	$ 111,092
After one year through five years	30,477
After five years through ten years	13,429
After ten years	25,492
Amortized cost, excluding investment securities not due at a single maturity date	180,490
Investment securities not due at a single maturity date, mortgage-backed securities	274,877
Amortized cost	455,367
Fair/Book Value [Abstract]
Within one year	111,024
After one year through five years	30,394
After five years through ten years	13,408
After ten years	25,454
Fair/Book value, excluding investment securities not due at a single maturity date	180,280
Investment securities not due at a single maturity date, mortgage-backed securities	276,043
Fair/Book value	456,323	$ 448,263	$ 358,857
Book Value [Abstract]
Within one year	1,985
After one year through five years	9,221
After five years through ten years	13,694
After ten years	30,642
Book value, excluding investment securities not due at a single maturity date	55,542
Investment securities not due at a single maturity date, mortgage-backed securities	0
Book value	55,542	58,109	58,905
Fair Value [Abstract]
Within one year	1,989
After one year through five years	9,238
After five years through ten years	13,887
After ten years	31,177
Fair value, excluding investment securities not due at a single maturity date	56,291
Investment securities not due at a single maturity date, mortgage-backed securities	0
Fair value	$ 56,291	$ 58,408	$ 60,454

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Investment Securities, Securities in Continuous Unrealized Loss Position (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($) Security	Dec. 31, 2016 USD ($)	Sep. 30, 2016 USD ($)
Investment Securities [Abstract]
Number of investment securities held | Security	485
Less than 12 months, number of positions | Security	156
12 months or more, number of positions | Security	0
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, fair value	$ 215,970	$ 250,069	$ 59,993
Less than 12 months, unrealized loss	1,154	1,905	1
12 months or more, fair value	0	0	0
12 months or more, unrealized loss	0	0	0
Total, fair value	215,970	250,069	59,993
Total, unrealized loss	1,154	1,905	1
Held-to-maturity Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, fair value		7,251
Less than 12 months, unrealized loss		40
12 months or more, fair value		0
12 months or more, unrealized loss		0
Total, fair value		7,251
Total, unrealized loss		40
Government Agency & Government-Sponsored Entities [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, fair value			59,993
Less than 12 months, unrealized loss			1
12 months or more, fair value			0
12 months or more, unrealized loss			0
Total, fair value			59,993
Total, unrealized loss	0	0	1
US Treasury Notes [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, fair value	74,414	99,429
Less than 12 months, unrealized loss	249	332	0
12 months or more, fair value	0	0
12 months or more, unrealized loss	0	0
Total, fair value	74,414	99,429
Total, unrealized loss	$ 249	332
Less than 12 months, number of positions | Security	6
12 months or more, number of positions | Security	0
US Govt SBA [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, fair value	$ 18,669	27,483
Less than 12 months, unrealized loss	86	260
12 months or more, fair value	0	0
12 months or more, unrealized loss	0	0
Total, fair value	18,669	27,483
Total, unrealized loss	$ 86	260
Less than 12 months, number of positions | Security	94
12 months or more, number of positions | Security	0
Mortgage Backed Securities [Member]
Available-for-sale Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, fair value	$ 122,887	123,157
Less than 12 months, unrealized loss	819	1,313	0
12 months or more, fair value	0	0
12 months or more, unrealized loss	0	0
Total, fair value	122,887	123,157
Total, unrealized loss	$ 819	1,313
Less than 12 months, number of positions | Security	55
12 months or more, number of positions | Security	0
Obligations of States and Political Subdivisions [Member]
Held-to-maturity Securities, Continuous Unrealized Loss Position [Abstract]
Less than 12 months, fair value		7,251
Less than 12 months, unrealized loss		40
12 months or more, fair value		0
12 months or more, unrealized loss		0
Total, fair value		7,251
Total, unrealized loss	$ 0	$ 40	$ 0
Less than 12 months, number of positions | Security	0
12 months or more, number of positions | Security	0
Municipal Bonds [Member]
Held-to-maturity Securities, Continuous Unrealized Loss Position [Abstract]
Percentage of bank qualified municipal bond portfolio rated	98.00%
Percentage of portfolio not rated	2.00%

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Investment Securities, Proceeds from Sales (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Proceeds from sales and calls of securities [Abstract]
Proceeds	$ 0	$ 1,855	$ 7,831	$ 104,750
Gains	0	3	143	248
Losses	$ 0	$ 0	$ 12	$ 534

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Investment Securities, Pledged Securities (Details) - USD ($) $ in Millions	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
Investment Securities [Abstract]
Securities pledged to secure public deposits, FHLB borrowings, and other government agency deposits as required by law	$ 201.8	$ 171.9	$ 185.1

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Investment Securities, Investment in Unconsolidated Subsidiary (Details) - Voting Shares of Bank of Rio Vista [Member] - USD ($) $ in Millions	Jul. 20, 2017	Apr. 05, 2017
Schedule of Cost-method Investments [Line Items]
Percentage of voting shares acquired		4.90%
Percentage of additional voting shares acquired	34.55%
Payments to acquire business	$ 10.5	$ 1.4

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Loans & Leases and Allowance for Credit Losses, Allocation of The Allowance For Credit Losses by Portfolio Segment and By Impairment Methodology (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Allowance for Credit Losses [Roll Forward]
Beginning Balance	$ 49,064	$ 44,118	$ 47,919	$ 41,523	$ 41,523
Charge-Offs	(54)	(25)	(230)	(130)	(172)
Recoveries	134	103	205	203	233
Provision	1,600	250	2,850	2,850	6,335
Ending Balance	50,744	44,446	50,744	44,446	47,919
Ending Balance Individually Evaluated for Impairment	768	848	768	848	831
Ending Balance Collectively Evaluated for Impairment	49,976	43,598	49,976	43,598	47,088
Loans & Leases [Abstract]
Ending Balance	2,216,779	2,079,670	2,216,779	2,079,670	2,177,601
Ending Balance Individually Evaluated for Impairment	9,238	12,579	9,238	12,579	10,863
Ending Balance Collectively Evaluated for Impairment	2,207,541	2,067,091	2,207,541	2,067,091	2,166,738
Commercial Real Estate [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	11,242	10,236	11,110	10,063	10,063
Charge-Offs	0	0	(109)	0	0
Recoveries	99	0	110	2	2
Provision	(244)	(114)	(14)	57	1,045
Ending Balance	11,097	10,122	11,097	10,122	11,110
Ending Balance Individually Evaluated for Impairment	385	0	385	0	0
Ending Balance Collectively Evaluated for Impairment	10,712	10,122	10,712	10,122	11,110
Loans & Leases [Abstract]
Ending Balance	683,037	627,114	683,037	627,114	668,046
Ending Balance Individually Evaluated for Impairment	4,855	4,324	4,855	4,324	1,932
Ending Balance Collectively Evaluated for Impairment	678,182	622,790	678,182	622,790	666,114
Agricultural Real Estate [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	10,265	9,501	9,450	6,881	6,881
Charge-Offs	0	0	0	0	0
Recoveries	0	0	0	0	0
Provision	1,131	(130)	1,946	2,490	2,569
Ending Balance	11,396	9,371	11,396	9,371	9,450
Ending Balance Individually Evaluated for Impairment	0	0	0	0	0
Ending Balance Collectively Evaluated for Impairment	11,396	9,371	11,396	9,371	9,450
Loans & Leases [Abstract]
Ending Balance	470,738	439,972	470,738	439,972	467,685
Ending Balance Individually Evaluated for Impairment	0	513	0	513	1,304
Ending Balance Collectively Evaluated for Impairment	470,738	439,459	470,738	439,459	466,381
Real Estate Construction [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	2,687	2,442	3,223	2,485	2,485
Charge-Offs	0	0	0	0	0
Recoveries	0	0	0	0	0
Provision	63	16	(473)	(27)	738
Ending Balance	2,750	2,458	2,750	2,458	3,223
Ending Balance Individually Evaluated for Impairment	0	0	0	0	0
Ending Balance Collectively Evaluated for Impairment	2,750	2,458	2,750	2,458	3,223
Loans & Leases [Abstract]
Ending Balance	162,167	175,045	162,167	175,045	176,462
Ending Balance Individually Evaluated for Impairment	0	0	0	0	0
Ending Balance Collectively Evaluated for Impairment	162,167	175,045	162,167	175,045	176,462
Residential 1st Mortgages [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	872	837	865	789	789
Charge-Offs	0	0	0	(7)	(21)
Recoveries	18	4	37	13	26
Provision	107	(12)	95	34	71
Ending Balance	997	829	997	829	865
Ending Balance Individually Evaluated for Impairment	61	74	61	74	70
Ending Balance Collectively Evaluated for Impairment	936	755	936	755	795
Loans & Leases [Abstract]
Ending Balance	257,920	238,376	257,920	238,376	242,247
Ending Balance Individually Evaluated for Impairment	1,887	2,173	1,887	2,173	2,126
Ending Balance Collectively Evaluated for Impairment	256,033	236,203	256,033	236,203	240,121
Home Equity Lines & Loans [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	2,170	2,149	2,140	2,146	2,146
Charge-Offs	0	0	0	(46)	(46)
Recoveries	1	69	6	102	103
Provision	90	(23)	115	(7)	(63)
Ending Balance	2,261	2,195	2,261	2,195	2,140
Ending Balance Individually Evaluated for Impairment	17	18	17	18	18
Ending Balance Collectively Evaluated for Impairment	2,244	2,177	2,244	2,177	2,122
Loans & Leases [Abstract]
Ending Balance	33,350	32,513	33,350	32,513	31,625
Ending Balance Individually Evaluated for Impairment	369	409	369	409	402
Ending Balance Collectively Evaluated for Impairment	32,981	32,104	32,981	32,104	31,223
Agricultural [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	7,236	6,223	7,381	6,308	6,308
Charge-Offs	0	0	(7)	0	0
Recoveries	0	0	0	0	0
Provision	124	(1)	(14)	(86)	1,073
Ending Balance	7,360	6,222	7,360	6,222	7,381
Ending Balance Individually Evaluated for Impairment	69	129	69	129	128
Ending Balance Collectively Evaluated for Impairment	7,291	6,093	7,291	6,093	7,253
Loans & Leases [Abstract]
Ending Balance	259,127	274,704	259,127	274,704	295,325
Ending Balance Individually Evaluated for Impairment	368	640	368	640	625
Ending Balance Collectively Evaluated for Impairment	258,759	274,064	258,759	274,064	294,700
Commercial [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	9,544	7,849	8,515	7,836	7,836
Charge-Offs	0	0	0	0	0
Recoveries	2	16	6	45	47
Provision	(486)	(265)	539	(281)	632
Ending Balance	9,060	7,600	9,060	7,600	8,515
Ending Balance Individually Evaluated for Impairment	231	620	231	620	608
Ending Balance Collectively Evaluated for Impairment	8,829	6,980	8,829	6,980	7,907
Loans & Leases [Abstract]
Ending Balance	257,951	214,086	257,951	214,086	217,577
Ending Balance Individually Evaluated for Impairment	1,752	4,509	1,752	4,509	4,464
Ending Balance Collectively Evaluated for Impairment	256,199	209,577	256,199	209,577	213,113
Consumer & Other [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	205	170	200	175	175
Charge-Offs	(54)	(25)	(114)	(77)	(105)
Recoveries	14	14	46	41	55
Provision	44	20	77	40	75
Ending Balance	209	179	209	179	200
Ending Balance Individually Evaluated for Impairment	5	7	5	7	7
Ending Balance Collectively Evaluated for Impairment	204	172	204	172	193
Loans & Leases [Abstract]
Ending Balance	7,312	6,975	7,312	6,975	6,913
Ending Balance Individually Evaluated for Impairment	7	11	7	11	10
Ending Balance Collectively Evaluated for Impairment	7,305	6,964	7,305	6,964	6,903
Leases [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	2,952	3,442	3,586	3,294	3,294
Charge-Offs	0	0	0	0	0
Recoveries	0	0	0	0	0
Provision	242	102	(392)	250	292
Ending Balance	3,194	3,544	3,194	3,544	3,586
Ending Balance Individually Evaluated for Impairment	0	0	0	0	0
Ending Balance Collectively Evaluated for Impairment	3,194	3,544	3,194	3,544	3,586
Loans & Leases [Abstract]
Ending Balance	85,177	70,885	85,177	70,885	71,721
Ending Balance Individually Evaluated for Impairment	0	0	0	0	0
Ending Balance Collectively Evaluated for Impairment	85,177	70,885	85,177	70,885	71,721
Unallocated [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance	1,891	1,269	1,449	1,546	1,546
Charge-Offs	0	0	0	0	0
Recoveries	0	0	0	0	0
Provision	529	657	971	380	(97)
Ending Balance	2,420	1,926	2,420	1,926	1,449
Ending Balance Individually Evaluated for Impairment	0	0	0	0	0
Ending Balance Collectively Evaluated for Impairment	2,420	1,926	2,420	1,926	1,449
Loans & Leases [Abstract]
Ending Balance	0	0	0	0	0
Ending Balance Individually Evaluated for Impairment	0	0	0	0	0
Ending Balance Collectively Evaluated for Impairment	0	0	0	0	0
Restructured Loans [Member]
Loans & Leases [Abstract]
Ending Balance Individually Evaluated for Impairment	$ 3,000	$ 4,900	$ 3,000	$ 4,900	$ 3,300

XML

Loans & Leases and Allowance for Credit Losses, Loan Portfolio Allocated by Management's Internal Risk Ratings (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	$ 2,216,779	$ 2,177,601	$ 2,079,670
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	2,180,249	2,144,650	2,054,256
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	26,763	26,588	18,627
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	9,767	6,363	6,787
Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	0	0	0
Loss [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	0	0	0
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	683,037	668,046	627,114
Commercial Real Estate [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	678,083	659,694	618,975
Commercial Real Estate [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	4,458	6,817	7,141
Commercial Real Estate [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	496	1,535	998
Agricultural Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	470,738	467,685	439,972
Agricultural Real Estate [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	465,427	464,997	437,059
Agricultural Real Estate [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	1,281	1,384	1,418
Agricultural Real Estate [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	4,030	1,304	1,495
Real Estate Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	162,167	176,462	175,045
Real Estate Construction [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	152,989	176,462	173,556
Real Estate Construction [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	9,178	0	1,489
Real Estate Construction [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	0	0	0
Residential 1st Mortgages [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	257,920	242,247	238,376
Residential 1st Mortgages [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	256,906	241,816	237,254
Residential 1st Mortgages [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	43	47	404
Residential 1st Mortgages [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	971	384	718
Home Equity Lines & Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	33,350	31,625	32,513
Home Equity Lines & Loans [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	33,297	31,558	32,408
Home Equity Lines & Loans [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	0	0	0
Home Equity Lines & Loans [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	53	67	105
Agricultural [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	259,127	295,325	274,704
Agricultural [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	250,372	283,525	273,184
Agricultural [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	5,331	11,366	1,070
Agricultural [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	3,424	434	450
Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	257,951	217,577	214,086
Commercial [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	253,144	208,172	204,119
Commercial [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	4,184	6,974	7,105
Commercial [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	623	2,431	2,862
Consumer & Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	7,312	6,913	6,975
Consumer & Other [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	7,142	6,705	6,816
Consumer & Other [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	0	0	0
Consumer & Other [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	170	208	159
Leases [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	85,177	71,721	70,885
Leases [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	82,889	71,721	70,885
Leases [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	2,288	0	0
Leases [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans & leases	$ 0	$ 0	$ 0

XML

Loans & Leases and Allowance for Credit Losses, Aging Analysis of Loan Portfolio by the Time Past Due (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	$ 0	$ 0	$ 0
Nonaccrual	4	3,074	3,075
Total Past Due	23	3,084	4,063
Current	2,216,756	2,174,517	2,075,607
Total Loans & Leases	2,216,779	2,177,601	2,079,670
30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	16	10	5
60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	3	0	983
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	0	0	0
Nonaccrual	0	0	998
Total Past Due	0	0	998
Current	683,037	668,046	626,116
Total Loans & Leases	683,037	668,046	627,114
Commercial Real Estate [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Commercial Real Estate [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Agricultural Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	0	0	0
Nonaccrual	0	1,304	322
Total Past Due	0	1,304	1,305
Current	470,738	466,381	438,667
Total Loans & Leases	470,738	467,685	439,972
Agricultural Real Estate [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Agricultural Real Estate [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	983
Real Estate Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	0	0	0
Nonaccrual	0	0	0
Total Past Due	0	0	0
Current	162,167	176,462	175,045
Total Loans & Leases	162,167	176,462	175,045
Real Estate Construction [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Real Estate Construction [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Residential 1st Mortgages [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	0	0	0
Nonaccrual	0	95	55
Total Past Due	0	95	55
Current	257,920	242,152	238,321
Total Loans & Leases	257,920	242,247	238,376
Residential 1st Mortgages [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Residential 1st Mortgages [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Home Equity Lines & Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	0	0	0
Nonaccrual	0	0	0
Total Past Due	0	0	0
Current	33,350	31,625	32,513
Total Loans & Leases	33,350	31,625	32,513
Home Equity Lines & Loans [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Home Equity Lines & Loans [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Agricultural [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	0	0	0
Nonaccrual	0	243	243
Total Past Due	0	243	243
Current	259,127	295,082	274,461
Total Loans & Leases	259,127	295,325	274,704
Agricultural [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Agricultural [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	0	0	0
Nonaccrual	0	1,425	1,450
Total Past Due	3	1,425	1,450
Current	257,948	216,152	212,636
Total Loans & Leases	257,951	217,577	214,086
Commercial [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Commercial [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	3	0	0
Consumer & Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	0	0	0
Nonaccrual	4	7	7
Total Past Due	20	17	12
Current	7,292	6,896	6,963
Total Loans & Leases	7,312	6,913	6,975
Consumer & Other [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	16	10	5
Consumer & Other [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Leases [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
90 Days and Still Accruing	0	0	0
Nonaccrual	0	0	0
Total Past Due	0	0	0
Current	85,177	71,721	70,885
Total Loans & Leases	85,177	71,721	70,885
Leases [Member] | 30-59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0	0
Leases [Member] | 60-89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 0	$ 0	$ 0

XML

Loans & Leases and Allowance for Credit Losses, Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
With no related allowance recorded [Abstract]
Recorded Investment	$ 505	$ 5,043	$ 505	$ 5,043	$ 4,963
Unpaid Principal Balance	563	5,093	563	5,093	5,016
Average Recorded Investment	1,028	4,642	1,969	4,535	4,705
Interest Income Recognized	5	40	15	121	158
With an allowance recorded [Abstract]
Recorded Investment	5,724	2,635	5,724	2,635	2,592
Unpaid Principal Balance	5,771	2,870	5,771	2,870	2,844
Related Allowance	721	790	721	790	768
Average Recorded Investment	5,748	2,616	5,251	2,578	2,588
Interest Income Recognized	49	10	159	38	47
Total [Abstract]
Recorded Investment	6,229	7,678	6,229	7,678	7,555
Unpaid Principal Balance	6,334	7,963	6,334	7,963	7,860
Related Allowance	721	790	721	790	768
Average Recorded Investment	6,776	7,258	7,220	7,113	7,293
Interest Income Recognized	54	50	174	159	205
Commercial Real Estate [Member]
With no related allowance recorded [Abstract]
Recorded Investment	106	1,074	106	1,074	184
Unpaid Principal Balance	107	1,071	107	1,071	184
Average Recorded Investment	107	575	121	248	354
Interest Income Recognized	2	2	9	6	7
With an allowance recorded [Abstract]
Recorded Investment	2,991		2,991
Unpaid Principal Balance	2,977		2,977
Related Allowance	384		384
Average Recorded Investment	3,000		2,509
Interest Income Recognized	25		80
Total [Abstract]
Related Allowance	384		384
Agricultural Real Estate [Member]
With no related allowance recorded [Abstract]
Recorded Investment	0	322	0	322
Unpaid Principal Balance	0	322	0	322
Average Recorded Investment	488	404	868	270
Interest Income Recognized	0	0	0	3
Residential 1st Mortgages [Member]
With no related allowance recorded [Abstract]
Recorded Investment	399	414	399	414	451
Unpaid Principal Balance	456	466	456	466	504
Average Recorded Investment	403	417	415	411	404
Interest Income Recognized	3	3	6	7	10
With an allowance recorded [Abstract]
Recorded Investment	519	430	519	430	430
Unpaid Principal Balance	574	471	574	471	469
Related Allowance	26	21	26	21	21
Average Recorded Investment	472	335	442	290	336
Interest Income Recognized	3	3	12	9	13
Total [Abstract]
Related Allowance	26	21	26	21	21
Home Equity Lines & Loans [Member]
With no related allowance recorded [Abstract]
Recorded Investment	0	0	0	0	0
Unpaid Principal Balance	0	0	0	0	0
Average Recorded Investment	0	0	21	339	181
Interest Income Recognized	0	0	0	0	0
With an allowance recorded [Abstract]
Recorded Investment	83	92	83	92	90
Unpaid Principal Balance	90	98	90	98	97
Related Allowance	4	5	4	5	5
Average Recorded Investment	67	93	76	142	123
Interest Income Recognized	0	1	2	3	4
Total [Abstract]
Related Allowance	4	5	4	5	5
Agricultural [Member]
With no related allowance recorded [Abstract]
Recorded Investment	0	191	0	191	0
Unpaid Principal Balance	0	191	0	191	0
Average Recorded Investment	30	192	40	193	144
Interest Income Recognized	0	2	0	5	5
With an allowance recorded [Abstract]
Recorded Investment	367	640	367	640	625
Unpaid Principal Balance	367	640	367	640	625
Related Allowance	69	137	69	137	128
Average Recorded Investment	499	644	588	529	581
Interest Income Recognized	7	6	21	18	22
Total [Abstract]
Related Allowance	69	137	69	137	128
Commercial [Member]
With no related allowance recorded [Abstract]
Recorded Investment	0	3,042	0	3,042	3,023
Unpaid Principal Balance	0	3,043	0	3,043	3,023
Average Recorded Investment	0	3,053	504	3,073	3,053
Interest Income Recognized	0	33	0	100	133
With an allowance recorded [Abstract]
Recorded Investment	1,760	1,466	1,760	1,466	1,441
Unpaid Principal Balance	1,752	1,648	1,752	1,648	1,640
Related Allowance	234	620	234	620	608
Average Recorded Investment	1,696	1,536	1,624	1,599	1,536
Interest Income Recognized	14	0	44	8	8
Total [Abstract]
Related Allowance	234	620	234	620	608
Consumer & Other [Member]
With no related allowance recorded [Abstract]
Recorded Investment		0		0
Unpaid Principal Balance		0		0
Average Recorded Investment		1		1
Interest Income Recognized		0		0
With an allowance recorded [Abstract]
Recorded Investment	4	7	4	7	6
Unpaid Principal Balance	11	13	11	13	13
Related Allowance	4	7	4	7	6
Average Recorded Investment	14	8	12	18	12
Interest Income Recognized	0	0	0	0	0
Total [Abstract]
Related Allowance	$ 4	$ 7	$ 4	$ 7	$ 6

XML

Loans & Leases and Allowance for Credit Losses, Loans by Class Modified as Troubled Debt Restructured Loans (Details) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2017 USD ($) Loan	Sep. 30, 2016 USD ($) Loan	Sep. 30, 2017 USD ($) Loan	Sep. 30, 2016 USD ($) Loan	Dec. 31, 2016 USD ($) Loan
Financing Receivable, Modifications [Line Items]
Specific reserves	$ 721	$ 758	$ 721	$ 758	$ 736
Troubled debt restructured loans	6,200	6,100	6,200	6,100	5,900
Commitments to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings	$ 0	$ 0	$ 0	$ 0	$ 0
Loans by class modified as troubled debt restructured loans [Abstract]
Number of Loans | Loan	4	1	4	4	5
Pre-Modification Outstanding Recorded Investment	$ 282	$ 192	$ 282	$ 594	$ 706
Post-Modification Outstanding Recorded Investment	282	192	282	567	679
Increase (decrease) in allowance for loan losses due to TDR	$ 13	0	$ 13	0	0
TDR's charge-offs		$ 0		$ 27	$ 27
Number of loans modified as troubled debt restructurings with subsequent payment defaults | Loan	0	0	0	0	0
Threshold period after which loan is considered to be in payment default			90 days
Stated Interest Rate Reduction [Member]
Financing Receivable, Modifications [Line Items]
Period of modifications			5 years	5 years	5 years
Extended Maturity [Member]
Financing Receivable, Modifications [Line Items]
Period of modifications				10 years	10 years
Extended Maturity [Member] | Minimum [Member]
Financing Receivable, Modifications [Line Items]
Period of modifications			7 years
Extended Maturity [Member] | Maximum [Member]
Financing Receivable, Modifications [Line Items]
Period of modifications			10 years
Performing [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructured loans	$ 6,200	$ 4,600	$ 6,200	$ 4,600	$ 4,500
Commercial Real Estate [Member]
Loans by class modified as troubled debt restructured loans [Abstract]
Number of Loans | Loan					1
Pre-Modification Outstanding Recorded Investment					$ 112
Post-Modification Outstanding Recorded Investment					$ 112
Residential 1st Mortgages [Member]
Loans by class modified as troubled debt restructured loans [Abstract]
Number of Loans | Loan	1	1	1	2	2
Pre-Modification Outstanding Recorded Investment	$ 112	$ 192	$ 112	$ 289	$ 289
Post-Modification Outstanding Recorded Investment	$ 112	$ 192	$ 112	$ 281	$ 281
Home Equity Lines & Loans [Member]
Loans by class modified as troubled debt restructured loans [Abstract]
Number of Loans | Loan	1	0	1	2	2
Pre-Modification Outstanding Recorded Investment	$ 32	$ 0	$ 32	$ 305	$ 305
Post-Modification Outstanding Recorded Investment	$ 32	$ 0	$ 32	$ 286	$ 286
Commercial [Member]
Loans by class modified as troubled debt restructured loans [Abstract]
Number of Loans | Loan	2		2
Pre-Modification Outstanding Recorded Investment	$ 138		$ 138
Post-Modification Outstanding Recorded Investment	$ 138		$ 138

XML

Fair Value Measurements, Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands		9 Months Ended		12 Months Ended
		Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Percentage of selling costs		10.00%
Available-for-Sale Securities		$ 456,323	$ 358,857	$ 448,263
Gains (losses) for assets categorized as Level 3 assets		0	0	0
Transfer into Level 3		0	0	0
Transfer out of Level 3		0	0	0
Government Agency & Government-Sponsored Entities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		3,169	83,293	3,241
US Treasury Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		144,410	85,681	134,428
US Govt SBA [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		31,691		36,314
Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities	[1]	276,043	188,873	273,270
Other [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		1,010	1,010	1,010
Significant Unobservable Inputs (Level 3) [Member] | SBA Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		500	500	500
Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		456,323	358,857	448,263
Recurring [Member] | Government Agency & Government-Sponsored Entities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		3,169	83,293	3,241
Recurring [Member] | US Treasury Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		144,410	85,681	134,428
Recurring [Member] | US Govt SBA [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		31,691		36,314
Recurring [Member] | Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		276,043	188,873	273,270
Recurring [Member] | Other [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		1,010	1,010	1,010
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		144,610	85,881	134,628
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Government Agency & Government-Sponsored Entities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0	0	0
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | US Treasury Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		144,410	85,681	134,428
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | US Govt SBA [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0		0
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0	0	0
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		200	200	200
Recurring [Member] | Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		311,213	272,476	313,135
Recurring [Member] | Other Observable Inputs (Level 2) [Member] | Government Agency & Government-Sponsored Entities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		3,169	83,293	3,241
Recurring [Member] | Other Observable Inputs (Level 2) [Member] | US Treasury Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0	0	0
Recurring [Member] | Other Observable Inputs (Level 2) [Member] | US Govt SBA [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		31,691		36,314
Recurring [Member] | Other Observable Inputs (Level 2) [Member] | Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		276,043	188,873	273,270
Recurring [Member] | Other Observable Inputs (Level 2) [Member] | Other [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		310	310	310
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		500	500	500
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Government Agency & Government-Sponsored Entities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0	0	0
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | US Treasury Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0	0	0
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | US Govt SBA [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0		0
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Mortgage Backed Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		0	0	0
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Other [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-Sale Securities		$ 500	$ 500	$ 500

[1] All Mortgage Backed Securities consist of securities collateralized by residential real estate and were issued by an agency or government sponsored entity of the U.S. government.

XML

Fair Value Measurements, Assets or Liabilities Measured at Fair Value on a Non-recurring Basis (Details) - Nonrecurring [Member] - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	$ 4,980	$ 1,893	$ 1,930
Other Real Estate	873	3,745	785
Total Assets Measured at Fair Value On a Non-Recurring Basis	5,853	5,638	2,715
Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	2,594
Residential 1st Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	491	480	496
Home Equity Lines and Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	78	83	84
Other Real Estate		785	785
Agricultural [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	298	497	503
Commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	1,519	833	847
Real Estate Construction [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate	873	2,960
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Other Real Estate	0	0	0
Total Assets Measured at Fair Value On a Non-Recurring Basis	0	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Residential 1st Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Home Equity Lines and Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Other Real Estate		0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Agricultural [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Real Estate Construction [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate	0	0
Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Other Real Estate	0	0	0
Total Assets Measured at Fair Value On a Non-Recurring Basis	0	0	0
Other Observable Inputs (Level 2) [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0
Other Observable Inputs (Level 2) [Member] | Residential 1st Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Other Observable Inputs (Level 2) [Member] | Home Equity Lines and Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Other Real Estate		0	0
Other Observable Inputs (Level 2) [Member] | Agricultural [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Other Observable Inputs (Level 2) [Member] | Commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	0	0	0
Other Observable Inputs (Level 2) [Member] | Real Estate Construction [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate	0	0
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	4,980	1,893	1,930
Other Real Estate	873	3,745	785
Total Assets Measured at Fair Value On a Non-Recurring Basis	5,853	5,638	2,715
Significant Unobservable Inputs (Level 3) [Member] | Commercial Real Estate [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	2,594
Significant Unobservable Inputs (Level 3) [Member] | Residential 1st Mortgage [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	491	480	496
Significant Unobservable Inputs (Level 3) [Member] | Home Equity Lines and Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	78	83	84
Other Real Estate		785	785
Significant Unobservable Inputs (Level 3) [Member] | Agricultural [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	298	497	503
Significant Unobservable Inputs (Level 3) [Member] | Commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Loans	1,519	833	$ 847
Significant Unobservable Inputs (Level 3) [Member] | Real Estate Construction [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate	$ 873	$ 2,960

XML

Fair Value Measurements, Quantitative Information (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Impaired Loans [Member] | Commercial Real Estate [Member] | Income Approach [Member]
Quantitative Information [Abstract]
Fair value	$ 2,594
Unobservable inputs	Discount Rate
Impaired Loans [Member] | Commercial Real Estate [Member] | Income Approach [Member] | Minimum [Member]
Quantitative Information [Abstract]
Discount rate	3.25%
Impaired Loans [Member] | Commercial Real Estate [Member] | Income Approach [Member] | Maximum [Member]
Quantitative Information [Abstract]
Discount rate	3.25%
Impaired Loans [Member] | Commercial Real Estate [Member] | Income Approach [Member] | Weighted Average [Member]
Quantitative Information [Abstract]
Discount rate	3.25%
Impaired Loans [Member] | Residential 1st Mortgage [Member] | Sales Comparison Approach [Member]
Quantitative Information [Abstract]
Fair value	$ 491
Unobservable inputs	Adjustment for Difference Between Comparable Sales
Impaired Loans [Member] | Residential 1st Mortgage [Member] | Sales Comparison Approach [Member] | Minimum [Member]
Quantitative Information [Abstract]
Adjustment for difference between comparable sales	1.00%
Impaired Loans [Member] | Residential 1st Mortgage [Member] | Sales Comparison Approach [Member] | Maximum [Member]
Quantitative Information [Abstract]
Adjustment for difference between comparable sales	4.00%
Impaired Loans [Member] | Residential 1st Mortgage [Member] | Sales Comparison Approach [Member] | Weighted Average [Member]
Quantitative Information [Abstract]
Adjustment for difference between comparable sales	3.00%
Impaired Loans [Member] | Home Equity Lines and Loans [Member] | Sales Comparison Approach [Member]
Quantitative Information [Abstract]
Fair value	$ 78
Unobservable inputs	Adjustment for Difference Between Comparable Sales
Impaired Loans [Member] | Home Equity Lines and Loans [Member] | Sales Comparison Approach [Member] | Minimum [Member]
Quantitative Information [Abstract]
Adjustment for difference between comparable sales	1.00%
Impaired Loans [Member] | Home Equity Lines and Loans [Member] | Sales Comparison Approach [Member] | Maximum [Member]
Quantitative Information [Abstract]
Adjustment for difference between comparable sales	2.00%
Impaired Loans [Member] | Home Equity Lines and Loans [Member] | Sales Comparison Approach [Member] | Weighted Average [Member]
Quantitative Information [Abstract]
Adjustment for difference between comparable sales	2.00%
Impaired Loans [Member] | Agricultural [Member] | Income Approach [Member]
Quantitative Information [Abstract]
Fair value	$ 298
Unobservable inputs	Discount Rate
Impaired Loans [Member] | Agricultural [Member] | Income Approach [Member] | Minimum [Member]
Quantitative Information [Abstract]
Discount rate	7.50%
Impaired Loans [Member] | Agricultural [Member] | Income Approach [Member] | Maximum [Member]
Quantitative Information [Abstract]
Discount rate	7.50%
Impaired Loans [Member] | Agricultural [Member] | Income Approach [Member] | Weighted Average [Member]
Quantitative Information [Abstract]
Discount rate	7.50%
Impaired Loans [Member] | Commercial [Member] | Income Approach [Member]
Quantitative Information [Abstract]
Fair value	$ 1,519
Unobservable inputs	Discount Rate
Impaired Loans [Member] | Commercial [Member] | Income Approach [Member] | Minimum [Member]
Quantitative Information [Abstract]
Discount rate	2.00%
Impaired Loans [Member] | Commercial [Member] | Income Approach [Member] | Maximum [Member]
Quantitative Information [Abstract]
Discount rate	9.00%
Impaired Loans [Member] | Commercial [Member] | Income Approach [Member] | Weighted Average [Member]
Quantitative Information [Abstract]
Discount rate	3.00%
Other Real Estate [Member] | Real Estate Construction [Member] | Sales Comparison Approach [Member]
Quantitative Information [Abstract]
Fair value	$ 873
Unobservable inputs	Adjustment for Difference Between Comparable Sales
Other Real Estate [Member] | Real Estate Construction [Member] | Sales Comparison Approach [Member] | Minimum [Member]
Quantitative Information [Abstract]
Adjustment for difference between comparable sales	10.00%
Other Real Estate [Member] | Real Estate Construction [Member] | Sales Comparison Approach [Member] | Maximum [Member]
Quantitative Information [Abstract]
Adjustment for difference between comparable sales	10.00%
Other Real Estate [Member] | Real Estate Construction [Member] | Sales Comparison Approach [Member] | Weighted Average [Member]
Quantitative Information [Abstract]
Adjustment for difference between comparable sales	10.00%

XML

Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands		Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
Assets [Abstract]
Available-for-Sale Securities		$ 456,323	$ 448,263	$ 358,857
Investment Securities Held-to-Maturity		56,291	58,408	60,454
Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Investment Securities Held-to-Maturity		56,291	58,408	60,454
Government Agency & Government-Sponsored Entities [Member]
Assets [Abstract]
Available-for-Sale Securities		3,169	3,241	83,293
U.S. Govt SBA [Member]
Assets [Abstract]
Available-for-Sale Securities		31,691	36,314
U.S. Treasury Notes [Member]
Assets [Abstract]
Available-for-Sale Securities		144,410	134,428	85,681
Mortgage Backed Securities [Member]
Assets [Abstract]
Available-for-Sale Securities	[1]	276,043	273,270	188,873
Other [Member]
Assets [Abstract]
Available-for-Sale Securities		1,010	1,010	1,010
Carrying Amount [Member]
Assets [Abstract]
Cash and Cash Equivalents		193,270	98,960	99,303
Available-for-Sale Securities		456,323	448,263	358,857
Investment Securities Held-to-Maturity		55,542	58,109	58,905
FHLB Stock		10,342	8,872	8,872
Loans & Leases, Net of Deferred Fees & Allowance		2,166,035	2,129,682	2,035,224
Accrued Interest Receivable		11,498	10,047	10,116
Liabilities [Abstract]
Deposits		2,709,427	2,581,711	2,355,637
Subordinated Debentures		10,310	10,310	10,310
Accrued Interest Payable		939	852	681
Carrying Amount [Member] | Demand [Member]
Liabilities [Abstract]
Deposits		767,162	756,236	672,351
Carrying Amount [Member] | Interest Bearing Transaction [Member]
Liabilities [Abstract]
Deposits		564,904	495,063	433,220
Carrying Amount [Member] | Savings and Money Market [Member]
Liabilities [Abstract]
Deposits		827,588	760,119	702,441
Carrying Amount [Member] | Time [Member]
Liabilities [Abstract]
Deposits		549,773	570,293	547,625
Carrying Amount [Member] | Commercial Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		671,940	656,936	616,992
Carrying Amount [Member] | Agricultural Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		459,342	458,235	430,601
Carrying Amount [Member] | Real Estate Construction [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		159,417	173,239	172,587
Carrying Amount [Member] | Residential 1st Mortgages [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		256,923	241,382	237,547
Carrying Amount [Member] | Home Equity Lines and Loans [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		31,089	29,485	30,318
Carrying Amount [Member] | Agricultural [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		251,767	287,944	268,482
Carrying Amount [Member] | Commercial [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		248,891	209,062	206,486
Carrying Amount [Member] | Consumer & Other [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		7,103	6,713	6,796
Carrying Amount [Member] | Leases [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		81,983	68,135	67,341
Carrying Amount [Member] | Unallocated Allowance [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		(2,420)	(1,449)	(1,926)
Carrying Amount [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Investment Securities Held-to-Maturity		55,542	58,109	58,905
Carrying Amount [Member] | Government Agency & Government-Sponsored Entities [Member]
Assets [Abstract]
Available-for-Sale Securities		3,169	3,241	83,293
Carrying Amount [Member] | U.S. Govt SBA [Member]
Assets [Abstract]
Available-for-Sale Securities		31,691	36,314
Carrying Amount [Member] | U.S. Treasury Notes [Member]
Assets [Abstract]
Available-for-Sale Securities		144,410	134,428	85,681
Carrying Amount [Member] | Mortgage Backed Securities [Member]
Assets [Abstract]
Available-for-Sale Securities		276,043	273,270	188,873
Carrying Amount [Member] | Other [Member]
Assets [Abstract]
Available-for-Sale Securities		1,010	1,010	1,010
Estimated Fair Value [Member]
Assets [Abstract]
Cash and Cash Equivalents		193,270	98,960	99,303
Available-for-Sale Securities		456,323	448,263	358,857
Investment Securities Held-to-Maturity		56,292	58,408	60,454
Loans & Leases, Net of Deferred Fees & Allowance		2,148,524	2,107,060	2,035,353
Accrued Interest Receivable		11,498	10,047	10,116
Liabilities [Abstract]
Deposits		2,707,450	2,580,601	2,355,157
Subordinated Debentures		6,589	6,578	6,606
Accrued Interest Payable		939	852	681
Estimated Fair Value [Member] | Demand [Member]
Liabilities [Abstract]
Deposits		767,162	756,236	672,351
Estimated Fair Value [Member] | Interest Bearing Transaction [Member]
Liabilities [Abstract]
Deposits		564,904	495,063	433,220
Estimated Fair Value [Member] | Savings and Money Market [Member]
Liabilities [Abstract]
Deposits		827,588	760,119	702,441
Estimated Fair Value [Member] | Time [Member]
Liabilities [Abstract]
Deposits		547,796	569,183	547,145
Estimated Fair Value [Member] | Commercial Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		665,566	651,877	620,655
Estimated Fair Value [Member] | Agricultural Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		446,684	444,393	422,056
Estimated Fair Value [Member] | Real Estate Construction [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		159,131	172,682	172,358
Estimated Fair Value [Member] | Residential 1st Mortgages [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		258,256	241,174	241,703
Estimated Fair Value [Member] | Home Equity Lines and Loans [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		31,869	30,495	31,397
Estimated Fair Value [Member] | Agricultural [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		249,995	286,074	267,101
Estimated Fair Value [Member] | Commercial [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		247,344	207,215	205,769
Estimated Fair Value [Member] | Consumer & Other [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		7,067	6,706	6,832
Estimated Fair Value [Member] | Leases [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		85,032	67,893	69,408
Estimated Fair Value [Member] | Unallocated Allowance [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		(2,420)	(1,449)	(1,926)
Estimated Fair Value [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Investment Securities Held-to-Maturity		56,292	58,408	60,454
Estimated Fair Value [Member] | Government Agency & Government-Sponsored Entities [Member]
Assets [Abstract]
Available-for-Sale Securities		3,169	3,241	83,293
Estimated Fair Value [Member] | U.S. Govt SBA [Member]
Assets [Abstract]
Available-for-Sale Securities		31,691	36,314
Estimated Fair Value [Member] | U.S. Treasury Notes [Member]
Assets [Abstract]
Available-for-Sale Securities		144,410	134,428	85,681
Estimated Fair Value [Member] | Mortgage Backed Securities [Member]
Assets [Abstract]
Available-for-Sale Securities		276,043	273,270	188,873
Estimated Fair Value [Member] | Other [Member]
Assets [Abstract]
Available-for-Sale Securities		1,010	1,010	1,010
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets [Abstract]
Cash and Cash Equivalents		193,270	98,960	99,303
Available-for-Sale Securities		144,610	134,628	85,881
Investment Securities Held-to-Maturity		0	0	0
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Accrued Interest Receivable		0	0	0
Liabilities [Abstract]
Deposits		2,159,654	2,011,418	1,808,012
Subordinated Debentures		0	0	0
Accrued Interest Payable		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Demand [Member]
Liabilities [Abstract]
Deposits		767,162	756,236	672,351
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Interest Bearing Transaction [Member]
Liabilities [Abstract]
Deposits		564,904	495,063	433,220
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Savings and Money Market [Member]
Liabilities [Abstract]
Deposits		827,588	760,119	702,441
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Time [Member]
Liabilities [Abstract]
Deposits		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Commercial Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Agricultural Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Real Estate Construction [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Residential 1st Mortgages [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Home Equity Lines and Loans [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Agricultural [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Commercial [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Consumer & Other [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Leases [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Unallocated Allowance [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Investment Securities Held-to-Maturity		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Government Agency & Government-Sponsored Entities [Member]
Assets [Abstract]
Available-for-Sale Securities		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Govt SBA [Member]
Assets [Abstract]
Available-for-Sale Securities		0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Treasury Notes [Member]
Assets [Abstract]
Available-for-Sale Securities		144,410	134,428	85,681
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Mortgage Backed Securities [Member]
Assets [Abstract]
Available-for-Sale Securities		0	0	0
Estimated Fair Value [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Other [Member]
Assets [Abstract]
Available-for-Sale Securities		200	200	200
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member]
Assets [Abstract]
Cash and Cash Equivalents		0	0	0
Available-for-Sale Securities		311,213	313,135	272,476
Investment Securities Held-to-Maturity		39,254	40,415	42,675
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Accrued Interest Receivable		11,498	10,047	10,116
Liabilities [Abstract]
Deposits		547,796	569,183	547,145
Subordinated Debentures		6,589	6,578	6,606
Accrued Interest Payable		939	852	681
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Demand [Member]
Liabilities [Abstract]
Deposits		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Interest Bearing Transaction [Member]
Liabilities [Abstract]
Deposits		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Savings and Money Market [Member]
Liabilities [Abstract]
Deposits		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Time [Member]
Liabilities [Abstract]
Deposits		547,796	569,183	547,145
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Commercial Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Agricultural Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Real Estate Construction [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Residential 1st Mortgages [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Home Equity Lines and Loans [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Agricultural [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Commercial [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Consumer & Other [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Leases [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Unallocated Allowance [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Investment Securities Held-to-Maturity		39,254	40,415	42,675
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Government Agency & Government-Sponsored Entities [Member]
Assets [Abstract]
Available-for-Sale Securities		3,169	3,241	83,293
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | U.S. Govt SBA [Member]
Assets [Abstract]
Available-for-Sale Securities		31,691	36,314
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | U.S. Treasury Notes [Member]
Assets [Abstract]
Available-for-Sale Securities		0	0	0
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Mortgage Backed Securities [Member]
Assets [Abstract]
Available-for-Sale Securities		276,043	273,270	188,873
Estimated Fair Value [Member] | Other Observable Inputs (Level 2) [Member] | Other [Member]
Assets [Abstract]
Available-for-Sale Securities		310	310	310
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member]
Assets [Abstract]
Cash and Cash Equivalents		0	0	0
Available-for-Sale Securities		500	500	500
Investment Securities Held-to-Maturity		17,037	17,993	17,779
Loans & Leases, Net of Deferred Fees & Allowance		2,148,524	2,107,060	2,035,353
Accrued Interest Receivable		0	0	0
Liabilities [Abstract]
Deposits		0	0	0
Subordinated Debentures		0	0	0
Accrued Interest Payable		0	0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Demand [Member]
Liabilities [Abstract]
Deposits		0	0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Interest Bearing Transaction [Member]
Liabilities [Abstract]
Deposits		0	0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Savings and Money Market [Member]
Liabilities [Abstract]
Deposits		0	0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Time [Member]
Liabilities [Abstract]
Deposits		0	0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Commercial Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		665,566	651,877	620,655
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Agricultural Real Estate [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		446,684	444,393	422,056
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Real Estate Construction [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		159,131	172,682	172,358
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Residential 1st Mortgages [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		258,256	241,174	241,703
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Home Equity Lines and Loans [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		31,869	30,495	31,397
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Agricultural [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		249,995	286,074	267,101
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Commercial [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		247,344	207,215	205,769
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Consumer & Other [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		7,067	6,706	6,832
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Leases [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		85,032	67,893	69,408
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Unallocated Allowance [Member]
Assets [Abstract]
Loans & Leases, Net of Deferred Fees & Allowance		(2,420)	(1,449)	(1,926)
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Obligations of States and Political Subdivisions [Member]
Assets [Abstract]
Investment Securities Held-to-Maturity		17,037	17,993	17,779
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Government Agency & Government-Sponsored Entities [Member]
Assets [Abstract]
Available-for-Sale Securities		0	0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | U.S. Govt SBA [Member]
Assets [Abstract]
Available-for-Sale Securities		0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | U.S. Treasury Notes [Member]
Assets [Abstract]
Available-for-Sale Securities		0	0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Mortgage Backed Securities [Member]
Assets [Abstract]
Available-for-Sale Securities		0	0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Other [Member]
Assets [Abstract]
Available-for-Sale Securities		$ 500	$ 500	$ 500

[1] All Mortgage Backed Securities consist of securities collateralized by residential real estate and were issued by an agency or government sponsored entity of the U.S. government.

XML

Dividends and Basic Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands				3 Months Ended		9 Months Ended
	Jul. 01, 2017	May 09, 2017	Jul. 01, 2016	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Dividends Payable [Line Items]
Cash dividends declared per share of common stock (in dollars per share)						$ 6.75	$ 6.55
Earnings per share for the period [Abstract]
Net Income				$ 8,581	$ 7,538	$ 24,589	$ 22,042
Weighted Average Number of Common Shares Outstanding (in shares)				810,291	792,387	809,002	792,223
Basic Earnings Per Common Share Amount (in dollars per share)				$ 10.59	$ 9.51	$ 30.39	$ 27.82
Mid-Year Cash Dividend Declared in 2017 [Member]
Dividends Payable [Line Items]
Dividends payable, date declared						May 09, 2017
Cash dividends declared per share of common stock (in dollars per share)		$ 6.75
Percentage increase in cash dividend per share		3.10%
Cash dividends paid per share of common stock (in dollars per share)	$ 6.75
Dividends payable, date paid	Jul. 01, 2017
Dividends payable, date of record						Jun. 09, 2017
Mid-Year Cash Dividend Declared in 2016 [Member]
Dividends Payable [Line Items]
Cash dividends paid per share of common stock (in dollars per share)			$ 6.55
Dividends payable, date paid						Jul. 01, 2016

XML

Shareholders' Equity (Details) - Common Stock [Member] - $ / shares	3 Months Ended
	Sep. 30, 2017	Mar. 31, 2017	Mar. 31, 2016
Class of Stock [Line Items]
Issuance of common stock (in shares)	4,975	4,975	1,600
Per share price of shares issued (in dollars per share)			$ 525.00
Minimum [Member]
Class of Stock [Line Items]
Per share price of shares issued (in dollars per share)	$ 590.00	$ 590.00
Maximum [Member]
Class of Stock [Line Items]
Per share price of shares issued (in dollars per share)	$ 595.00	$ 595.00