10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2014

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 0-14492

FARMERS & MERCHANTS BANCORP, INC.

OHIO	34-1469491
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

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

Registrant’s telephone number, including area code (419) 446-2501

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
None	None

Securities registered pursuant to Section 12(g) of the Act:

Common shares without par value

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    Yes  ¨    No  x

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 the definitions 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	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

As of June 30, 2014, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $113,061,326.

As of February 25, 2015, the Registrant had 5,200,000 shares of common stock issued of which 4,627,338 shares are outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of Form 10-K – Portions of the definitive Proxy Statement for the 2015 Annual Meeting of Shareholders of Farmers & Merchants Bancorp, Inc.

FARMERS & MERCHANTS BANCORP, INC.

TABLE OF CONTENTS

Form 10-K Items		PAGE
Item 1.	Business		3-13
Item 1a.	Risk Factors		13-15
Item 1b.	Unresolved Staff Comments		15
Item 2.	Properties		15-16
Item 3.	Legal Proceedings		16
Item 4.	Mine Safety Disclosures		16
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters		17-19
Item 6.	Selected Financial Data		19-20
Item 7.	Management Discussion and Analysis of Financial Condition and Results of Operations		20-43
Item 7a.	Quantitative and Qualitative Disclosures About Market Risk		43-44
Item 8.	Financial Statements and Supplementary Data		44-91
Item 9.	Changes In and Disagreements on Accounting and Financial Disclosure		91
Item9a.	Controls and Procedures		92
Item 9b.	Other Information		92
Item 10.	Directors and Executive Officers of the Registrant		93-94
Item 11.	Executive Compensation		95
Item 12.	Security Ownership of Certain Beneficial Owners and Management		95
Item 13.	Certain Relationships and Related Transactions		95
Item 14.	Principal Accountant Fees and Services		95
Item 15.	Exhibits, Financial Schedules and Reports on Form 8-K		96-97

Signatures		98
Exhibit 21	Subsidiaries of Farmers & Merchants Bancorp, Inc.
Exhibit 31.	Certifications Under Section 302
Exhibit 32.	Certifications Under Section 906
Exhibit 101.INS	XBRL Instance Document (1)
Exhibit 101.SCH	XBRL Taxonomy Extension Schema Document (1)
Exhibit 101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (1)
Exhibit 101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (1)
Exhibit 101.LAB	XBRL Taxonomy Extension Label Linkbase Document (1)
Exhibit 101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document (1)

** The following materials from Farmers & Merchants Bancorp, Inc. on Form 10-K for the year ended December 31, 2014, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Income and Comprehensive Income; (iii) the Consolidated Statements of Cash Flows and (iv) Notes to Consolidated Financial Statements, tagged as blocks of text.

Total Pages: 98

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Forward Looking Statements

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

PART 1.

ITEM 1. BUSINESS

General

Farmers & Merchants Bancorp, Inc. (Company) is a bank holding company incorporated under the laws of Ohio in 1985 and elected to become a financial holding company under the Federal Reserve in 2014. Our primary subsidiary, The Farmers & Merchants State Bank (Bank) is a community bank operating in Northwest Ohio since 1897. We report our financial condition and net income on a consolidated basis and we report only one segment.

Our executive offices are located at 307 North Defiance Street, Archbold, Ohio 43502, and our telephone number is (419) 446-2501.

For a discussion of the general development of the Company’s business throughout 2014, please see the portion of Management’s Discussion and Analysis of Financial Condition and Results of Operations captioned “2014 in Review”.

Nature of Activities

The local economies of Northwest Ohio and Northeast Indiana continued to improve throughout 2014. Business profits increased in the markets served by the Company. While prices on agricultural crops reduced, our farm customers were still able to realize stable profits through their use of crop insurance hedges, and securing prices and cost early in the year. Overall, the local economy is gaining momentum heading into 2015.

The Farmers & Merchants State Bank engages in general commercial banking business. Its activities include commercial, agricultural and residential mortgage, consumer and credit card lending activities. Because the Bank’s offices are located in Northwest Ohio and Northeast Indiana, a substantial amount of the loan portfolio is comprised of loans made to customers in the farming industry for such things as farm land, farm equipment, livestock and operating loans for seed, fertilizer, and feed. Other types of lending activities include loans for home improvements,

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and loans for such items as autos, trucks, recreational vehicles, motorcycles. With the expansion into newer market areas, the most recent increases in loan activity have been in commercial real estate, providing operation lines of credit and machinery purchases.

The Bank also provides checking account services, as well as savings and time deposit services such as certificates of deposits. In addition, ATM’s (automated teller machines) are provided at most branch locations along with other independent locations including major employers and hospitals in the market area. The Bank has custodial services for IRA’s (Individual Retirement Accounts) and HSA’s (Health Savings Accounts). The Bank provides on-line banking access for consumer and business customers. For consumers, this includes bill-pay and on-line statement opportunities. For business customers, it provides the option of electronic transaction origination such as wire and ACH file transmittal. In addition the Bank offers remote deposit capture or electronic deposit processing. Mobile banking was added in 2012 and has been widely accepted and used by consumers.

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

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

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

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

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

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

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

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

Industrial Development Bonds (IDB): Funds for public improvements in the Bank’s service area. Repayment ability is based on the continuance of the taxation revenue as the source of repayment.

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All loan requests are reviewed as to credit worthiness and are subject to the Bank’s underwriting guidelines as to secured versus unsecured credit. Secured loans are in turn subject to loan to value (LTV) requirements based on collateral types as set forth in the Bank’s Loan Policy. In addition, credit scores of principal borrowers are reviewed and an approved exception from an additional officer is required should a credit score not meet the Bank’s Loan Policy guidelines.

Consumer Loans:

Maximum loan to value (LTV) for cars, trucks and light trucks vary from 90% to 110% depending on whether direct or indirect. Loans above 100% are generally due to additional charges for extended warranties and/or insurance coverage periods of lost wages or death.

Boats, campers, motorcycles, RV’s and Motor Coaches range from 80%-90% based on age of vehicle.

1^st or 2^nd mortgages on 1-4 family homes range from 75%-90% with “in-house” first real estate mortgages requiring private mortgage insurance on those exceeding 80% LTV.

Raw land LTV maximum ranges from 65%-75% depending on whether or not the property has been improved.

Commercial/Agriculture/Real Estate:

Maximum LTVs range from 70%-80% depending on type.

Accounts Receivable:

Up 80% LTV

Inventory:

Agriculture:

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

Commercial:

Maximum LTV of 50% on raw and finished goods

Used vehicles, new recreational vehicles and manufactured homes not to exceed (NTE) 80% LTV

Equipment:

New not to exceed 80% of invoice, used NTE 50% of listed book or 75% of appraised value

Restaurant equipment up to 35% of market value

Heavy trucks, titled trailers up to NTE 75% LTV and aircraft up to 75% of appraised value

We also provide checking account services, as well as savings and time deposit services such as certificates of deposits. In addition, ATM’s (automated teller machines) are provided at our Ohio offices in Archbold, Wauseon, Stryker, West Unity, Bryan, Delta, Napoleon, Montpelier, Swanton, Defiance, Hicksville, Perrysburg, Waterville, Custar, and Sylvania along with ones at our Auburn and Angola, Indiana offices. Two ATM’s are located at Sauder Woodworking Co., Inc., a major employer in Archbold. Additional locations in Ohio are at Northwest State Community College, Archbold; Community Hospitals of Williams County, Bryan; Fairlawn Haven Wyse Commons, Archbold; R&H Restaurant, Fayette; Delta Eagles, Sauder Village, Archbold; Fulton County Health Center, Wauseon; downtown Defiance; and a mobile trailer ATM. In Indiana, four additional remote ATM’s are located at St. Joe; at Kaiser’s Supermarket and Therma-Tru in Butler; and at DeKalb Memorial Hospital in Auburn.

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

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

The Bank’s primary market includes communities located in the Ohio counties of Defiance, Fulton, Henry, Lucas, Williams, and Wood. The commercial banking business in this market is highly competitive, with approximately 17 other depository institutions currently doing business in the Bank’s primary market. In our banking activities, we compete directly with other commercial banks, credit unions, farm credit services, and savings and loan institutions in each of our operating localities. In a number of our locations, we compete against entities which are much larger than us. The primary factors in competing for loans and deposits are the rates charged as well as location and quality of the

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services provided. On December 31, 2007, the Bank acquired the Knisely Bank of Indiana, expanding its market with the addition of offices in Butler and Auburn, Indiana, both located in DeKalb County. An additional office was opened in the summer of 2008 in Angola, Indiana, located in Steuben County. On July 9, 2010 the Bank purchased a branch office in Hicksville, Ohio shortening the distance between our Ohio and Indiana offices. During 2013, the Bank opened an office in Waterville, Ohio and closed on a purchase in December of an office in Custar, Ohio. Both offices are a natural extension of the market area in Lucas and Wood counties that the Bank services. In the summer of 2014, the Bank opened an office in Sylvania, Ohio also situated in Lucas County.

At December 31, 2014, we had 260 full time equivalent employees. The employees are not represented by a collective bargaining unit. We provide our employees with a comprehensive benefit program, some of which are contributory. We consider our employee relations to be excellent.

Supervision and Regulation

General

The Company is a corporation organized under the laws of the State of Ohio. The business in which the Company and its subsidiaries are engaged is subject to extensive supervision, regulation and examination by various bank regulatory authorities. The supervision, regulation and examination to which the Company and its subsidiaries are subject are intended primarily for the protection of depositors and the deposit insurance funds that insure the deposits of banks, rather than for the protection of shareholders.

Several of the more significant regulatory provisions applicable to banks and bank holding companies to which the Company and its subsidiary are subject are discussed below, along with certain regulatory matters concerning the Company and its subsidiaries. To the extent that the following information describes statutory or regulatory provisions, it is qualified in its entirety by reference to the particular statutory provisions. Any change in applicable law or regulation may have a material effect on the business and prospects of the Company and its subsidiaries.

Regulatory Agencies

The Company is a financial holding company and is subject to inspection, examination and supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) pursuant to the Bank Holding Company Act of 1956, as amended. As a financial holding company, the Company is still subject to all the bank holding company regulations.

The Bank is an Ohio chartered commercial bank. It is subject to regulation and examination by both the Ohio Division of Financial Institutions (ODFI) and the Federal Deposit Insurance Corporation (FDIC).

The Captive is an insurance company incorporated in Nevada and regulated by the State of Nevada, Division of Insurance.

Holding Company Activities

As a bank holding company incorporated and doing business within the State of Ohio, the Company is subject to regulation and supervision under the Bank Holding Act of 1956, as amended (the “Act”). The Company is required to file with the Federal Reserve Board on quarterly basis information pursuant to the Act. The Federal Reserve Board may conduct examinations or inspections of the Company and its subsidiaries.

The Company is required to obtain prior approval from the Federal Reserve Board for the acquisition of more than five percent of the voting shares or substantially all of the assets of any bank or bank holding company. In addition, the Company is generally prohibited by the Act from acquiring direct or indirect ownership or control of more than five percent of the voting shares of any company which is not a bank or bank holding company and from engaging directly or indirectly in activities other than those of banking, managing or controlling banks or furnishing services to its subsidiaries. The Company may, however, subject to the prior approval of the Federal Reserve Board, engage in, or acquire shares of companies engaged in activities which are deemed by the Federal Reserve Board by order or by regulation to be so closely related to banking or managing and controlling a bank as to be a proper activity.

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On November 12, 1999, the Gramm-Leach-Bliley Act (the “GLB Act”) was enacted into law. The GLB Act made sweeping changes with respect to the permissible financial services which various types of financial institutions may now provide. The Glass-Steagall Act, which had generally prevented banks from affiliation with securities and insurance firms, was repealed. Pursuant to the GLB Act, bank holding companies may elect to become a “financial holding company,” provided that all of the depository institution subsidiaries of the bank holding company are “well capitalized” and “well managed” under applicable regulatory standards.

Under the GLB Act, a bank holding company that has elected to become a financial holding company may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature. Activities that are “financial in nature” include securities underwriting, dealing and market-making, sponsoring mutual funds and investment companies, insurance underwriting and agency, merchant banking, and activities that the Federal Reserve Board has determined to be closely related to banking. Federal Reserve Board approval is not required for the Company to acquire a company, other than a bank holding company, bank or savings association, engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the Federal Reserve Board. Prior Federal Reserve Board approval is required before the Company may acquire the beneficial ownership or control of more than 5% of the voting shares, or substantially all of the assets, of a bank holding company, bank or savings association. If any subsidiary bank of the Company ceases to be “well capitalized” or “well managed” under applicable regulatory standards, the Federal Reserve Board may, among other actions, order the Company to divest the subsidiary bank. Alternatively, the Company may elect to conform its activities to those permissible for a bank holding company that is not also a financial holding company. If any subsidiary bank of the Company receives a rating under the Community Reinvestment Act of 1977 of less than satisfactory, the Company will be prohibited from engaging in new activities or acquiring companies other than bank holding companies, banks or savings associations. The Company has not elected to become a financial holding company and has no current intention of making such an election.

Affiliate Transactions

Various governmental requirements, including Sections 23A and 23B of the Federal Reserve Act and Regulation W promulgated thereunder limit borrowings by holding companies and non-bank subsidiaries from affiliated insured depository institutions, and also limit various other transactions between holding companies and their non-bank subsidiaries, on the one hand, and their affiliated insured depository institutions on the other. Section 23A of the Federal Reserve Act also generally requires that an insured depository institution’s loan to its non-bank affiliates be secured, and Section 23B of the Federal Reserve Act generally requires that an insured depository institution’s transactions with its non-bank affiliates be on arms-length terms.

Interstate Banking and Branching

Under the Riegle-Neal Interstate Banking and Branching Efficiency Act (“Riegle-Neal”), subject to certain concentration limits and other requirements, adequately capitalized bank holding companies such as the Company are permitted to acquire banks and bank holding companies located in any state. Any bank that is a subsidiary of a bank holding company is permitted to receive deposits, renew time deposits, close loans, service loans and receive loan payments as an agent for any other bank subsidiary of that bank holding company. Banks are permitted to acquire branch offices outside their home states by merging with out-of-state banks, purchasing branches in other states and establishing de novo branch offices in other states. The ability of banks to acquire branch offices is contingent, however, on the host state having adopted legislation “opting in” to those provisions of Riegle-Neal. In addition, the ability of a bank to merge with a bank located in another state is contingent on the host state not having adopted legislation “opting out” of that provision of Riegle-Neal. The Company could from time to time use Riegle-Neal to acquire banks in additional states.

Control Acquisitions

The Change in Bank Control Act prohibits a person or group of persons from acquiring “control” of a bank holding company, unless the Federal Reserve Board has been notified and has not objected to the transaction. Under the rebuttable presumption established by the Federal Reserve Board, the acquisition of 10% or more of a class of voting stock of a bank holding company with a class of securities registered under Section 12 of the Exchange Act, such as the Company, would, under the circumstances set forth in the presumption, constitute acquisition of control of the bank holding company. In addition, a company is required to obtain the approval of the Federal Reserve Board under the Bank Holding Company Act before acquiring 25% (5% in the case of an acquirer that is a bank holding company) or more of any class of outstanding voting stock of a bank holding company, or otherwise obtaining control or a “controlling influence” over that bank holding company.

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Liability for Banking Subsidiaries

Under the current Federal Reserve Board policy, a bank holding company is expected to act as a source of financial and managerial strength to each of its subsidiary banks and to maintain resources adequate to support each subsidiary bank. This support may be required at times when the bank holding company may not have the resources to provide it. In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a U.S. federal bank regulatory agency to maintain the capital of a subsidiary bank would be assumed by the bankruptcy trustee and entitled to priority of payment. Any depository institution insured by the FDIC can be held liable for any loss incurred, or reasonably expected to be incurred, by the FDIC in connection with (1) the “default” of a commonly controlled FDIC-insured depository institution; or (2) any assistance provided by the FDIC to both a commonly controlled FDIC-insured depository institution “in danger of default.” The Bank is an FDIC-insured depository institution. If a default occurred with respect to the Bank, any capital loans to the Bank from its parent holding company would be subordinate in right of payment to payment of the Bank’s depositors and certain of its other obligations.

Regulatory Capital Requirements

The Company is required by the various regulatory authorities to maintain certain capital levels. Bank holding companies are required to maintain minimum levels of capital in accordance with Federal Reserve Board capital adequacy guidelines. If capital falls below minimum guideline levels, a bank holding company, among other things, may be denied approval to acquire or establish additional banks or non-bank businesses. The required capital levels and the Company’s capital position at December 31, 2013 and 2014 are summarized in the table included in Note 14 to the consolidated financial statements.

FDICIA

The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), and the regulations promulgated under FDICIA, among other things, established five capital categories for insured depository institutions-well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized-and requires U.S. federal bank regulatory agencies to implement systems for “prompt corrective action” for insured depository institutions that do not meet minimum capital requirements based on these categories. Unless a bank is well capitalized, it is subject to restrictions on its ability to offer brokered deposits and on certain other aspects of its operations. An undercapitalized bank must develop a capital restoration plan and its parent bank holding company must guarantee the bank’s compliance with the plan up to the lesser of 5% of the banks or thrift’s assets at the time it became undercapitalized and the amount needed to comply with the plan. As of December 31, 2014 the Bank was well capitalized pursuant to these prompt corrective action guidelines.

Dividend Restrictions

The ability of the Company to obtain funds for the payment of dividends and for other cash requirements will be largely dependent on the amount of dividends which may be declared by its banking subsidiary. Various U.S. federal statutory provisions limit the amount of dividends the Company’s banking subsidiary can pay to the Company without regulatory approval. In 2009, The Board of Governors of the Federal Reserve Division of Banking Supervision and Regulation issued SR09-4 regarding the safe and sound payment of dividends by bank holding companies. In addition, dividend payments by the Bank are limited to its retained earnings during the current year and its prior two years. See Note 15 to the consolidated financial statements for the actual amount.

Deposit Insurance Assessments

The deposits of the Bank are insured up to the regulatory limits set by the FDIC. The FDIC maintains the Deposit Insurance fund (“DIF”) by assessing depository institutions an insurance premium (assessment). The amount assessed to each institution is based on statutory factors that take into account the degree of risk the institution poses to the DIF. The primary purposes of the DIF are to (1) insure the deposits and protect the depositors of insured depository institutions; and (2) resolve failed banks. The DIF is primarily funded through quarterly assessments on insured depository institutions, but it also earns interest income on its securities. Decreases in the DIF result from loss provisions associated with the resolution of failed banks and FDIC operating expenses.

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The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) revised the statutory authorities governing the FDIC’s management of the DIF. A key requirement from the Dodd-Frank Act resulted in the FDIC’s adoption of new rules in February 2011 regarding Assessments, Dividends, Assessment Base, and Large Bank Pricing. The new rules implemented the following changes: (1) redefined the definition of an institution’s deposit insurance assessment base from one based on domestic deposits to one based on assets now defined as “average consolidated total assets minus average tangible equity”; (2) changed the assessment rate adjustments to better account for risk based on an institution’s funding sources; (3) revised the deposit insurance assessment rate schedule in light of the new assessment base and assessment rate adjustments; (4) implemented Dodd-Frank Act dividend provisions; (5) revised the large insured depository institution assessment system to better differentiate for risk and to take into account losses the FDIC may incur from large institution failures; and (6) provided technical and other changes to the FDIC’s assessment rules. Though deposit insurance assessments maintain a risk-based approach, the FDIC imposed a more extensive risk-based assessment system on large insured depository institutions with at least $10 billion in total assets since they are more complex in nature and could pose greater risk. The rules became effective April 1, 2011 implementing the revised assessment rate schedule for the quarter beginning April 1, 2011. The revised assessment rate schedule was used to calculate the June 30, 2011 assessments which were due September 30, 2011 and subsequent quarterly assessments thereafter.

Due to the changes to the assessment base and assessment rates, as well as the DIF restoration time frame, the impact on the Company’s future deposit insurance assessments has been and should continue to be favorable.

The Dodd-Frank Act permanently raised the standard maximum deposit insurance coverage amount to $250,000.

The FDIC deposit insurance coverage limit applies per depositor, per insurance depository institution for each account ownership category.

The FDIC Board of Directors issued a final rule on November 9, 2010 implementing a provision of the Dodd-Frank Act which temporarily provided for separate deposit insurance coverage for noninterest-bearing transaction accounts. This temporary deposit insurance coverage became effective on December 31, 2010. Funds held in noninterest-bearing transaction accounts were fully insured, without limit, and the temporary unlimited coverage was separate from, and in addition to, the deposit insurance coverage provided to depositors with respect to other accounts held at an insured depository institution. The temporary unlimited deposit insurance coverage for noninterest-bearing transaction accounts terminated on December 31, 2012. As of January 1, 2013, noninterest-bearing transaction accounts are insured up to the standard maximum deposit insurance coverage amount of $250,000 per depositor under the FDIC’s general deposit insurance coverage rules.

Depositor Preference Statute

In the “liquidation or other resolution” of an institution by any receiver, U.S. federal legislation provides that deposits and certain claims for administrative expenses and employee compensation against the insured depository institution would be afforded a priority over general unsecured claims against that institution, including federal funds and letters of credit.

Government Monetary Policy

The earnings of the Company are affected primarily by general economic conditions and to a lesser extent by the fiscal and monetary policies of the federal government and its agencies, particularly the Federal Reserve. Its policies influence, to some degree, the volume of bank loans and deposits, and interest rates charged and paid thereon, and thus have an effect on the earnings of the Company’s subsidiary Bank.

Additional Regulation

Implementation of the Dodd-Frank Act provisions has resulted in new rulemaking by the federal regulatory agencies and new rules yet to be issued over the next several years. Fully implementing the new and expanded regulation will involve ensuring compliance with extensive new disclosure and reporting requirements.

The Dodd-Frank Act created an independent regulatory body, the Bureau of Consumer Financial Protection (“Bureau”), with authority and responsibility to set rules and regulations for most consumer protection laws applicable to all banks – large and small – adds another regulator to scrutinize and police financial activities. Transfer to the Bureau of all consumer financial protection functions for designated laws by the other federal agencies was completed on July 21, 2011. The Bureau has responsibility for mortgage reform and enforcement, as

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well as broad new powers over consumer financial activities which could impact what consumer financial services would be available and how they are provided. The following consumer protection laws are the designated laws which fall under the Bureau’s rulemaking authority: the Alternative Mortgage Transactions Parity Act of 1928, the Consumer Leasing Act of 1976, the Electronic Fund Transfers Act, the Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act subject to certain exclusions, the Fair Debt Collection Practices Act, the Home Owners Protection Act, certain privacy provisions of the Gramm-Leach-Bliley Act, the Home Mortgage Disclosure Act (HMDA), the Home Ownership and Equity Protection Act of 1994, the Real Estate Settlement Procedures Act (RESPA), the S.A.F.E. Mortgage Licensing Act of 2008 (SAFE Act), the Truth in Lending Act, and the Truth in Savings Act.

After assuming authority and responsibility for most consumer financial protection laws, the Bureau republished and reissued the regulations implementing the consumer financial protection laws. Interim final rules for each regulation were issued along with a request for public comment regarding technical and conforming changes to reflect the transfer of authority and certain other non-substantive changes to the regulations made by the Dodd-Frank Act. Issuance of interim final rules did not impose any substantive obligations on parties subject to existing regulations. In February 2012, the Bureau issued a final rule to the Electronic Fund Transfer Act and Regulation E which implemented Dodd-Frank Act provisions regarding remittance transfers. These final rules provided new protections, including new disclosures and error resolution and cancellation rights, to consumers sending remittance transfers to other consumers or businesses in a foreign country. Due to further revisions, clarifications, and additional rulemaking, the original effective date was postponed and then temporarily delayed to address additional changes regarding disclosure of foreign taxes and institution fees, disclosure of subnational taxes in a foreign country, and errors from incorrect account information. The final effective date of the Remittance Transfer Rule was October 28, 2013. The Bank is currently exempt from the Remittance Transfer Rule requirements as it provides 100 or fewer remittance transfers a year.

Significant final mortgage rules were issued by the Bureau in January 2013 most with mandatory effective dates in January 2014. These rules were mandated by the Dodd-Frank Act provisions enacted in response to the breakdown in the mortgage lending markets and to provide for consumer protections. The Bureau solicited comments from consumers, the banking industry, and other members of the public prior to issuance of these final rules. Final rules were issued by the Bureau or jointly with other regulatory agencies to implement requirements under the Dodd-Frank Act. The following rules are intended to address problems consumers face in the three major steps in buying a home – shopping for a mortgage, closing on a mortgage, and paying off a mortgage:

• Ability-to-Repay (“ATR”)/Qualified Mortgage (“QM”) Rule – Issuance of these rules was intended to address concerns that residential mortgage borrowers received loans for which they had no ability to repay. The Ability-to-Repay final rule requires a creditor to make “a reasonable and good faith determination at or before closing that the consumer will have a reasonable ability, at the time of consummation, to repay the loan, according to its terms, including any mortgage-related obligations.” The ATR standards require consideration of eight specific underwriting factors. Information used must be documented and verified using reasonably reliable third-party records. The ATR rule provides for a wide variety of documents and sources of information that can be used and relied on to determine ATR.

In addition, the ATR rules included provisions that create a legal advantage for lenders for loans that are “qualified mortgages (“QM”). A QM must have a fully amortizing payment, have a term of 30 year or less, and not have points and fees that exceed certain thresholds depending on the total loan amount. Safe Harbor QM loans are lower priced loans that meet QM requirements. Loans satisfying the QM requirements will be entitled to liability protection from damage claims and defenses by borrowers based on an asserted failure to meet ATR requirements. Rebuttable Presumption QM loans are higher-priced loans that meet QM requirements and provide liability protection to a lesser degree from damage claims and defense by borrowers based on an asserted failure to meet ATR requirements. While the Bank satisfies the criteria for making loans under the “Small Creditor” standard, it has chosen to originate loans under the General QM and Temporary QM loan definitions available to all creditors.

• General QM loan must meet the QM product feature requirements and have total monthly debt-to-income ratio of 43% or less.

• Temporary QM loans qualify for purchase or guarantee by a government sponsored enterprise, such as Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac), or is eligible to insured or guaranteed by a federal housing agency such as the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), the U.S. Department of Agriculture (USDA), or the Rural Housing Service. These loans must be underwritten using the required guidelines of the government sponsored entity or federal housing agency. The 43% debt-to-income ratio threshold does not apply to these loans.

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• Mortgage Servicing Rules – Loan servicing has become a key focus, especially when loan workouts and modifications are involved. New Mortgage Servicing Rules effective in January 2014 implement new provisions regarding servicing standards. These new standards seek to ensure similar borrowers who default or become delinquent are treated in a similar, consistent manner. Two separate rules contain mortgage servicing provisions found in the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA). These final mortgage servicing rules address administration of a loan post- closing and ensure adequate levels of service. The Bank presently services 5,000 or fewer mortgage loans which it owns or originated and is considered a Small Servicer and is exempt from certain parts of the Mortgage Servicing Rules. The mortgage servicing rules for the following matters are applicable to the Bank’s servicing operations: 1) adjustable rate mortgage interest rate adjustment notices; 2) prompt payment crediting and payoff statements; 3) limits on force-placed insurance; 4) responses to written information requests and complaints of errors; 5) loss mitigation with regard to the first notice or filing for a foreclosure and no foreclosure proceedings if a borrower is performing pursuant to the terms of a loss mitigate agreement.

• Higher-Priced Mortgage Loan (“HPML”) Escrow Requirements – New final rules amended existing requirements applicable to “higher-priced mortgage loan” became effective on June 1, 2013. A mortgage loan cannot be extended if secured by a first lien on a borrower’s principal dwelling unless an escrow account is established for real estate taxes and homeowners insurance or other mortgage-related insurance. A mortgage loan secured by a borrower’s principal dwelling is a HPML if the Annual Percentage Rate (APR) exceeds the Average Prime Offer Rate (APOR) by 1.5% for first lien loans, 2.5% for first lien jumbo loans (new), and 3.5% for subordinate-lien loans. The final rules: implemented Dodd-Frank Act provisions and created a new section in the Truth in Lending Act – Regulation Z; established a higher rate threshold for first lien jumbo loans; and increased the time period for which an escrow account is required from one year to five years.

• Appraisal Rules for Higher-Priced Mortgage Loans (HPMLs) – New final rules established under TILA implemented provisions regarding appraisals for “higher-priced mortgages” that meet certain specified standards. If a HPML is a QM, it is exempt from the HPML Appraisal Rules. Otherwise, creditors can continue to make higher-priced mortgage loans if the following conditions are met:

• The creditor obtains a written appraisal;

• The appraisal is performed by a certified or licensed appraiser;

• The appraiser conducts a physical property visit of the interior of the property;

• At application, the applicant is provided a notice regarding the purpose of the appraisal, that the creditor will provide the applicant a copy of the appraisal, and that the applicant may choose to have a separate appraisal conducted at their expense; and

• The creditor provides the consumer with a free copy of any written appraisals obtained for the loan transaction at least three business days before closing.

• Providing Appraisals and Valuations – New final rules implemented under the Dodd-Frank Act made changes to the Equal Credit Opportunity Act (ECOA). The amendments require creditors to provide loan applicants with: (1) free copies of appraisals/valuations for loan applications to be secured by a first lien on a dwelling; and 2) a new notice regarding their right to receive a copy of the appraisal/valuation at no additional cost. Copies of the appraisal/valuation must be provided to the applicants no later than three business days before loan closing.

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• Loan Originator Compensation Rules – These final rules provided clarification to existing loan –originator compensation rules effective in April 2011 and further implemented Dodd-Frank Act requirements and restrictions. Existing loan originator compensation rules prohibited dual compensation, as well as compensation based on a term of a transaction or a proxy for a transaction term. The Bureau’s final rules provided further amendments and guidance regarding the following:

• Revision to the definition of Mortgage Loan Originators (MLOs),

• New guidance on the definition of compensation,

• Restrictions and tests for profits-based compensation,

• New qualification standards for registered MLOs,

• Required use of a MLO’s NMLSR unique identifier on the loan application, note, and mortgage,

• Requirements for written policies and procedures to monitor compliance, and

• Established recordkeeping requirements.

The Bank is also subject to federal regulation as to such matters as required reserves, limitation as to the nature and amount of its loans and investments, regulatory approval of any merger or consolidation, issuance or retirement of their own securities, limitations upon the payment of dividends and other aspects of banking operations. In addition, the activities and operations of the Bank are subject to a number of additional detailed, complex and sometimes overlapping laws and regulations. These include state usury and consumer credit laws, state laws relating to fiduciaries, the federal Equal Credit Opportunity Act and Regulation B, the federal Home Mortgage Disclosure Act and Regulation C, the federal Electronic Funds Transfer Act and Regulation E, the federal Fair Credit Reporting Act and Regulation V, the federal Real Estate Settlement Procedures Act (RESPA) and Regulation X, the federal Truth in Lending Act and Regulation Z, the federal Truth in Savings Act and Regulation DD, the Bank Secrecy Act, the federal Community Reinvestment Act, anti-discrimination laws and legislation, and antitrust laws.

Future Legislation

Changes to the laws and regulations, both at the federal and state levels, can affect the operating environment of the Company and its subsidiary in substantial and unpredictable ways. The Company cannot accurately predict whether those changes in laws and regulations will occur, and, if those changes occur, the ultimate effect they would have upon the financial condition or results of operations of the Company or its subsidiary.

Beginning in 2015, the Company and Bank will be required to measure capital adequacy using Basel III accounting. Basel III is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector. Implementation of the rules will be overseen by the Federal Reserve, the FDIC and the OCC. Reporting under the new rules will begin with the March 2015 quarterly filings.

Available Information

The Company maintains an Internet web site at the following internet address: www.fm-bank.com. The Company files reports with the Securities and Exchange Commission (SEC). Copies of all filings made with the SEC may be read and copied at the SEC’s Public Reference Room, 100 F Street, NE, Washington, DC, 20549. You may obtain information about the SEC’s Public Reference Room by calling the SEC at 800-SEC-0330. Because the Company makes its filing with the SEC electronically, you may access such reports at the SEC’s website, www.sec.gov. The Company makes available, free of charge through its internet address, copies of its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to these reports as soon as reasonably practical after such materials have been filed with or furnished to the SEC. Copies of these documents may also be obtained, either in electronic or paper form, by contacting Barbara J. Britenriker, Chief Financial Officer of the Company at (419) 446-2501.

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Please see the Consolidated Financial Statements provided under Part II, Item 8 of this Form 10-K for information regarding the Company’s revenues from external customers, profits, and total assets for and as of, respectively, the fiscal year ended December 31, 2013 and 2014.

ITEM 1a. RISK FACTORS

Significant Competition from an Array of Financial Service Providers

Our ability to achieve strong financial performance and a satisfactory return on investment to shareholders will depend in part on our ability to expand our available financial services. In addition to the challenge of attracting and retaining customers for traditional banking services, our competitors now include securities dealers, brokers, mortgage bankers, investment advisors and finance and insurance companies who seek to offer one-stop financial services to their customers that may include services that banks have not been able or allowed to offer to their customers in the past. The increasingly competitive environment is a result primarily of changes in regulation, changes in technology and product delivery systems and the accelerating pace of consolidation among financial services providers. If we fail to adequately address each of the competitive pressures in the banking industry, our financial condition and results of operations could be adversely affected.

Credit Risk

The risk of nonpayment of loans is inherent in commercial banking. Such nonpayment could have an adverse effect on the Company’s earnings and our overall financial condition as well as the value of our common stock. Management attempts to reduce the Bank’s credit exposure by carefully monitoring the concentration of its loans within specific industries and through the loan approval process. However, there can be no assurance that such monitoring and procedures will totally mitigate the risks. Credit losses can cause insolvency and failure of a financial institution and, in such event, its shareholders could lose their entire investment. For more information on the exposure of the Company and the Bank to credit risk, see the section under Part II, Item 7 of this Form 10-K captioned “Loan Portfolio.”

Susceptibility to Changes in Regulation

Any changes to state and federal banking laws and regulations may negatively impact our ability to expand services and to increase the value of our business. We are subject to extensive state and federal regulation, supervision, and legislation that govern almost all aspects of our operations. These laws may change from time to time and are primarily intended for the protection of consumers, depositors and the deposit insurance funds. In addition, the Company’s earnings are affected by the monetary policies of the Board of Governors of the Federal Reserve. These policies, which include regulating the national supply of bank reserves and bank credit, can have a major effect upon the source and cost of funds and the rates of return earned on loans and investments. The Federal Reserve influences the size and distribution of bank reserves through its open market operations and changes in cash reserve requirements against member bank deposits. The Gramm-Leach-Bliley Act regarding financial modernization that became effective in November, 1999 removed many of the barriers to the integration of the banking, securities and insurance industries and is likely to increase the competitive pressures upon the Bank. We cannot predict what effect such Act and any presently contemplated or future changes in the laws or regulations or their interpretations would have on us, but such changes could be materially adverse to our financial performance. For more information on this subject, see the section under Part I, Item 1 of this Form 10-K captioned “Supervision and Regulation.”

Interest Rate Risk

Changes in interest rates affect our operating performance and financial condition in diverse ways. Our profitability depends in substantial part on our “net interest spread,” which is the difference between the rates we receive on loans and investments and the rates we pay for deposits and other sources of funds. Our net interest spread will depend on many factors that are partly or entirely outside our control, including competition, federal economic, monetary and fiscal policies, and economic conditions generally. Historically, net interest spreads for other financial institutions have widened and narrowed in response to these and other factors, which are often collectively referred to as “interest rate

13

risk.” Over the last few years, the Bank, along with most other financial institutions, has experienced a “margin squeeze” as drastic interest rate decreases have made it difficult to maintain a more favorable net interest spread. During 2014, the Bank’s margin and spread began to improve slightly even though the rate environment remained low and flat. Maturities of higher rate deposits aided the decrease in cost of funds. This widening of the margin directly correlated to the improvement of the Bank’s loan to asset ratio.

The Bank manages interest rate risk within an overall asset/liability framework. The principal objectives of asset/liability management are to manage sensitivity of net interest spreads and net interest income to potential changes in interest rates. Funding positions are kept within predetermined limits designed to ensure that risk-taking is not excessive and that liquidity is properly managed. In the event that our asset/liabilities management strategies are unsuccessful, our profitability may be adversely affected. For more information regarding the Company’s exposure to interest rate risk, see Part II, Item 7A of this Form 10-K.

Attraction and Retention of Key Personnel

Our success depends upon the continued service of our senior management team and upon our ability to attract and retain qualified financial services personnel. Competition for qualified employees is intense. In our experience, it can take a significant period of time to identify and hire personnel with the combination of skills and attributes required in carrying out our strategy. If we lose the services of our key personnel, or are unable to attract additional qualified personnel, our business, financial condition, results of operations and cash flows could be adversely affected.

A key component of employee retention is providing a fair compensation base combined with the opportunity for additional compensation for above average performance. In this regard, the Company and the Bank use two incentive programs. The Company uses a stock award program to recognize and incent officers of the Bank. Under the long-term incentive compensation plan, restricted stock awards may be granted to officers. The amount of shares to be granted each year is determined by the Board Compensation Committee and may vary each year in its amount of shares and the number of recipients. The Compensation Committee determines the number of shares to be awarded overall and to the Chief Executive Officer (“CEO”) specifically. The CEO then makes recommendations to the committee as to the recipients of the remaining shares. The full Board of Directors approves the action of the Committee. Since the plan’s inception in 2005, all granted stock awards have utilized a three year cliff vesting feature. This is viewed as a retention aid as the awards may be forfeited should an officer leave employment during the vesting period.

A second incentive program of the Bank is based on cash compensation of which almost all employees participate (excluding commission based employees and other employees paid for specific higher paid positions, such as peak time.) A discussion of executive officer pay is incorporated within the proxy and as such, this discussion will pertain to all other employees. Non-officer employees are paid a cash incentive based on the projected overall performance of the Bank in terms of Return of Average Assets (“ROA”). The Compensation Committee determines the target performance levels on which the percentage of pay will be based. The Committee takes into account the five and ten year trend of ROA along with budget forecasted for the next year and the Bank’s past year performance. The Committee also considers the predicted banking environment under which the Bank will be operating. Non-officers receive incentive pay in December of the same year based on the year-to-date base compensation through the last pay received in November.

Officers, other than executive, receive incentive pay based on additional criterion. The officers are rewarded based on overall ROA of the Bank along with individual pre-established goals. Officers, therefore, have incentive pay at risk for individual performance. The individualized goals are recommended by each officer’s supervisor and are approved by an incentive committee of the Bank. The goals are designed to improve the performance of the Bank while also limiting the risk of a short-term performance focus. For example, a lending officer may be given two goals of which one is to grow loans within specific targets and another is tied to a specific level of past dues and charge-offs. The second goal limits the ability to be rewarded for growth at all costs along with the specific target levels within the growth goal itself. Officers in a support department may be given goals which create efficiencies, ensure compliance with procedures, or generate new fee or product opportunities. An average of three to four goals was given to each officer in 2014. Officers are paid cash incentives based on the year-end ROA of the Bank and receive it within the first quarter of the following year. Should the ROA be forecasted to be positive but below the base target set by the Board, the officers are paid an incentive under the same basis and timing as non-officers disclosed above.

The percentages of base pay on which the incentive is calculated graduates higher as does the responsibility level of the employee and their ability to impact the financial performance of the Bank. These percentages are recommended by management to the Compensation Committee and Board for approval. The cash incentive plan along with its targets and goals are subject to modification at the Compensation Committee and Board’s discretion throughout each year.

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Dividend Payout Restrictions

We currently pay a quarterly dividend on our common shares. However, there is no assurance that we will be able to pay dividends in the future. Dividends are subject to determination and declaration by our Board of Directors, which takes into account many factors. The declaration of dividends by us on our common stock is subject to the discretion of our Board and to applicable state and federal regulatory limitations. The Company’s ability to pay dividends on its common stock depends on its receipt of dividends from the Bank. The Bank is subject to restrictions and limitations in the amount and timing of the dividends it may pay to the Company.

Anti-Takeover Provisions

Provisions of our Articles of Incorporation and Ohio law could have the effect of discouraging takeover attempts which certain stockholders might deem to be in their interest. These anti-takeover provisions may make us a less attractive target for a takeover bid or merger, potentially depriving shareholders of an opportunity to sell their shares of common stock at a premium over prevailing market prices as a result of a takeover bid or merger.

Operational Risks

We are subject to certain operational risks, including, but not limited to, data processing system failures and errors, customer or employee fraud and catastrophic failures resulting from terrorist acts or natural disasters. We maintain a system of internal controls to mitigate against such occurrences and maintain insurance coverage for such risks that are insurable, but should such an event occur that is not prevented or detected by our internal controls, uninsured or in excess of applicable insurance limits, it could have a significant adverse impact on our business, financial condition or results of operations.

Limited Trading Market

The Company moved its shares of stock to a new OTC Markets Group trading platform. Our stock is traded on the OTC-QX platform. The Company’s trading symbol is “FMAO”.

ITEM 1b. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our principal office is located in Archbold, Ohio.

The Bank operates from the facilities at 307 North Defiance Street. In addition, the Bank owns the property from 200 to 208 Ditto Street, Archbold, Ohio, which it uses for Bank parking and a community mini-park area. The Bank owns real estate at two locations, 207 Ditto Street and 209 Ditto Street in Archbold, Ohio upon which the bank built a commercial building to be used for storage, and a parking lot for company vehicles and employee parking. The Bank also owns real estate across from the main facilities to provide for parking.

The Bank occupies an Operations Center at 620 S. Clyde’s Way in Archbold, Ohio to accommodate our growth over the years. The bank owns a parking lot in downtown Montpelier which is provided for community use. The bank owns a property at 204 Washington Street, St Joe, Indiana at which an ATM is located.

The Bank owns all of its office locations, with the exception of Angola, Indiana. The Angola office location is leased.

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Current locations of retail banking services are:

Office	Location
Archbold, Ohio	1313 S Defiance Street
Wauseon, Ohio	1130 N Shoop Avenue 119 N Fulton Street
Stryker, Ohio	300 S Defiance Street
West Unity, Ohio	200 W Jackson Street
Bryan, Ohio	929 E High Street 1000 S Main Street
Delta, Ohio	101 Main Street
Montpelier, Ohio	1150 E Main Street
Napoleon, Ohio	2255 Scott Street
Swanton, Ohio	7 Turtle Creek Circle
Defiance, Ohio	1175 Hotel Drive
Perrysburg, Ohio	7001 Lighthouse Way
Butler, Indiana	200 S Broadway
Auburn, Indiana	403 Erie Pass
Angola, Indiana	2310 N Wayne Street
Hicksville, Ohio	100 N Main Street
Waterville, Ohio	8720 Waterville-Swanton Road
Custar, Ohio	22973 Defiance Pike
Sylvania, Ohio	5830 Monroe Street

All but one of the above locations has drive-up service facilities and an ATM. The Captive operates from leased office space at 101 Convention Center Dr., Suite 850, Las Vegas, NV 89109.

ITEM 3. LEGAL PROCEEDINGS

There are no material pending legal proceedings, other than ordinary routine proceedings incidental to the business of the Company or its subsidiaries, to which we are a party or of which any of our properties are the subject.

ITEM 4. MINE SAFETY DISCLOSURES

None.

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PART II.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company moved its shares of stock to a new OTC Markets Group trading platform. Our stock is traded on the OTC-QX platform. OTC Markets Group developed the new market specifically for community banks. The new market is intended to help community banks improve liquidity by increasing the trading volume of their shares.

There are market makers that set a price for our stock; however, private sales continue to occur. The high and low sale prices were from sales of which we have been made aware by researching daily on Bloomberg.com. The high and low sale prices known to our management are as follows:

Stock Prices 2014
Quarter	Low		High
1st	$	22.10	$	25.39
2nd		23.20		26.00
3rd		24.50		26.25
4th		25.00		27.00
Stock Prices 2013
Quarter	Low		High
1st	$	19.90	$	22.50
2nd		21.00		22.25
3rd		21.25		22.48
4th		20.00		22.75

The Company utilizes Computershare as its transfer agent.

As of January 30, 2015 there were 1,878 record holders of our common stock of which 26.40% of the outstanding shares are being held in brokerage accounts or “street name” and only considered as one record holder.

Below is a line-graph presentation comparing the cumulative total shareholder returns for the Corporation, an index for NASDAQ Stock Market (U.S. Companies) comprised of all domestic common shares traded on the NASDAQ National Market System and the NASDAQ Bank Index for the five-year period ended December 31, 2014. The chart compares the value of $100 invested in the Corporation and each of the indices and assumes investment on December 31, 2009 with all dividends reinvested.

The Board of Directors recognizes that the market price of stock is influenced by many factors, only one of which is performance. The stock price performance shown on the graph is not necessarily indicative of future performance.

	2009		2010		2011		2012		2013		2014
FMAO		100.00		114.77		116.73		136.46		154.04		187.87
NASDAQ - COMPOSITE		100.00		117.99		117.08		137.8		192.78		221.15
NASDAQ-BANK INDEX		100.00		114.01		102.08		121.01		171.00		179.23

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Dividends are declared and paid quarterly. Per share dividends declared for the years ended 2014 and 2013 are as follows:

	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Total
2014	$	0.21	$	0.21	$	0.21	$	0.21	$	0.84
2013	$	0.20	$	0.20	$	0.20	$	0.21	$	0.81

The ability of the Company to pay dividends is limited by the dividend that the Company receives from the Bank. The Bank may pay as dividends to the Company its retained earnings during the current year and its prior two years. Currently, such limitation on the payment of dividends from the Bank to the Company does not materially restrict the Company’s ability to pay dividends to its shareholders.

Dividends declared during 2014 were $0.84 per share totaling $3.86 million, 3.85% higher than 2013 declared dividends of $0.81 per share. During 2014, the Company repurchased 23,750 shares and awarded 13,250 shares to 61 employees and 780 shares were forfeited under its long term incentive plan. At year end, 2014, the Company held 572,662 shares in Treasury stock and 33,390 in unearned stock awards.

Dividends declared during 2013 were $0.81 per share totaling $3.76 million, 3.85% higher than 2012 declared dividends of $0.78 per share. During 2013, the Company purchased 56,000 shares and awarded 11,000 restricted shares to 53 employees under its long term incentive plan. 620 shares were forfeited during 2013. At yearend 2013, the Company held 561,562 shares in Treasury stock.

The Company continues to have a strong capital base and to maintain regulatory capital ratios that are significantly above the defined regulatory capital ratios.

	2014			2013
Primary Ratio		12.29	%		11.38	%
Tier I Leverage Ratio		11.70	%		10.88	%
Risk Based Capital Tier I		15.79	%		15.53	%
Total Risk Based Capital		16.68	%		16.34	%
Stockholders’ Equity/Total Assets		12.16	%		11.22	%

On January 16, 2015, the Company announced the authorization by its Board of Directors for the Company’s repurchase, either on the open market, or in privately negotiated transactions, of up to 200,000 shares of its outstanding common stock commencing January 16, 2015 and ending December 31, 2015.

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ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs		Remaining Share Repurchase Authorization
10/1/2014 to 10/31/2014		—		—		23,750		176,430
11/1/2014 to 11/30/2014		—		—		23,750		176,430
12/1/2014 to 12/31/2014		—		—		23,750		176,430
Total		—		—		23,750		176,430	(1)

(1) The Company purchased shares in the market pursuant to stock repurchase program publicly announced on January 17, 2014. On that date, the Board of Directors authorized the repurchase of 200,000 common shares between January 17, 2014 and December 31, 2014. No shares were repurchased in the fourth quarter. In total for 2014, 23,750 shares were repurchased.

Reclassification

Certain amounts in the 2013 and 2012 consolidated financial statements have been reclassified to conform with the 2014 presentation.

ITEM 6. SELECTED FINANCIAL DATA

SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA

	(In Thousands, except share data)
	2014			2013			2012			2011			2010
Summary of Income:
Interest income	$	33,453		$	31,428		$	33,273		$	36,660		$	39,893
Interest expense		3,716			4,604			6,250			8,156			10,863
Net Interest Income		29,737			26,824			27,023			28,504			29,030
Provision for loan losses		1,191			858			738			1,715			5,325
Net interest income after provision for loan loss		28,546			25,966			26,285			26,789			23,705
Other income (expense), net		(15,029	)		(13,363	)		(12,593	)		(15,382	)		(14,342	)
Net income before income taxes		13,517			12,603			13,692			11,407			9,363
Income taxes		3,871			3,596			3,904			2,893			2,382
Net income	$	9,646		$	9,007		$	9,788		$	8,514		$	6,981
Per Share of Common Stock:
Earnings per common share outstanding *
Net income	$	2.08		$	1.93		$	2.08		$	1.82		$	1.48
Dividends	$	0.84		$	0.81		$	0.78		$	0.76		$	0.73
Weighted average number of shares outstanding		4,628,178			4,676,547			4,695,876			4,689,021			4,721,235

* Based on weighted average number of shares outstanding

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	(In Thousands)
	2014			2013			2012			2011			2010
Total assets	$	941,213		$	965,938		$	946,660		$	922,993		$	906,363
Loans		616,021			570,919			496,178			501,124			521,883
Total Deposits		762,560			776,464			763,252			739,382			724,513
Stockholders’ equity		114,493			108,340			110,239			105,091			94,403
Key Ratios
Return on average equity		8.72	%		8.28	%		9.08	%		8.56	%		7.38	%
Return on average assets		1.02	%		0.96	%		1.05	%		0.93	%		0.80	%
Loans to deposits		80.78	%		73.53	%		65.01	%		67.78	%		72.03	%
Capital to assets		12.16	%		11.22	%		11.65	%		11.39	%		10.42	%
Dividend payout		40.04	%		41.69	%		37.15	%		41.85	%		49.33	%

ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Critical Accounting Policy and Estimates

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, and the Company follows general practices within the financial services industry in which it operates. At times the application of these principles requires management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. These assumptions, estimates and judgments are based on information available as of the date of the financial statements. As this information changes, the financial statements could reflect different assumptions, estimates and judgments. Certain policies inherently have a greater reliance on assumptions, estimates and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Examples of critical assumptions, estimates and judgments are when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not required to be recorded at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability must be recorded contingent upon a future event.

All significant accounting policies followed by the Company are presented in Note 1 to the consolidated financial statements. These policies, along with the disclosures presented in the notes to the consolidated financial statements and in the management discussion and analysis of financial condition and results of operations, provide information on how significant assets and liabilities are valued and how those values are determined for the financial statements. Based on the valuation techniques used and the sensitivity of financial statement amounts to assumptions, estimates and judgments underlying those amounts, management has identified the determination of the Allowance for Loan and Lease Losses (ALLL) and the valuation of its Mortgage Servicing Rights (MSR) and Other Real Estate Owned (ORE) as the accounting areas that requires the most subjective or complex judgments, and as such could be the most subject to revision as new information becomes available.

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the lower of fair value or the loan carrying amount at the date of foreclosure. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell.

The ALLL represents management’s estimate of credit losses inherent in the Bank’s loan portfolio at the report date. The estimate is a composite of a variety of factors including experience, collateral value, and the general economy. ALLL includes a specific portion, a formula driven portion, and a general nonspecific portion. The collection and ultimate recovery of the book value of the collateral, in most cases, is beyond our control.

The Company is also required to estimate the value of its MSR. The Company recognizes as separate assets rights to service fixed rate single-family mortgage loans that it has sold without recourse but services for others for a fee. Mortgage servicing assets are initially recorded at cost, based upon pricing multiples as determined by the purchaser,

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when the loans are sold. Mortgage servicing assets are carried at the lower of the initial carrying value, adjusted for amortization, or estimated fair value. Amortization is determined in proportion to and over the period of estimated net servicing income using the level yield method. For purposes of determining impairment, the mortgage servicing assets are stratified into like groups based on loan type, term, new versus seasoned and interest rate. The valuation is completed by an independent third party.

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

The Company’s mortgage servicing rights relating to loans serviced for others represent an asset of the Company. This asset is initially capitalized and included in other assets on the Company’s consolidated balance sheet. The mortgage servicing rights are then amortized against noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying mortgage servicing rights. There are a number of factors, however, that can affect the ultimate value of the mortgage servicing rights to the Company, including the estimated prepayment speed of the loan and the discount rate used to present value the servicing right. For example, if the mortgage loan is prepaid, the Company will receive fewer servicing fees, meaning that the present value of the mortgage servicing rights is less than the carrying value of those rights on the Company’s balance sheet. Therefore, in an attempt to reflect an accurate expected value to the Company of the mortgage servicing rights, the Company receives a valuation of its mortgage servicing rights from an independent third party. The independent third party’s valuation of the mortgage servicing rights is based on relevant characteristics of the Company’s loan servicing portfolio, such as loan terms, interest rates and recent national prepayment experience, as well as current national market interest rate levels, market forecasts and other economic conditions. Management, with the advice from its third party valuation firm, review the assumptions related to prepayment speeds, discount rates, and capitalized mortgage servicing income on a quarterly basis. Changes are reflected in the following quarter’s analysis related to the mortgage servicing asset. In addition, based upon the independent third party’s valuation of the Company’s mortgage servicing rights, management then establishes a valuation allowance by each strata, if necessary, to quantify the likely impairment of the value of the mortgage servicing rights to the Company. The estimates of prepayment speeds and discount rates are inherently uncertain, and different estimates could have a material impact on the Company’s net income and results of operations. The valuation allowance is evaluated and adjusted quarterly by management to reflect changes in the fair value of the underlying mortgage servicing rights based on market conditions. The accuracy of these estimates and assumptions by management and its third party can be directly tied back to the fact that management has not been required to record a valuation allowance through its income statement based upon the valuation of each stratum of serving rights.

For more information regarding the estimates and calculations used to establish the ALLL and the value of Mortgage Servicing Rights, please see Note 1 to the consolidated financial statements provided herewith.

2014 in Review

Profitability improved in 2014 due to the increased loan balances and repositioning of the balance sheet. The asset size of the Company decreased as loan growth was funded by sales and maturities of investments. Liabilities also decreased as borrowings and time deposits matured and were not replaced or renewed. These factors enabled the net interest income to improve as well as the net interest margin. Higher net interest income is the largest contributor to the bottom line for 2014, an increase of $2.9 million over 2013 or 10.9% higher.

The increased profitability of 2013 and 2012 resulted primarily from the improvement in noninterest income. 2012 and 2013’s performances were bolstered by the gains on sales of real estate loans and securities. These were a smaller part of the performance of 2014. The long duration of the low rate environment limited the refinance activity in 2014.

An additional office was opened in Sylvania, Ohio during the second half of 2014. This brings the number of our full service offices to twenty-one along with a drive-up window at our operation center. The Sylvania office will negatively impact the earnings in the next couple of years only slightly while having the potential to be very profitable thereafter. The Company expects to continue its strategy to grow the number of locations in the foreseeable future. The acquisition of the Custar office at the end of 2013 also contributed to the improved profitability as 2014 included a full year of revenue from this office. Unlike Sylvania, this office was accretive to earnings upon its opening since a customer base already existed. This also indicates that the additional growth potential of Sylvania will not be matched in Custar. Balance sheet growth from activity in 2013 is expected to come from the new office opened in Waterville, Ohio. This office has the same future earnings potential and current production costs as the Sylvania office.

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A deposit strategy to revamp the Bank’s deposit mix was begun in the later part of 2014. The strategy included offering a new product line to checking and discontinuing some of the older products. An emphasis is on realigning our products to provide value to our depositors while building revenue or decreasing costs to the Bank. Secure checking and FM eXpress were two of the revamped or new offerings. The focus remains on growing core deposits and allowing higher cost time deposits to run off. The success of this strategy is evidenced by the growth in core deposits along with increased debit card activity, on-line statement usage and lower cost of funds.

While rates remain low, short-term rates are expected to raise slightly the second half of 2015. The slope of the yield curve has enabled the Company to continue to sell investment securities with shorter term maturities and recognize a gain without compromising the yield. In prior years, the proceeds were mainly reinvested in the security portfolio while 2014’s proceeds were used to fund loan growth. For 2014, the recognized gain was $494 thousand, which was lower than 2013’s $775 thousand and 2012’s $852 thousand. Most of the securities sold were agencies. The Bank was able to continue to capitalize on the steepness of the yield curve. The market value of the security portfolio has increased as evidenced by the comprehensive income reported on the income statement. The Company will continue to look for opportunities to utilize the investment portfolio to fund loan growth.

Net income was up 7.1% compared to 2013 and was down just 1.5% compared to 2012. The Company has done an exceptional job of recognizing opportunities to provide services and products that the low rate environment made possible. A commitment to improve asset quality over the years also benefited the Company during the period of 2012 through 2014. These opportunities are further discussed in the Material Changes in Results of Operations. The Company remains strong, stable and well capitalized and has the capacity to continue to cover the increased costs of doing business in a tough economy while seeking good loans to improve profitability. The Company continues to look for new opportunities to generate and protect revenue while providing additional channels through which to serve our customers and maintain our high level of customer satisfaction.

Material Changes in Results of Operations

Net Interest Income

The discussion now centers on the individual line items of the consolidated statement of income and their effect on the bottom line. This section will focus on the most traditional source of revenue contributing to the profitability of the Company, net interest income.

Net interest income is the difference between interest income on interest earning assets, such as loans and securities, and interest expense on liabilities used to fund those assets, such as interest bearing deposits and other borrowings. Net interest income is affected by changes in both interest rates and the amount and composition of earning assets and liabilities. The change in net interest income is most often measured as a result of two statistics – interest spread and net interest margin. The difference between the yields on earning assets and the rates paid for interest bearing liabilities supporting those funds represents the interest spread. Because noninterest bearing sources of funds such as demand deposits and stockholders’ equity also support earning assets, the net interest margin exceeds the interest spread.

Overall, we began to see an increase in the net interest margin and spread starting the fourth quarter of 2013 and the expansion continued throughout 2014. The net interest margin increased over 2013 by 48 basis points and the spread by 49. This was a reversal of a tightening trend of previous years. The net interest margin decreased by 6 basis points, and the net interest spread decreased by 3 basis points in comparing 2013 to 2012. This tightening was significantly smaller than the corresponding decrease of 26 basis points in margin and 24 basis points in spread during 2012 as compared to 2011. Short term rates remained flat throughout 2012, 2013, and 2014 and long term rates lowered during the year 2012 and inched upward in 2013 and remained relatively flat in 2014.

The size of the Company decreased overall as did the earning assets in both average and actual during 2014. The earnings, however, increased along with the yield as compared to 2013. The earnings were over $2 million higher and the yield 39 basis points higher for 2014 as compared to 2013. The largest increase in balances and interest income was in the loan portfolio. The growth in the balances earned an amount higher at $3.7 million, than the $575 thousand given up due to lower yields on the portfolio as compared to 2013. The remaining interest earning line items made up of investment securities and the more liquid federal funds sold and bank deposits had lower earnings than in 2013. Lower average balances, with the exception of tax-exempt investment securities, were the cause as the balances decreased to fund loan growth. The improvement in interest earnings from loan growth far outweighed the decreased earnings in the remaining earning assets.

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Before switching to the interest expense discussion, a quick review of 2013 and 2012’s interest income will be summarized. 2014 was a reversal to the trends of previous years with its significant loan growth and higher interest earnings. During 2013 and 2012 the Company experienced compression on the yield of earning assets.

During 2013, earning assets increased during the year in actual and average balance. The interest collected on the earning assets decreased; with the yield decreasing for both 2013 and 2012 as compared to 2012 and 2011 in most portfolios. The largest decrease in yield occurred in the loans. 2012 was hampered by negative loan growth, lower variable loan repricing and overall loan refinancing. 2013’s loan growth occurred mainly in commercial real estate which pushed lower yields along with variable repricing continuing to price down. Investment securities had lower yields due to the large amount of calls on government sponsored agencies and the lower yield on new purchases. The portfolio decreased $3.1 million in average during 2013 as compared to 2012, reversing the 2012 average growth of $38.2 million over 2011 average balances. It was not unusual for a called security to be replaced with a new security with a yield lower by 50 basis points or more. Overall, this portfolio’s yield was 7 basis points lower in 2013 than in 2012, preceded by a 23 basis points drop in 2012 as compared to 2011.

Loans, which have the highest earning asset yield, increased on average by $14.4 million from 2012 to 2013 while decreasing $11.4 million on average between 2011 and 2012. The overall change in yield in the loan portfolio for 2013 and 2012 was due mainly to the change in rate. Given that the loan portfolio represented only 57.5% of the earning assets in 2013 as compared to 56% in 2012, it stands to reason that the overall asset yield decreased in every year since 2010 until 2014. Coupling this with the growth in earning assets being lower yielding investments in securities and Federal Funds Sold and interest bearing bank balances during 2012 and late in the year in loans during 2013, the overall yield on earning assets decreased 24 basis points as compared to 2012, lower than the 50 basis points yield decreased in 2012 as compared to 2011. The higher ratio of loans to earning assets of 1.5% corresponded to a smaller decrease in the overall asset yield of 26 basis points between 2013 and 2012. This emphasizes how important and how significant an impact an increase in loan balances had on the Bank’s profitability. Loan growth remains a focus and priority for 2015.

Net interest spread is the difference between what the Company earns on its assets and what it pays on its liabilities. It is on this spread that the Company must fund its operations and generate profit. When the asset yield decreases so must funding costs in order to maintain profitability. It becomes increasingly challenging as the asset yield gets closer to the prime lending rate, or the break-even point, of operations.

With respect to interest expense, a decrease in the cost is apparent for 2014 as compared to both 2013 and 2012. Fortunately, for 2014, both the interest factors of the net interest margin ratio improved to raise the margin by 48 basis points over 2013. Unfortunately, in the other years presented, the asset yield decreased more than funding costs. As a result, both the net interest margin and spread decreased for both those periods as compared to 2011.

The impact of the change in the portfolio mix was a factor in the liabilities as it was in the assets. All portfolios decreased in interest expense in comparing 2014 to 2013 and 2013 to 2012 with the exception of a slight increase in Fed Funds Sold under agreement to repurchase in 2013 and 2014 of $6 thousand. Time deposits and other borrowed money both decreased in cost and balances during all three years presented. The Bank borrowed funds from the Federal Home Loan Bank in the first quarter of 2010, to lock in lower rates to replace maturities coming due in the second through fourth quarter of the year. The Bank did not borrow any additional funds in 2011 through 2013, and the cost of those funds was again lower in 2013 since the associated expense of the matured advances was gone for a full year. The Bank paid off $4.5, $7.1 and $5.1 million of FHLB borrowings during 2014, 2013 and 2012 respectively. The average balance of other borrowed money was lower by $6.5, $8.6 and $10.1 million at December 31, 2014, 2013 and 2012, respectively.

The following tables present net interest income, interest spread and net interest margin for the three years 2012 through 2014, comparing average outstanding balances of earning assets and interest bearing liabilities with the associated interest income and expense. The tables show the corresponding average rates of interest earned and paid. The tax-exempt asset yields have been tax adjusted to reflect a marginal corporate tax rate of 34%. Average outstanding loan balances include non-performing loans and mortgage loans held for sale. Average outstanding security balances are computed based on carrying values including unrealized gains and losses on available-for-sale securities.

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The percentage of interest earning assets to total assets decreased to 90.6% in 2014 from 2013 and 2012’s 94.0%. Noninterest earning assets increased during 2014 by $31.4 million as the earning credit rates paid by our correspondent banks were higher than the interest rates. The Bank switched those accounts to noninterest bearing to save costs which resulted in a lower percentage of interest earning assets.

The deposit strategy implemented during 2014 to alter the deposit mix and introduce new products resulted in lower interest bearing liabilities. In average balances, 2014 had $41.3 million less than 2013 in interest bearing liabilities. “Secure” and “Pure” checking were the main launches. Secure offered ID Protect along with credit score monitoring (reporting the score quarterly and providing notification of any access occurring) for a monthly charge. Pure provided depositors options to reduce or eliminate fees through modification of usage or having a total deposit relationship over a specified amount. The majority of the new offered accounts were noninterest bearing which caused the reduction in interest bearing liabilities. Time deposits also continued to run off reducing in average balance during 2014 by approximately $36.1 million as compared to 2013. The average cost of deposits also decreased 10 basis points, aided by the decrease in time deposits and payoff of all other borrowed money during 2014. The average cost of funds for 2014 was ..55%, the average cost in 2013 for interest bearing liabilities was .65% compared to .86% in 2012.

In 2013, the largest fluctuation in the cost of funds was in the other borrowed money, which decreased by 39 basis points. Advances from Federal Home Loan Bank were allowed to run off without replacement. The cost on savings deposits decreased 16 basis points while expense related to time deposits decreased 18 basis points. The Bank has focused on increasing its core deposit base to lessen the dependency on more expensive time deposits. The Bank has also attempted to increase the duration of the time deposits; however, customers have maintained a short-term, twelve month focus.

The yield on Tax-Exempt investment securities shown in the following charts were computed on a tax equivalent basis. The yield on Loans has been tax adjusted for the portion of tax-exempt IDB loans included in the total. Total Interest Earning Assets is therefore also reflecting a tax equivalent yield in both line items, also with the Net Interest Spread and Margin. The adjustments were based on a 34% tax rate.

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	2014
	(In Thousands)
	Average Balance			Interest/ Dividends		Yield/Rate
ASSETS
Interest Earning Assets:
Loans	$	581,483		$	28,070		4.83	%
Taxable investment securities		189,003			3,570		1.89	%
Tax-exempt investment securities		65,520			1,794		4.15	%
Federal funds sold & interest bearing deposits		8,992			19		0.21	%
Total Interest Earning Assets		844,998		$	33,453		4.07	%
Non-Interest Earning Assets:
Cash and cash equivalents		23,634
Other assets		64,595
Total Assets	$	933,227
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest Bearing Liabilities:
Savings deposits	$	394,690		$	1,449		0.37	%
Other time deposits		214,680			2,009		0.94	%
Other borrowed money		158			4		2.53	%
Federal funds purchased and securities sold under agreement to repurchase		60,989			254		0.42	%
Total Interest Bearing Liabilities		670,517		$	3,716		0.55	%
Non-Interest Bearing Liabilities:
Non-interest bearing demand deposits		152,155
Other		(2,703	)
Total Liabilities		819,969
Shareholders’ Equity		113,258
Total Liabilities and Shareholders’ Equity	$	933,227
Interest/Dividend income/yield				$	33,453		4.07	%
Interest Expense / yield					3,716		0.55	%
Net Interest Spread				$	29,737		3.52	%
Net Interest Margin							3.63	%

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	2013
	(In Thousands)
	Average Balance		Interest/ Dividends		Yield/Rate
ASSETS
Interest Earning Assets:
Loans	$	507,126	$	24,978		4.93	%
Taxable investment securities		287,736		4,597		1.60	%
Tax-exempt investment securities		64,355		1,819		4.28	%
Federal funds sold & interest bearing deposits		22,243		34		0.15	%
Total Interest Earning Assets		881,460	$	31,428		3.68	%
Non-Interest Earning Assets:
Cash and cash equivalents		17,691
Other assets		39,107
Total Assets	$	938,258
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest Bearing Liabilities:
Savings deposits	$	400,071	$	1,475		0.37	%
Other time deposits		250,737		2,718		1.08	%
Other borrowed money		6,690		163		2.44	%
Federal funds purchased and securities sold under agreement to repurchase		54,312		248		0.46	%
Total Interest Bearing Liabilities		711,810	$	4,604		0.65	%
Non-Interest Bearing Liabilities:
Non-interest bearing demand deposits		109,804
Other		7,895
Total Liabilities		829,509
Shareholders’ Equity		108,749
Total Liabilities and Shareholders’ Equity	$	938,258
Interest/Dividend income/yield			$	31,428		3.68	%
Interest Expense / yield				4,604		0.65	%
Net Interest Spread			$	26,824		3.03	%
Net Interest Margin						3.15	%

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	2012
	(In Thousands)
	Average Balance		Interest/ Dividends		Yield/Rate
ASSETS
Interest Earning Assets:
Loans	$	492,697	$	26,489		5.41	%
Taxable investment securities		289,864		4,802		1.66	%
Tax-exempt investment securities		65,330		1,936		4.49	%
Federal funds sold & interest bearing deposits		32,068		46		0.14	%
Total Interest Earning Assets		879,959	$	33,273		3.92	%
Non-Interest Earning Assets:
Cash and cash equivalents		16,814
Other assets		39,342
Total Assets	$	936,115
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest Bearing Liabilities:
Savings deposits	$	372,997	$	1,982		0.53	%
Other time deposits		285,214		3,592		1.26	%
Other borrowed money		15,333		434		2.83	%
Federal funds purchased and securities sold under agreement to repurchase		54,776		242		0.44	%
Total Interest Bearing Liabilities		728,320	$	6,250		0.86	%
Non-Interest Bearing Liabilities:
Non-interest bearing demand deposits		88,588
Other		11,458
Total Liabilities		828,366
Shareholders’ Equity		107,749
Total Liabilities and Shareholders’ Equity	$	936,115
Interest/Dividend income/yield			$	33,273		3.92	%
Interest Expense / yield			$	6,250		0.86	%
Net Interest Spread			$	27,023		3.06	%
Net Interest Margin						3.21	%

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The following tables show changes in interest income, interest expense and net interest resulting from changes in volume and rate variances for major categories of earnings assets and interest bearing liabilities.

	2014 vs 2013
	(In Thousands)
	Net Change			Due to change in Volume			Rate
Interest Earning Assets:
Loans	$	3,092		$	3,667		$	(575	)
Taxable investment securities		(1,027	)		(1,577	)		550
Tax-exempt investment securities		(25	)		50			(75	)
Federal funds sold & interest bearing deposits		(15	)		(20	)		5
Total Interest Earning Assets	$	2,025		$	2,120		$	(95	)
Interest Bearing Liabilities:
Savings deposits	$	(26	)	$	(20	)	$	(6	)
Other time deposits		(709	)		(391	)		(318	)
Other borrowed money		(159	)		(159	)		—
Federal funds purchased and securities sold under agreement to repurchase		6			30			(24	)
Total Interest Bearing Liabilities	$	(888	)	$	(540	)	$	(348	)
	2013 vs 2012
	(In Thousands)
	Net Change			Due to change in Volume			Rate
Interest Earning Assets:
Loans	$	(1,511	)	$	781		$	(2,292	)
Taxable investment securities		(205	)		(35	)		(170	)
Tax-exempt investment securities		(117	)		(44	)		(73	)
Federal funds sold & interest bearing deposits		(12	)		(14	)		2
Total Interest Earning Assets	$	(1,845	)	$	688		$	(2,533	)
Interest Bearing Liabilities:
Savings deposits	$	(507	)	$	144		$	(651	)
Other time deposits		(874	)		(434	)		(440	)
Other borrowed money		(271	)		(245	)		(26	)
Federal funds purchased and securities sold under agreement to repurchase		6			6			—
Total Interest Bearing Liabilities	$	(1,646	)	$	(529	)	$	(1,117	)

As mentioned in the discussion earlier, in reviewing the 2014 to 2013, the change in volume is the main driver for the improved ratio which is opposite of the change between 2013 to 2012 where an impact in change due to volume is evident; however the largest impact was due to rate. The strategy since 2010 is to extend the maturities of time deposit “specials” to over 24 months to prepare for rising rates. The other strategy employed since 2011 was to increase core deposits by offering innovative products focused on customer needs, such as higher interest rates and fraud notification. In exchange for these accounts, customers were asked to utilize services that benefited both the Bank and themselves. Smaller time deposit rate shoppers had an option to perhaps change their behavior of banking or allow those deposits to run off. The new core deposit products were indeed embraced by our customers and have helped to attain the deposit portfolio mix sought by the Bank.

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Non-Interest Income

The discussion now turns to the noninterest activity of 2014 operations, beginning with the revenue portion. In comparing line items of the consolidated statement of income for years ended 2012 through 2014, it can be seen where the Company has been spending its time and the impact of the recession and slow recovery. This section will focus on the significant noninterest items that impacted the operations of the Company.

The Company has concerns with the increased costs associated with regulatory compliance such as the possible loss of revenue from new regulations stemming from the Dodd-Frank Act. History has proven the concern is justified. One area of revenue impacted was overdraft fees. Updated Regulation E guidelines were implemented on August 15, 2010 and the Bank has ended each year since with a lower revenue stream. This has occurred in spite of the addition of the new offices since 2010. At year-end 2012 and 2013, the number of checking accounts again increased along with the balances; however average collected overdraft fees per account decreased as compared to 2011. In the last two years, 2013 and 2014, checking balances have increased while average revenue per account continued to decline. Overdraft fees in 2014 accounted for $2.5 million in noninterest income and $2.7 million for 2013. This represents 65.45% of the line item service charges and fees on the income statement which was down from 2013’s percentage of 71.5%. The Bank has made this an area of focus for 2014 as this revenue stream remains under intense regulator review. The decrease in the percentage is due to an increase in the service charge revenue on checking accounts with the new offerings and discontinuation of some checking products. Service charges on checking accounts, excluding Health Savings Accounts, were up $208.7 thousand for 2014 as compared to 2013.

The Bank has long promoted the use of debit cards by its customers and continued that philosophy with the introduction of additional new products.

2014 revenue improved $250.5 and $558.8 thousand from ATM/debit card usage as compared to 2013 and 2012, respectively. The Bank receives interchange revenue from each “swipe” of the card. In 2011, this revenue stream was at risk of being reduced by the Federal Reserve regulation of the interchange fee. The establishment of a tiered pricing for banks under $10 billion has helped to protect the profitability from such fees, although the concern remains as to how long this tiered pricing will remain in effect. While this revenue stream continues to improve with more depositors using electronic methods for purchasing, the expense of fraud has offset a portion of the revenue gain. Further discussion can be found in the non-interest expense section regarding the net effect of debit card activity.

Overall, noninterest income decreased for 2014 as compared to both 2013 and 2012. Unfortunately, this has become a trend mainly due to the duration of the flat rate interest environment.

In 2012, the largest positive impact on the income statement was derived from sales activity; including net gain on sale of loans and net gain on sale of securities. During 2012, the net gain on sale of loans, which is derived from sales of real estate loans into the secondary market, was the most significant factor for this category. The gain on residential real estate loans accounted for $1.3 million and $725 thousand was derived from gain on sales of agricultural real estate. Both of these programs are offered to our customers to enable them to have a fixed rate loan while the Bank limits its interest rate risk exposure. Of these loan types, the Bank sells 100% of the residential loans and 90% of the agricultural loans into the secondary market. 2013 or 2014 activity did not reach the same high levels as 2012. Gains of $452.7 and $194.3 thousand were recorded for residential and agricultural real estate respectively for 2014 along with gains of $865 and $258 thousand were recorded for residential and agricultural real estate respectively for 2013. In conjunction with these sales, the Bank maintains servicing rights and those income amounts during all three years are included in the customer service fees line item and account for over a $1 million in revenue each year. However, new sales in 2012 catapulted this income higher than 2013 or 2014.

The last line item in the noninterest income section as was discussed previously is the net gain on sale of investments. The Bank has taken advantage of this opportunity the last three years and expects to continue as long as the rates remain low and the yield curve is favorable to the transaction. The Bank will not increase short-term gain at the sacrifice of long-term profitability. All of the sales of securities in 2014 of $57.9 million were used to fund loan growth while only some of the $91 million in proceeds realized on the sale of securities in 2013 were used to fund loan growth. This is a source of funds that will continue to be analyzed for use in the coming year. Gains of $494 thousand were recorded for 2014 as compared to $775 and $852 thousand for 2013 and 2012 respectively.

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Overall, noninterest income decreased $654 thousand in 2014 following a year where it had decreased $758 thousand. Some of the revenue may not be easily duplicated as it is dependent on economic and market conditions to provide the opportunity. However, the increased revenue amounts from deposit and loan services should continue to provide improved profitability in the future. Gains on sales should also continue in the near term though when it will change is unknown at this time.

Moving to the noninterest expense side, overall, noninterest expense increased 4.2% in 2014 as compared to 2013 and 2012 which were basically equal at $24.2 million. The largest factor behind the higher 2014 level was the impact of employee salaries and wages on the income statement. Employee wages increased $633.3 thousand in 2014 over 2013; they increased $513.4 thousand in 2013 compared to 2012. Three main components flow into salaries and wages: base salary, deferred costs, and incentives composed of the expense of restricted stock awards and performance incentives. Base pay has increased with the addition of the three offices of Waterville, Custar and Sylvania and through normal yearly increases to the remainder of the employees. Base was up $474.1 thousand for 2014 over the previous year and 2013 was up $408.1 thousand over 2012. The full time equivalent number at each yearend of employees increased to 260 for 2014 compared to 2012’s 248.

Incentive pay as it related to performance was up $209.5 thousand in 2014 over 2013. Both measurements used to award incentive pay had improved in 2014 and employees benefited accordingly. This followed a year in which the incentive performance pay was down $110.1 thousand from 2012. The Banks’ performance was not up to the level of 2012, even though the number of employees receiving an incentive was higher. (For further discussion in incentive pay, see note 11 of the consolidated financial statements.)

While net loss on sale of other assets owned, mainly OREO property, does not represent income for the years presented, the decrease in the amount of the loss for 2014 and 2013, as compared to 2012, does contribute to improved profitability. The loss of $634 thousand for 2012 stems not only from sales but also from write-downs in the carrying value of those properties still held on the Bank’s balance sheet. The number of properties decreased and the carrying value declined in 2014 to $1.1 million and 2013 to $2.3 million from $3.6 million in 2012.

The mortgage refinancing activity has declined over the last three years. A correlating expense to that activity is the amortization of mortgage servicing rights. The amortization is the expense that offsets the income recognized when the loan is first made. Income is recorded when the mortgage loan is first sold with servicing retained and is therefore recognized within one year. The amortization, however, is calculated over the life of the loan and accelerated as loans are paid off early. An increase in this expense can be driven by two activities: an increase in the number of sold loans and/or by the acceleration of the expense from payoff and refinance activity. The best picture of the bottom line impact is achieved by netting the income with the expense each year. 2014 had net expense of $42.7 thousand, 2013 had a net income of $2 thousand and 2012 had net expense of $8 thousand. Of course, the value (or income) of the mortgage servicing right when sold also impacts the net position. While gain on sale of these loans was high in 2012, the net position was an expense indicating the activity was mainly refinance. 2013 had new loan activity and lower refinance activity making the additions and amortization almost equal. The number of loans and balances also indicates this as the levels have remained fairly constant. 2014 was a year with limited sales and the amortization expense was therefore higher than the capitalized additions. As of December 31, 2014, there were 3,638 loans serviced with balances of $275.4 million. As of December 2013, there were 3,684 loans serviced with balances of $282.1 million. As of December 2012, there were 3,674 loans serviced with balances of $280.4 million.

The impact of mortgage servicing rights to both noninterest income and expense is shown in the following table:

	(In Thousands)
	2014			2013			2012
Beginning Year	$	2,066		$	2,063		$	2,071
Capitalized Additions		301			429			761
Amortization		(344	)		(426	)		(769	)
Valuation Allowance		—			—			—
End of Year	$	2,023		$	2,066		$	2,063

Occupancy expense decreased by $144 thousand in 2014 as compared to 2013 and by $168 thousand in 2013 as compared to 2012. Although real estate taxes and building depreciation were higher on our office locations, these were offset by the increased rental income from the Bank’s investment services. $97.7 thousand more was collected in 2014 as compared to 2013 and 2013 collected $217 thousand more than 2012.

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Data processing expense increased $38 thousand during 2014 and by $93 thousand in 2013. The Company continues to investigate ways to reduce this expense. The pricing on many services, however, is based on number of accounts and the Bank fully expects those to increase with the growth from the newer additions of the Waterville, Custar and Sylvania offices and overall Bank growth.

The FDIC assessment decreased in 2012 as new regulation changed the method of calculation in the summer of 2011. 2012 represented the first full year under the new method. As can be seen, the change to calculations based on asset size rather than deposits has been very beneficial to F&M. 2013 was higher than 2012 as the Bank grew in size by $19.3 million over 2012 and was lower in 2014 by $32 thousand as the Bank decreased in size by $24.7 million.

The last line item in the noninterest expense is “other general and administrative”. While it is higher by $461 thousand in 2014 following a smaller increase of $449 thousand in 2013 over 2012’s $5.1 million, the fluctuation is not isolated to a single source. The primary factors impacting this fluctuation in 2014 and 2013 are increases in both ATM expense and core deposit intangible expenses. The increased expense of $52.7 and $376.3 thousand relating to ATM and debit cards in 2014 and 2013 respectively, over the previous year is caused by many factors. First, 2012 was lower due to incentive credits received by the Bank for switching providers and these credits were depleted early in 2013. Increased usage during both years corresponds to increases in both revenue and cost. Finally, fraud increases cost as new cards have to be issued to limit the risk exposure. The fraud losses themselves are not recognized in this breakout, however the cost of replacement cards is. The Bank is not currently deploying chip technology within its cards; however the Bank is aware the adoption of embedded chips will increase this expense in the coming years. 2014 experienced additional expense over 2013 in consulting ($161.7 thousand), audit and accounting fees ($166.5 thousand) and advertising ($101.3 thousand).

The first two line items increased related to the new deposit products offered and the establishment of an affiliate subsidiary by the Company. To establish the new subsidiary, actuarial studies and consulting services were utilized to determine the feasibility and benefit thereof. By establishing at yearend, the Company has enabled 2015 to fully capture the benefits with limited additional cost. The affiliate is a Captive insurance company insuring the Company and the Bank in addition to their coverage before the formation. The Captive has provided additional coverage that was not available from our current carriers or was cost prohibitive. The Captive also provides a tax benefit to the Company with its formation in Nevada. The increase in advertising expense is warranted with the Bank’s increased marketing area.

Provision for loan losses is the last non-interest line item to discuss. The provision expense increased $333 thousand for 2014. The increase was needed to offset account for the loan growth and the net charge-off activity of 2014. Sustained strong asset quality kept the provision expense lower than the growth alone would have warranted. The provision expense for 2013 was higher than for 2012 by $120 thousand. Net charge-offs of $480 and $888 thousand for 2014 and 2013, respectively, were in the middle of the $605 thousand recorded for 2012. Commercial and Industrial loans had the largest charge-off activity in 2013, while 2014 and 2012 were impacted with higher levels in the consumer portfolios. Further analysis by loan type is presented in the discussion of the allowance for credit losses.

Allowance for Credit Losses

The Company segregates its Allowance for Credit Losses (ACL) into two reserves: The ACL and the Allowance for Unfunded Loan Commitments and Letters of Credit (AULC). When combined, these reserves constitute the total ACL. The AUCL is included in other liabilities on the consolidated balance sheets.

The Bank’s ALLL methodology captures trends in leading, current, and lagging indicators which will directly affect the Bank’s allocation amount. The Bank monitors trends in such leading indicators as delinquency, unemployment changes in the Bank’s service area, experience and ability of staff, regulatory trends, and credit concentrations. A current indicator such as the total watch list loan amount to Capital, and a lagging indicator such as the charge off amount are referenced as well. A matrix formed by loan type from these indicators is used in making ALLL adjustments.

Special mention loan balances increased 21.2% or $1.7 million overall as of yearend 2014 compared to same date 2013. The increase is in the commercial and commercial real estate portfolios. The largest increase of $2.1 million was in the commercial real estate caused mainly by one large relationship being downgraded. Agricultural real estate showed a decrease of $618 thousand offsetting the above increase.

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Special Mention loan balances decreased 40.6% or $5.4 million as of December 31, 2013 as compared to December 31, 2012. The balances decreased due to pay offs received and improved performance of the companies, thereby resulting in an upgrade out of special mention. This improvement was preceded by an increase of 26.5% or $2.8 million from 2011 to 2012. For 2014, the increase in special mention is offset by significant decreases in the substandard classifications of those same commercial related portfolios. Overall, substandard and doubtful loans decreased 42.5% or $2.9 million as compared to yearend 2013. A similar level of improvement is evident in substandard and doubtful loans during the same time frames for a year ago. 2013 had a decrease of 71.1%, or $2.5 million, compared to 2012. In response to these fluctuations and loan growth during 2014, the Bank changed ALLL to outstanding loan coverage percentage to .95% as of December 31, 2014 from .90% as of December 31, 2013 and 1.04% as of December 31, 2012.

The above indicators are reviewed quarterly. Some of the indicators are quantifiable and, as such, will automatically adjust the ALLL once calculated. These indicators include the ratio of past due loans to total loans, loans past due greater than 30 days, and watch list loans to capital ratios, with the watch list made up of loans graded 5, 6 or 7 on a scale of 1 (best) to 7 (worst). Other indicators use more subjective data to the extent possible to evaluate the potential for inherent losses in the Bank’s loan portfolio. For example, the economic indicator uses the unemployment statistics from the communities in our market area to help determine whether the ALLL should be adjusted. At the end of each of 2012, 2013 and 2014, a slight improvement was noted in unemployment figures and several local firms were calling a small number of employees back from layoff while planning some expansion.

All aggregate commercial and agricultural credits including real estate loans of $250,000 and over are reviewed annually by both credit committees and internal loan review to look for early signs of deterioration.

To establish the specific reserve allocation for real estate, a discount to the market value is established to account for liquidation expenses. The discounting percentage used for real estate mirrors the discounting of real estate as provided for in the Bank’s Loan Policy. However, unique or unusual circumstances may be present which will affect the real estate value and, when appropriately identified, can adjust the discounting percentage at the discretion of management.

The ACL increased $755 thousand during 2014, which was preceded by a $29 thousand decrease during 2013. The large increase in 2014 directly correlates to the large increase in loan balances. With the improved asset quality, the percentage of ACL to the total loan portfolio actually decreased from 1.07% as of December 31, 2012 to .93% as of December 31, 2013 and .95% as of December 31, 2014. December 31, 2013 had the lowest loans past due 30+ day percentage at .25% in the Bank’s known history, December 31, 2014 was still at a respectable low of .37%.

Please see Note 4 in the consolidated financial statement for additional tables regarding the composition of the ACL.

Federal Income Taxes

Effective tax rates were 28.64%, 28.53% and 28.51% for 2014, 2013 and 2012 respectively. The effect of tax-exempt interest from holding tax-exempt securities and Industrial Development Bonds (IDBs) was $649, $640, and $677 thousand for 2014, 2013, and 2012, respectively. All years included an increase into a higher tax bracket for income over $10 million.

Material Changes in Financial Condition

The shifts in the balance sheet during 2014 have positioned the Company for continued improvement in profitability. On the asset side, the Company experiences an increase in asset yield due to loan growth with funding provided by a decrease in the investment portfolio. The cost of funds was impacted by the shift of interest bearing liabilities to noninterest and the decrease in time deposits and other borrowed money. Both contributed to improved profitability in 2014 and expected liabilities improvement in future years.

Average earning assets increased $1.5 million during 2013 over 2012. The main cause of fluctuation was the opening of the Waterville office in 2013 and the repositioning of the balance sheet. The Custar acquisition had minimal effect on the average balance of earning assets, given that it took place in December 2013. The $29 million of deposits from the Custar acquisition impacted 2014. Average interest bearing liabilities decreased $16.5 thousand over 2012. The decrease in balances was due to the runoff of time deposits and payoff of debt from FHLB. Savings deposits increased nicely in 2013 due to the success of the KASASA suite of products and Health Savings Accounts.

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Securities

The investment portfolio is primarily used to provide overall liquidity for the Bank. It is also used to provide required collateral for pledging to the Bank’s Ohio public depositors for amounts on deposit in excess of the FDIC coverage limits. It may also be used to pledge for additional borrowings from third parties. Investments are made with the above criteria in mind while still seeking a fair market rate of return, and looking for maturities that fall within the projected overall strategy of the Bank. The possible need to fund growth is also a consideration.

All of the Bank’s security portfolio is categorized as available for sale and as such is recorded at market value.

Security balances as of December 31 are summarized below:

	(In Thousands)
	2014		2013		2012
U.S. Treasury	$	25,393	$	25,272	$	10,568
U.S. Government agency		119,234		172,972		220,200
Mortgage-backed securities		29,562		44,792		53,006
State and local governments		74,303		81,473		72,131
	$	248,492	$	324,509	$	355,905

The following table sets forth the maturities of investment securities as of December 31, 2014 and the weighted average yields of such securities calculated on the basis of cost and effective yields weighted for the scheduled maturity of each security. Tax-equivalent adjustments, using a thirty-four percent rate, have been made in yields on obligations of state and political subdivisions. Stocks of domestic corporations have not been included.

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	Maturities (Amounts in Thousands)
						After One Year
	Within One Year					Within Five Years
	Amount		Yield			Amount		Yield
U.S. Treasury	$	—		—		$	20,174		0.89	%
U.S. Government agency		16,571		2.40	%		92,163		1.32	%
Mortgage-backed securities		—		—			—		—
State and local governments		5,922		1.85	%		38,352		2.38	%
Taxable state and local governments		1,012		3.00	%		6,092		1.78	%
	After Five Years
	Within Ten Years					After Ten Years
	Amount		Yield			Amount		Yield
U.S. Treasury	$	5,218		1.28	%	$	—		—
U.S. Government agency		10,501		1.58	%		—		—
Mortgage-backed securities		12,250		2.69	%		17,312		2.33	%
State and local governments		14,754		3.11	%		5,881		2.29	%
Taxable state and local governments		997		2.60	%		1,293		5.57	%

As of December 31, 2013 the Bank did not hold a large block of any one investment security, except for U.S. Government agencies. The Bank also holds stock in the Federal Home Loan Bank of Cincinnati at a cost of $3.7 million. This is required in order to obtain Federal Home Loan Bank loans. The Bank also acquired stock in the Federal Home Loan Bank of Indianapolis at a cost of $231.4 thousand through its acquisition of Knisely Bank. There were no borrowings at the time of acquisition associated with Federal Home Loan Bank of Indianapolis. The Bank had requested Federal Home Loan Bank of Indianapolis to buy back its stock when the acquisition of Knisely was completed in January 2008. A five year waiting period was imposed and the stock was ultimately redeemed in full during 2013. An early redemption of 42,000 shares occurred in 2010 with another 41,000 shares redeemed in 2011. These decreased the aggregate holdings to a value of $148.4 thousand which was redeemed in 2013. The Bank also owns stock of Farmer Mac with a carrying value of $37.4 thousand which is required to participate loans in the program.

Loan Portfolio

The Bank’s various loan portfolios are subject to varying levels of credit risk. Management mitigates these risks through portfolio diversification and through standardization of lending policies and procedures.

Risks are mitigated through an adherence to the Bank’s loan policies, with any exception being recorded and approved by senior management or committees comprised of senior management. The Bank’s loan policies define parameters to essential underwriting guidelines such as loan-to-value ratio, cash flow and debt-to-income ratio, loan requirements and covenants, financial information tracking, collection practice and others. The maximum loan amount to any one borrower is limited by the Bank’s legal lending limits and is stated in policy. On a broader basis, the Bank restricts total aggregate funding in comparison to Bank capital to any one business or agricultural sector by an approved sector percentage to capital limitation.

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The following table shows the Bank’s loan portfolio by category of loan as of December 31^st of each year, including loans held for sale:

	(In Thousands)
Loans:	2014		2013		2012		2011		2010
Commercial real estate	$	270,188	$	248,893	$	199,999	$	198,266	$	194,268
Agricultural real estate		50,895		44,301		40,143		31,993		33,650
Consumer real estate		97,550		92,438		80,287		84,477		86,036
Commercial and industrial		100,126		99,498		101,624		114,497		117,344
Agricultural		74,611		65,449		57,770		52,598		65,400
Consumer		24,277		21,406		20,413		23,375		29,008
Industrial Development Bonds		4,698		4,358		1,299		1,196		1,965
	$	622,345	$	576,343	$	501,535	$	506,402	$	527,671

The following table shows the maturity of loans as of December 31, 2014:

	(In Thousands)
	Within One Year		After One Year Within Five Years		After Five Years		Total
Commercial Real Estate	$	27,291	$	92,076	$	150,821	$	270,188
Agricultural Real Estate		3,546		14,289		33,060		50,895
Consumer Real Estate		11,118		19,377		67,055		97,550
Commercial and industrial		58,741		36,159		5,226		100,126
Agricultural		47,831		22,826		3,954		74,611
Consumer		5,652		14,265		4,360		24,277
Industrial Development Bonds		2,499		126		2,073		4,698
	$	156,678	$	199,118	$	266,549	$	622,345

The following table presents the total of loans due after one year which has either 1) predetermined interest rates (fixed) or 2) floating or adjustable interest rates (variable):

	(In Thousands)
	Fixed Rate		Variable Rate		Total
Commercial Real Estate	$	181,908	$	60,989	$	242,897
Agricultural Real Estate		35,306		12,043		47,349
Consumer Real Estate		75,894		10,538		86,432
Commercial and industrial loans		39,617		1,768		41,385
Agricultural		25,842		938		26,780
Consumer, Master Card and Overdrafts		18,625		—		18,625
Industrial Development Bonds		2,199		—		2,199

The following table summarizes the Company’s nonaccrual and past due 90 days or more and still accruing loans as of December 31 for each of the last five years:

	(In Thousands)
	2014		2013		2012		2011		2010
Non-accrual loans	$	1,705	$	3,329	$	4,828	$	2,131	$	5,844
Accruing loans past due 90 days or more		—		—		1		—		48
Total	$	1,705	$	3,329	$	4,829	$	2,131	$	5,892

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Although loans may be classified as non-performing, some pay on a regular basis, and many continue to pay interest irregularly or at less than original contractual rates. Interest income that would have been recorded under the original terms of these loans would have aggregated $52.3 thousand for 2014, $139.1 thousand for 2013 and $544.8 thousand for 2012. Any collections of interest on nonaccrual loans are included in interest income when collected unless it is on an impaired loan with a specific allocation. A collection of interest on an impaired loan with a specific allocation is applied to the loan balance to decrease the allocation. Total interest collections, whether on an accrued or cash basis, amounted to $87 thousand for 2014, $60 thousand for 2013 and $26 thousand for 2012. None of the interest collected in 2012 was applied to reduce a specific allocation. $12.8 thousand dollars of interest collected in 2014 was applied to reduce the specific allocation.

Loans are placed on nonaccrual status in the event that the loan is in past due status for more than 90 days or payment in full of principal and interest is not expected. The loss of interest due to the high balances in nonaccruals as of 2012 impacted the yield on loans. The Bank had nonaccrual loan balances of $4.8 million at December 21, 2012 compared to balances of $3.3 and $1.7 million as of year-end 2013 and 2014, respectively. All of the balances of nonaccrual loans for the past three years were collaterally secured.

As of December 31, 2014 the Bank had $13.5 million of loans which it considers to be “potential problem loans” in that the borrowers are experiencing financial difficulties. At December 31, 2013, the Bank had $14.8 million of these loans. These loans are subject to constant management attention and are reviewed at least monthly. The amount of the potential problem loans was considered in management’s review of the loan loss reserve at December 31, 2014 and 2013.

In extending credit to families, businesses and governments, banks accept a measure of risk against which an allowance for possible loan loss is established by way of expense charges to earnings. This expense is determined by management based on a detailed monthly review of the risk factors affecting the loan portfolio, including general economic conditions, changes in the portfolio mix, past due loan-loss experience and the financial condition of the bank’s borrowers.

As of December 31, 2014, the Bank had loans outstanding to individuals and firms engaged in the various fields of agriculture in the amount of $74.6 million with an additional $50.1 million in agricultural real estate loans these compared to $65.4 and $44.3 million respectively as of December 31, 2013. The ratio of this segment of loans to the total loan portfolio is not considered unusual for a bank engaged in and servicing rural communities.

Loan modifications granted are typically for seasonality issues where cash flow has decreased. The time period involved is generally quite short in relation to the loan term. For example, a typical modification may consist of interest only payments for 90 days. We consider this treatment of interest only payments for a short time as an insignificant delay in payment. Consequently, we do not consider these occurrences as “troubled debt restructurings”. Interest rate modification to reflect a decrease in market interest rates or maintain a relationship with the debtor, where the debtor is not experiencing financial difficulty and can obtain funding from other sources, is not considered a troubled debt restructuring. As of December 31, 2014, the Bank had $797.2 thousand of its loans that were classified as troubled debt restructurings. This compares to $911.2 thousand as of same date 2013 and the Bank had almost $5.5 million classified as such as of December 31, 2012. The Bank is occasionally ordered by the courts to give terms to a borrower that are better than what the Bank would like for the risk associated with that credit but not below or beyond rates and terms available for better credits in our market. Therefore, the Bank has not done any modifications that it would classify as “troubled debt restructurings” under those circumstances.

Updated appraisals are required on all collateral dependent loans once they are deemed impaired. The Bank may also require an updated appraisal of a watch list loan which the Bank monitors under their loan policy. On a quarterly basis, Bank management reviews properties supporting asset dependent loans to consider market events that may indicate a change in value has occurred.

To determine observable market price, collateral asset values securing an impaired loan are periodically evaluated. Maximum time of re-evaluation is every 12 months for chattels and titled vehicles and every two years for real estate. In this process, third party evaluations are obtained and heavily relied upon. Until such time that updated appraisals are received, the Bank may discount the existing collateral value used.

Performing “non-watch list” loans secured in whole or in part by real estate, do not require an updated appraisal unless the loan is rewritten and additional funds advanced. Watch List loans secured in whole or in part by real

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estate require updated appraisals every two years. All loans are subject to loan to values as found in the Bank’s loan policies irrespective of their grade. The Bank’s watch list is reviewed on a quarterly basis by management and any questions to value are addressed at that time.

The majority of the Bank’s loans are made in the market by lenders who live and work in the market. Thus, their evaluation of the independent valuation is also valuable and serves as a double check.

On extremely rare occasions, the Bank will make adjustments to the recorded values of collateral securing commercial real estate loans without acquiring an updated appraisal for the subject property. The Bank has no formalized policy for determining when collateral value adjustments between regularly scheduled appraisals are necessary, nor does it use any specific methodology for applying such adjustments. However, on a quarterly basis as part of its normal operations, the Bank’s senior management and the Loan Review Committee will meet to review all commercial credits either deemed to be impaired or on the Bank’s watch list. In addition to analyzing the recent performance of these loans, management and the Loan Review Committee will also consider any general market conditions that might warrant adjustments to the value of particular real estate collateralizing commercial loans. In addition, management conducts annual reviews of all commercial loans exceeding certain outstanding balance thresholds. In each of these situations, any information available to management regarding market conditions impacting a specific property or other relevant factors is considered, and lenders familiar with a particular commercial real estate loan and the underlying collateral may be present to provide their opinion on such factors. If the available information leads management to conclude a valuation adjustment is warranted, such an adjustment may be applied on the basis of the information available. If management concludes that an adjustment is warranted but lacks the specific information needed to reasonably quantify the adjustment, management will order a new appraisal on the subject property even though one may not be required under the Bank’s general policies for updating appraisal.

Note 4 of the Consolidated Financial Statements may also be reviewed for additional tables dealing with the Bank’s loans and ALLL.

ALLL is evaluated based on an assessment of the losses inherent in the loan portfolio. This assessment results in an allowance consisting of two components, allocated and unallocated.

Management considers several different risk assessments in determining ALLL. The allocated component of ALLL reflects expected losses resulting from an analysis of individual loans, developed through specific credit allocations for individual loans and historical loss experience for each loan category. For those loans where the internal credit rating is at or below a predetermined classification and management can reasonably estimate the loss that will be sustained based upon collateral, the borrowers operating activity and economic conditions in which the borrower operates, a specific allocation is made. For those borrowers that are not currently behind in their payment, but for which management believes, based on economic conditions and operating activities of the borrower, the possibility exists for future collection problems, a reserve is established. The amount of reserve allocated to each loan portfolio is based on past loss experiences and the different levels of risk within each loan portfolio. The historical loan loss portion is determined using a historical loss analysis by loan category.

The unallocated portion of the reserve for loan losses is determined based on management’s assessment of general economic conditions as well as specific economic factors in the Bank’s marketing area. This assessment inherently involves a higher degree of uncertainty. It represents estimated inherent but undetected losses within the portfolio that are probable due to uncertainties in economic conditions, delays in obtaining information, including unfavorable information about a borrower’s financial condition and other current risk factors that may not have yet manifested themselves in the Bank’s historical loss factors used to determine the allocated component of the allowance.

Actual charge-off of loan balances is based upon periodic evaluations of the loan portfolio by management. These evaluations consider several factors, including, but not limited to, general economic conditions, financial condition of the borrower, and collateral.

As presented below, charge-offs decreased to $778 thousand for 2014 and increased to $1.3 million for 2013 and decreased to $891 thousand for 2012 and $2.7 million for 2011. The provision expense also decreased in 2012 and 2011 and increased for 2013 and 2014. 2014 and 2013 had provision expense of $1.2 million and $858 thousand respectively. 2012 had provision expense of $738 thousand with 2011 having provision expense of $1.7 million. The Commercial and Industrial portfolio had the largest net charge-off position in 2011 through 2014. Consumer real estate and consumer & other loans were the loan categories which had the largest net charge-off position in 2012. The ratio of

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net charge offs to average loans outstanding is evidence of the recognition of troubled loans and the write down of collateral values in 2011. The improvement in asset quality during the periods shown is reflected in the increased percentage of the allowance for loan loss to nonperforming loans.

The years with the higher percentage of ACL to total loans ratio account for the higher level of nonaccrual and watch list loans, which demonstrates the extended time period with which it has taken to achieve resolution and/or collection of these loans. The ALLL for 2010 and 2011 decreased due to the improvement in the asset quality as the balances in impaired loans and nonaccruals were drastically reduced over the same time periods. In 2012, the increase in provision expense was to offset the higher year-end watch list values. 2013’s lower balance again recognizes the improvement in asset quality. The monetary decrease is minimal. However, the decrease as a percentage of loans is wider as compared to 2012 due to loan growth during 2013. A smaller portion of the allowance was needed to fund the impaired loans as collateral remained sufficient to cover the outstanding amounts in most cases. 2014’s significant and continued loan growth since fourth quarter 2013 was the reason behind 2014’s higher balances as asset quality remained strong.

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The following table presents a reconciliation of the allowance for credit losses for the years ended December 31, 2014, 2013, 2012, 2011 and 2010:

	(In Thousands)
	2014			2013			2012			2011			2010
Loans	$	621,926		$	576,113		$	501,402		$	506,215		$	527,589
Daily average of outstanding loans	$	592,162		$	507,126		$	492,697		$	504,058		$	550,698
Allowance for Loan Losses - Jan 1	$	5,194		$	5,224		$	5,091		$	5,706		$	6,008
Loans Charged off:
Commercial Real Estate		229			164			98			360			1,147
Ag Real Estate		—			—			—			—			—
Consumer Real Estate		168			147			246			423			507
Commercial and Industrial		—			513			47			1,500			4,188
Agricultural		—			—			6			24			136
Consumer & other loans		381			438			494			374			444
	$	778		$	1,262		$	891		$	2,681		$	6,422
Loan Recoveries:
Commercial Real Estate	$	4		$	23		$	7		$	32		$	52
Ag Real Estate		—			—			—			—			—
Consumer Real Estate		34			20			60			61			55
Commercial and Industrial		20			141			30			19			515
Agricultural		44			5			12			67			17
Consumer & other loans		196			185			177			172			156
	$	298		$	374		$	286		$	351		$	795
Net Charge Offs	$	480		$	888		$	605		$	2,330		$	5,627
Provision for loan loss		1,191			858			738			1,715			5,325
Acquisition provision for loan loss		—			—			—			—			—
Allowance for Loan & Lease Losses - Dec 31	$	5,905		$	5,194		$	5,224		$	5,091		$	5,706
Allowance for Unfunded Loan Commitments & Letters of Credit Dec 31		207			163			162			130			153
Total Allowance for Credit Losses - Dec 31	$	6,112		$	5,357		$	5,386		$	5,221		$	5,859
Ratio of net charge-offs to average Loans outstanding		0.08	%		0.18	%		0.12	%		0.46	%		1.02	%
Ratio of the Allowance for Loan Loss to Nonperforming Loans		346.30	%		156.03	%		108.20	%		238.90	%		97.63	%

* Nonperforming loans are defined as all loans on nonaccrual, plus any loans past due 90 days not on nonaccrual.

39

Allocation of ALLL per Loan Category in terms of dollars and percentage of loans in each category to total loans is as follows:

	2014				2013				2012				2011				2010
	Amount				Amount				Amount				Amount				Amount
	(000’s)		%		(000’s)		%		(000’s)		%		(000’s)		%		(000’s)		%
Balance at End of Period Applicable To:
Commercial Real Estate	$	2,367		43.43	$	2,107		43.19	$	1,749		39.89	$	2,087		39.74	$	1,868		36.82
Ag Real Estate		184		8.18		131		7.69		113		8.01		140		6.32		122		6.38
Consumer Real Estate		537		15.69		257		16.05		368		16.01		260		16.12		258		16.31
Commercial and Industrial		1,421		16.10		1,359		17.27		2,183		20.27		1,948		22.62		2,354		22.24
Agricultural		547		12.00		326		11.36		290		11.52		267		10.38		327		12.40
Consumer, Overdrafts and other loans		323		3.84		292		3.68		268		4.04		315		4.58		380		5.48
Unallocated		526		0.76		722		0.76		253		0.26		74		0.24		397		0.37
Allowance for Loan & Lease Losses	$	5,905		100.00	$	5,194		100.00	$	5,224		100.00	$	5,091		100.00	$	5,706		100.00
Off Balance Sheet Commitments		207				163				162				130			$	153
Total Allowance for Credit Losses	$	6,112			$	5,357			$	5,386			$	5,221			$	5,859

Deposits

The amount of outstanding time certificates of deposits and other time deposits in amounts of $100,000 or more by maturity as of December 31, 2014 are as follows:

	(In Thousands)
	Under Three Months		Over Three Months Less than Six Months		Over Six Months Less Than One Year		Over One Year
Time Deposits	$	9,536	$	14,218	$	16,858	$	40,985

The following table presents the average amount of and average rate paid on each deposit category:

	(In Thousands)
	Non-Interest			Interest			Savings			Time
	DDAs			DDAs			Accounts			Accounts
December 31, 2014:
Average balance	$	151,752		$	207,103		$	216,405		$	214,680
Average rate		0.00	%		0.51	%		0.17	%		0.92	%
December 31, 2013:
Average balance	$	104,024		$	202,914		$	197,157		$	250,737
Average rate		0.00	%		0.53	%		0.19	%		1.06	%
December 31, 2012:
Average balance	$	84,217		$	190,273		$	182,724		$	285,214
Average rate		0.00	%		0.70	%		0.33	%		1.24	%

40

Liquidity

Liquidity remains high though down from prior years as the Bank has decreased the investment portfolio to fund loans. The Bank has access to $58 million of unsecured borrowings through correspondent banks and $71.6 million of unpledged securities which may be sold or used as collateral. An additional $15.0 million is also available from the Federal Home Loan Bank based on current collateral pledging with up to $112.6 million available provided adequate collateral is pledged.

Maintaining sufficient funds to meet depositor and borrower needs on a daily basis continues to be among management’s top priorities. This is accomplished not only by immediate liquid resources of cash, due from banks and federal funds sold, but also by the Bank’s available for sale securities portfolio. The average aggregate balance of these assets was $296.5 for 2014 and $387.7 million for 2013, and $397.3 million for 2012. This represented 31.8 percent and 42.5 percent of total average assets, respectively. Of the almost $248.5 million of debt securities in the company’s portfolio as of December 31, 2014, $23.5 million, or 9.5 percent of the portfolio, is expected to receive payments or mature in 2015. The availability of the funds may be reduced by the need to utilize securities for pledging purposes on public deposits. This liquidity provides the opportunity to fund loan growth by analysis of the lowest cost and source of funds whether by increasing deposits, sales or runoff of investments or utilizing debt.

Historically, the primary source of liquidity has been core deposits that include noninterest bearing and interest bearing demand deposits, savings, money market accounts and time deposits of individuals. Core deposit balances as of year-end 2014 increased in all categories with the exception of time deposits. Overall deposits increased an average of $913 thousand in 2014, $4.7 million during 2013 and $20.7 million in average deposits in 2012. The Bank also utilized Federal Funds purchased at times during 2012 through 2014. The average balance for 2014 and 2013 was $1.4 million and $785.5 thousand respectively, which was mainly for verification of borrowing procedures should the need arise and while awaiting the influx of deposits from the Custar acquisition.

Historically, the primary use of new funds is placing the funds back into the community through loans for the acquisition of new homes, consumer products and for business development. The use of new funds for loans is measured by the loan to deposit ratio. The Bank’s average loan to deposit ratio was 76.4 percent for 2014, 66.2 percent for 2013 and 65 percent for 2012. The lower ratios in 2013 and 2012 were due to the success of the deposit gathering function, the residential mortgage loans being sold in the secondary market and the lack of loan demand. The Bank’s goal is for this ratio to be higher in the 80-90 percent range with loan growth being the driver.

Short-term debt such as federal funds purchased and securities sold under agreement to repurchase also provides the Company with liquidity. Short-term debt for both federal funds purchased and securities sold under agreement to repurchase amounted to $56.0 million at the end of 2014 compared to $69.8 million at the end of 2013 and to $51.3 million at the end of 2012. These accounts are used to provide a sweep product to the Bank’s commercial customers. Though no federal funds were purchased at year end, the Bank does have arrangements with correspondent Banks that can be utilized when necessary.

“Other borrowings” are also a source of funds. Other borrowings consist of loans from the Federal Home Loan Bank of Cincinnati. These funds are then used to provide fixed rate mortgage loans secured by homes in our community. Borrowings from this source decreased by $4.5 million to none at December 31, 2014. This compares to decreased borrowings during 2013 of $7.1 million and decreased borrowings during 2012 of $5.1 million to $11.6 million to end at December 31, 2012. The decreased borrowings were payoffs of matured notes in 2013 and 2014. Sufficient funds were available to fund growth so new advances were not needed.

Asset/Liability Management

The primary functions of asset/liability management are to assure adequate liquidity and maintain an appropriate balance between interest earning assets and interest bearing liabilities. It involves the management of the balance sheet mix, maturities, re-pricing characteristics and pricing components to provide an adequate and stable net interest margin with an acceptable level of risk. Interest rate sensitivity management seeks to avoid fluctuating net interest margins and to enhance consistent growth of net interest income through periods of changing interest rates.

Changes in net income, other than those related to volume arise when interest rates on assets re-price in a time frame or interest rate environment that is different from that of the re-pricing period for liabilities. Changes in net interest income also arise from changes in the mix of interest-earning assets and interest-bearing liabilities.

41

Historically, the Bank has maintained liquidity through cash flows generated in the normal course of business, loan repayments, maturing earning assets, the acquisition of new deposits, and borrowings. The Bank’s asset and liability management program is designed to maximize net interest income over the long term while taking into consideration both credit and interest rate risk. Interest rate sensitivity varies with different types of interest-earning assets and interest-bearing liabilities. Overnight federal funds on which rates change daily and loans that are tied to the market rate differ considerably from long-term investment securities and fixed rate loans. Similarly, time deposits over $100,000 and money market certificates are much more interest rate sensitive than passbook savings accounts. The Bank utilizes shock analysis to examine the amount of exposure an instant rate change of 100, 200, 300 and 400 basis points in both increasing and decreasing directions would have on the financials. Acceptable ranges of earnings and equity at risk are established and decisions are made to maintain those levels based on the shock results.

Impact of Inflation and Changing Prices

The consolidated financial statements and notes thereto presented herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of the Company’s operations. Unlike most industrial companies, nearly all the assets and liabilities of the Company are monetary in nature. As a result, interest rates have a greater impact on the Company’s performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and service.

Contractual Obligations

Contractual Obligations of the Company totaled $252.4 million as of December 31, 2014. Time deposits represent contractual agreements for certificates of deposits held by its customers. Long term debt represents the borrowings with the Federal Home Loan Bank and is further defined in Note 4 and 9 of the Consolidated Financial Statements.

	Payment Due by Period (In Thousands)
Contractual Obligations	Total		Less than 1 year		1-3 Years		3-5 Years		More than 5 years
Securities sold under agreement to repurchase	$	55,962	$	55,962	$	—	$	—	$	—
Time Deposits		195,500		97,439		69,220		27,917		924
Dividends Payable		965		965		—		—		—
Long Term Debt		—		—		—		—		—
Total	$	252,427	$	154,366	$	69,220	$	27,917	$	924

Capital Resources

Stockholders’ equity was $114.5 million as of December 31, 2014 compared to $108.6 million at December 31, 2013. Dividends declared during 2014 were $.84 per share totaling $3.86 million and during 2013 were $0.81 per share totaling $3.75 million. During 2014, the Company purchased 23,570 shares and awarded 13,250 restricted shared to 61 employees. During 2013, the Company purchased 56,000 shares and awarded 11,000 restricted shares to 53 employees. For a summary of activity as it relates to the Company’s restricted stock awards, please refer to Note 11: Employee Benefit Plans in the consolidated financial statements. At yearend 2014, the Company held 572,772 shares in Treasury stock and 33,390 unvested shares of restricted stock. At year-end 2013, the Company held 561,562 shares in Treasury stock and 31,890 unvested shares of restricted stock. On January 16, 2015 the Company announced the authorization by its Board of Directors for the Company’s repurchase, either on the open market, or in privately negotiated transactions, of up to 200,000 shares of its outstanding common stock commencing January 16, 2015 and ending December 31, 2015.

The decrease in the equity balance of 2013 as compared to 2012 was due to the market value fluctuation of our available for sale investment portfolio.

42

The Company continues to have a strong capital base and maintains regulatory capital ratios that are above the defined regulatory capital ratios. At December 31, 2014, the Bank and the Company had total risk-based capital ratios of 14.35% and 16.68%, respectively. Core capital to risk-based asset ratios of 13.46% and 15.79% for the Bank and the Company, respectively, are well in excess of regulatory guidelines. The Bank’s leverage ratio of 10.01% is also substantially in excess of regulatory guidelines, as is the Company’s at 11.70%. For further discussion and analysis of regulatory capital requirements, refer to Note 15 of the Audited Financial Statements.

The Company’s subsidiaries are restricted by regulations from making dividend distributions in excess of certain prescribed amounts. Upon prior regulatory approval, the Bank may be allowed to pay above the prescribed amount.

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

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

Interest rate risk is managed within an overall asset/liability framework. The principal objectives of asset/liability management are to manage sensitivity of net interest spreads and net income to potential changes in interest rates. Funding positions are kept within predetermined limits designed to ensure that risk-taking is not excessive and that liquidity is properly managed. In the event that our asset/liabilities management strategies are unsuccessful, our profitability may be adversely affected. The Company employs a sensitivity analysis utilizing interest rate shocks to help in this analysis.

43

The shocks presented below assume an immediate change of rate in the percentages and directions shown:

Interest Rate Shock on Net Interest Margin										Interest Rate Shock on Net Interest Income
Net Interest Margin (Ratio)			% Change to Flat Rate			Rate Direction	Rate changes by			Cumulative Total (000)		% Change to Flat Rate
	3.65	%		10.17	%	Rising		3.00	%	$	33,149		9.95	%
	3.56	%		7.63	%	Rising		2.00	%	$	32,412		7.50	%
	3.42	%		3.25	%	Rising		1.00	%	$	31,102		3.16	%
	3.31	%		—		Flat		—		$	30,150		—
	3.03	%		-8.55	%	Falling		-1.00	%	$	27,538		-8.66	%
	2.82	%		-14.71	%	Falling		-2.00	%	$	25,675		-14.84	%
	2.61	%		-21.24	%	Falling		-3.00	%	$	23,679		-21.46	%

The shock chart currently shows a tightening in net interest margin over the next twelve months in a decreasing rate environment. Due to the length of and existence of such a low rate environment, the model does not predict expansion of net interest margin in a further decreasing rate environment. Cost of funds are below 1% so at even the lowest shock of 100 basis points, the Bank cannot take full advantage and reprice funds to match the level of shock. The positive impact in a rising rate environment is shown whereas previously it too had been decreasing. Because of the long duration of the current rate environment, assets have been able to lower the time frame when repricing will occur and therefore an increasing rate environment has become favorable. The Bank continues to enhance its use of the software model and performs additional stress tests whose results management and the directors review. Both directional changes are well within risk exposure guidelines. The effect of the rate shocks may be mitigated to the extent that not all lines of business are directly tied to an external index and actual balance sheet composition may differ from prediction.

ITEM 8. FINANCIAL STATEMENTS

Index To Consolidated Financial Statements

44

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders

Farmers & Merchants Bancorp, Inc.

Archbold, Ohio

We have audited the accompanying consolidated balance sheet of Farmers & Merchants Bancorp, Inc. as of December 31, 2014, and the related consolidated statements of income and comprehensive income, changes in stockholders’ equity and cash flows for the year ended December 31, 2014. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. Our audits included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Farmers & Merchants Bancorp, Inc. as of December 31, 2014, and the results of its operations and its cash flows for the year ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Farmers & Merchants Bancorp, Inc.’s internal control over financial reporting as of December 31, 2014, based on criteria established in 1992 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 25, 2015, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ BKD, LLP

BKD, LLP

Fort Wayne, Indiana

February 25, 2015

45

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders

Farmers & Merchants Bancorp, Inc.

Archbold, Ohio

We have audited Farmers & Merchants Bancorp, Inc.’s internal control over financial reporting as of December 31, 2014, based on criteria established in 1992 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (1992). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Farmers & Merchants Bancorp, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on criteria established in 1992 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of Farmers & Merchants Bancorp, Inc. and our report dated February 25, 2015, expressed an unqualified opinion thereon.

/s/ BKD, LLP

BKD, LLP

Fort Wayne, Indiana

February 25, 2015

46

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Farmers & Merchants Bancorp, Inc. and Subsidiary

We have audited the accompanying consolidated balance sheet of Farmers & Merchants Bancorp, Inc. and Subsidiary as of December 31, 2013, and the related consolidated statements of income and comprehensive income, stockholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2013. We also have audited the Company’s internal control over financial reporting as of December 31, 2013, based on criteria established in the 1992 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Farmers & Merchants Bancorp, Inc. and Subsidiary as of December 31, 2013, and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, Farmers & Merchants Bancorp, Inc. and Subsidiary maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in the 1992 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

/s/ Plante & Moran, PLLC

Auburn Hills, MI

February 26, 2014

47

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheet

December 31, 2014 and 2013

(000’s Omitted, Except Per Share Data)

	2014			2013
Assets
Assets
Cash and due from banks	$	22,246		$	18,265
Federal Funds Sold		2,049			998
Total cash and cash equivalents		24,295			19,263
Securities - available for sale		248,492			324,509
Other Securities, at cost		3,717			4,216
Loans, net		616,021			570,919
Premises and equipment		20,300			18,709
Goodwill		4,074			4,074
Mortgage Servicing Rights		2,023			2,066
Other Real Estate Owned		1,094			2,091
Other assets		21,197			20,091
Total Assets	$	941,213		$	965,938
Liabilities and Stockholders’ Equity
Liabilities
Deposits
Noninterest-bearing	$	164,009		$	110,452
Interest-bearing
NOW accounts		179,862			215,185
Savings		223,189			214,467
Time		195,500			236,360
Total deposits		762,560			776,464
Federal Funds purchased and Securities sold under agreement to repurchase		55,962			69,756
Federal Home Loan Bank (FHLB) Advances		—			4,500
Dividend payable		965			967
Accrued expenses and other liabilities		7,233			5,634
Total liabilities		826,720			857,321
Commitments and Contingencies
Stockholders’ Equity
Common stock - No par value - 6,500,000 shares authorized; 5,200,000 shares issued & outstanding		12,222			12,312
Treasury Stock - 572,662 shares 2014, 561,562 shares 2013		(11,928	)		(11,611	)
Retained earnings		113,755			107,910
Accumulated other comprehensive income		444			6
Total stockholders’ equity		114,493			108,617
Total Liabilities and Stockholders’ Equity	$	941,213		$	965,938

See Notes to Consolidated Financial Statements

48

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Consolidated Statement of Income & Comprehensive Income

Years Ended December 31, 2014, 2013 and 2012

(000’s Omitted, Except Per Share Data)

	2014			2013			2012
Interest Income
Loans, including fees	$	28,070		$	24,978		$	26,489
Debt securities:
U.S. Treasury and government agency		3,171			4,151			4,427
Municipalities		2,037			2,080			2,112
Dividends		156			185			199
Federal funds sold		7			11			20
Other		12			23			26
Total interest income		33,453			31,428			33,273
Interest Expense
Deposits		3,458			4,193			5,574
Federal funds purchased and securities sold under agreements to repurchase		254			248			242
Borrowed funds		4			163			434
Total interest expense		3,716			4,604			6,250
Net Interest Income - Before provision for loan losses		29,737			26,824			27,023
Provision for Loan Losses		1,191			858			738
Net Interest Income After Provision
For Loan Losses		28,546			25,966			26,285
Noninterest Income
Customer service fees		5,224			5,194			5,204
Other service charges and fees		3,819			3,746			3,499
Net gain on sale of loans		647			1,123			2,041
Net gain on sale of securities		494			775			852
Total noninterest income		10,184			10,838			11,596
Noninterest Expense
Salaries and Wages		10,186			9,553			9,039
Employee benefits		3,324			3,219			3,288
Net occupancy expense		1,107			1,251			1,419
Furniture and equipment		1,541			1,349			1,400
Data processing		1,250			1,212			1,119
Franchise taxes		781			953			946
Net loss on sale of other assets owned		157			144			634
FDIC Assessment		503			535			467
Mortgage servicing rights amortization		344			426			768
Other general and administrative		6,020			5,559			5,109
Total other operating expenses		25,213			24,201			24,189
Income Before Income Taxes		13,517			12,603			13,692
Income Taxes		3,871			3,596			3,904
Net Income		9,646			9,007			9,788
Other Comprehensive Income (Loss) (Net of Tax):
Net unrealized gain (loss) on available for sale securities		1,158			(8,448	)		417
Reclassification adjustment for gain on sale of available for sale securities		(494	)		(775	)		(852	)
Net unrealized gain (loss) on available for sale securities		664			(9,223	)		(435	)
Tax effect		226			(3,136	)		(147	)
Other comprehensive income (loss)		438			(6,087	)		(288	)
Comprehensive Income	$	10,084		$	2,920		$	9,500
Earnings Per Share - Basic and Diluted	$	2.08		$	1.93		$	2.08
Weighted Average Shares Outstanding		4,628,178			4,676,547			4,695,876

See Notes to Consolidated Financial Statements

49

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Consolidated Statement of Changes to Stockholders’ Equity

For the Years Ended December 31, 2014, 2013 and 2012

(000’s Omitted, Except Per Share Data)

	Shares of Common Stock			Common Stock			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income			Total Stockholders’ Equity
Balance - January 1, 2012		4,716,337		$	12,361		$	(9,898	)	$	96,495		$	6,381		$	105,339
Net income											9,788						9,788
Other comprehensive loss														(288	)		(288	)
Purchase of Treasury Stock		(42,144	)					(894	)								(894	)
Issuance of 11,000 shares of restricted stock (Net of Forfeitures - 1,135)		9,865			(235	)		204			(6	)					(37	)
Stock-based compensation expense					217												217
Cash dividends declared - $0.78 per share											(3,636	)					(3,636	)
Balance - December 31, 2012		4,684,058		$	12,343		$	(10,588	)	$	102,641		$	6,093		$	110,489
Net income											9,007						9,007
Other comprehensive loss														(6,087	)		(6,087	)
Purchase of Treasury Stock		(56,000	)					(1,236	)								(1,236	)
Issuance of 11,000 shares of restricted stock (Net of Forfeitures - 620)		10,380			(284	)		213			17						(54	)
Stock-based compensation expense					253												253
Cash dividends declared - $0.81 per share											(3,755	)					(3,755	)
Balance - December 31, 2013		4,638,438		$	12,312		$	(11,611	)	$	107,910		$	6		$	108,617
Net income											9,646						9,646
Other comprehensive income														438			438
Purchase of Treasury Stock		(23,570	)					(576	)								(576	)
Issuance of 13,250 shares of restricted stock (Net of Forfeitures - 780)		12,470			(322	)		259			61						(2	)
Stock-based compensation expense					232												232
Cash dividends declared - $0.84 per share											(3,862	)					(3,862	)
Balance - December 31, 2014		4,627,338		$	12,222		$	(11,928	)	$	113,755		$	444		$	114,493

See notes to Consolidated Financial Statements

50

Farmers & Merchants Bancorp, Inc and Subsidiaries

Consolidated Statement of Cash Flows

Years Ended December 31, 2014, 2013 and 2012

(000’s Omitted)

	2014			2013			2012
Cash Flows from Operating Activities
Net income	$	9,646		$	9,007		$	9,788
Adjustments to reconcile net income to net cash from operating activities:
Depreciation		1,293			1,184			1,154
Amortization of securities, net		1,430			2,149			3,075
Amortization of servicing rights		344			426			768
Amortization of core deposit intangible		480			319			312
Compensation expense related to stock awards		232			253			217
Provision for loan loss		1,191			858			738
Gain on sale of loans held for sale		(647	)		(1,123	)		(2,041	)
Originations of loans held for sale		(37,432	)		(62,360	)		(96,472	)
Proceeds from sale of loans held for sale		41,992			65,391			95,435
Loss on sale of other assets		157			144			634
Gain on sales of securities		(494	)		(775	)		(852	)
Change in other assets and other liabilities, net		971			1,520			1,458
Net cash provided by operating activities		19,159			16,993			14,214
Cash Flows from Investing Activities
Activity in securities:
Maturities, prepayments and calls		17,817			33,228			42,851
Sales		57,928			91,039			60,513
Purchases		—			(103,320	)		(134,435	)
Proceeds from redemption of FHLB stock		499			—			—
Proceeds from sales of assets		24			1,138			1,146
Additions to premises and equipment		(2,908	)		(2,063	)		(1,774	)
Loan and lease originations and principal collections, net		(50,853	)		(67,194	)		5,245
Net cash received for acquisition		—			15,215			—
Net cash provided by (used in) investing activities		22,507			(31,957	)		(26,454	)
Cash Flows from Financing Activities
Net increase (decrease) in deposits		(13,904	)		(16,254	)		23,870
Net change in federal funds purchased and securities sold under agreements to repurchase		(13,794	)		18,444			(1,128	)
Repayment of FHLB advances		(4,500	)		(7,100	)		(5,062	)
Purchase of Treasury Stock		(576	)		(1,236	)		(894	)
Cash dividends paid on common stock		(3,864	)		(3,719	)		(3,597	)
Net cash provided by (used in) financing activities		(36,634	)		(9,865	)		13,189
Net Increase (Decrease) in Cash and Cash Equivalents		5,032			(24,829	)		949
Cash and Cash Equivalents - Beginning of Year		19,263			44,092			43,143
Cash and Cash Equivalents - End of Year	$	24,295		$	19,263		$	44,092
Supplemental Information
Cash paid during the year for:
Interest	$	3,732		$	4,679		$	6,304
Income taxes	$	4,285		$	3,240		$	4,085
Noncash investing activities:
Transfer of loans to other real estate owned	$	139		$	1,053		$	562

See Notes to Consolidated Financial Statements

51

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 1 – Summary of Significant Accounting Policies

Nature of Operations

The Farmers & Merchants Bancorp, Inc. (the Company) through its bank subsidiary, The Farmers & Merchants State Bank (the Bank) provides a variety of financial services to individuals and small businesses through its offices in Northwest Ohio and Northeast Indiana.

Consolidation Policy

The consolidated financial statements include the accounts of Farmers & Merchants Bancorp, Inc. and its wholly-owned subsidiaries, The Farmers & Merchants State Bank (the Bank), a commercial banking institution and Farmers & Merchants Risk Management, Inc. (the Captive), a Captive insurance company. All significant inter-company balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and the valuation of mortgage servicing rights, goodwill, available for sale investment securities, other real estate owned and impaired loans. Actual results could differ from those estimates.

The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. In connection with the determination of the estimated losses on loans, management obtains independent appraisals for significant collateral.

The Bank’s loans are generally secured by specific items of collateral including real property, consumer assets, and business assets. Although the Bank has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent on local economic conditions in the agricultural industry.

While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based on changes in local economic conditions. In addition regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the Bank to recognize additional losses based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans may change materially in the near term. However, the amount of the change that is reasonably possible cannot be estimated.

Cash and Cash Equivalents

For purposes of the consolidated statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. This includes cash on hand, amounts due from banks, and federal funds sold. Generally, federal funds are purchased for one day periods.

Restrictions on Cash and Amounts Due from Banks

The Bank is required to maintain average balances on hand with the Federal Reserve Bank. The aggregate reserve was $7.1 million for December 31, 2014 and it was $6.5 million for December 31, 2013. The Company and its subsidiaries maintain cash balances with high quality credit institutions. At times such balances may be in excess of the federally insured limits.

52

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 1 – Summary of Significant Accounting Policies (Continued)

Securities

Debt securities are classified as available-for-sale. Securities available-for-sale are carried at fair value with unrealized gains and losses reported in other comprehensive income. Realized gains and losses on securities available for sale are included in other income (expense) and, when applicable, are reported as a reclassification adjustment, net of tax, in other comprehensive income (loss). Gains and losses on sales of securities are determined on the specific-identification method.

Declines in the fair value of securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. The related write-downs are included in earnings as realized losses.

Other Securities

Other Securities consists of Federal Home Loan Bank of Cincinnati and Indianapolis stock and Farmer Mac stock. The Federal Home Loan Bank of Indianapolis stock was completely redeemed during 2013. These stocks are carried at cost and are held to enable the Bank to conduct business with the entities. The Federal Home Loan Banks sell and purchase their stock at par. The Federal Home Loan Bank of Cincinnati stock is held as collateral security for all indebtedness of the Bank to the Federal Home Loan Bank. The Federal Home Loan Bank of Cincinnati is evaluated for impairment as conditions warrant.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at the amount of unpaid principal, reduced by unearned discounts and deferred loan fees and costs, as well as, by the allowance for loan losses. Interest income is accrued on a daily basis based on the principal outstanding.

Generally, a loan is classified as nonaccrual and the accrual of interest income is generally discontinued when a loan becomes ninety days past due as to principal or interest and these loans are placed on a “cash basis” for purposes of income recognition. Management may elect to continue the accrual of interest when the estimated net realizable value of collateral is sufficient to cover the principal and accrued interest, and the loan is in the process of collection. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest receivable is charged against income.

Loan origination and commitment fees and certain direct loan origination costs are deferred and amortized as a net adjustment to the related loan’s yield. The Bank is generally amortizing these costs over the contractual life of such loans.

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses charged to income. Loans deemed to be uncollectable and changes in the allowance relating to loans are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based on management’s periodic review of the collectability of the loans in light of historical experiences, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are subject to revision as more information becomes available.

53

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 1 – Summary of Significant Accounting Policies (Continued)

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. The unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and agricultural loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

At 120 days delinquent, secured consumer loans are charged down to the value of the collateral, if repossession of the collateral is assured and/or in the process of repossession. Consumer mortgage loan deficiencies are charged down upon the sale of the collateral or sooner upon the recognition of collateral deficiency.

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

Large groups of homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer loans for impairment, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

For more information regarding the actual composition and classification of loans involved in the establishment of the allowance for loan loss, please see Note 4 provided here with the notes to consolidated financial statements.

Loans Held for Sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized in a valuation allowance by charges to income.

Servicing Assets

Servicing assets are recognized as separate assets when rights are acquired through purchase or sale of financial assets. Capitalized servicing rights are reported in other assets and are amortized into noninterest expense in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as interest

54

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 1 – Summary of Significant Accounting Policies (Continued)

rates and terms. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market based assumptions. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the capitalized amount for the stratum. Fees received for servicing loans owned by investors are based on a percentage of the outstanding monthly principal balance of such loans and are included in operating income as loan payments are received. Costs of servicing loans are charged to expense as incurred.

Goodwill and other Intangible Assets

Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed at least annually. If possible impairment is likely, the Bank will utilize the assistance of an independent third party for impairment and any such impairment is recognized in the period identified. The Bank considered the following qualitative factors to determine if impairment was likely: 1) the Bank continued to perform above peer and remains profitable with capital growth, 2) the Bank had improved asset quality and does not see any change in the trend, 3) the Bank had strong liquidity and capital positions, 4) in quantitative testing done by an independent source in 2014, the excess fair value of capital was $48 million or 50.16% over the carrying value and was nearly 12 times the value of the goodwill being carried and 5) the Bank was unaware of any likely circumstances that would indicate the fair value of the entity would be greatly decreased in the near future. Therefore, the Bank concluded it is unlikely impairment of Goodwill has occurred from the goodwill established from the Bank’s acquisition which occurred on December 31, 2007.

Other intangible assets consist of core deposit intangible assets arising from business acquisitions. They are initially measured at fair value and then are amortized on a straight line method over their estimated useful lives and evaluated for impairment.

Off Balance Sheet Instruments

In the ordinary course of business, the Bank has entered into commitments to extend credit, including commitments under credit card arrangements, commercial letters of credit and standby letters of credit. Such financial instruments are recorded when they are funded.

Foreclosed Real Estate

Foreclosed real estate held for sale is carried at the lower of fair value minus estimated costs to sell, or cost. Costs of holding foreclosed real estate are charged to expense in the current period, except for significant property improvements, which are capitalized. Valuations are periodically performed by management and an allowance is established by a charge to non-interest expense if the carrying value exceeds the fair value minus estimated costs to sell. Foreclosed real estate is classified as other real estate owned. The net income from operations of foreclosed real estate held for sale is reported in non-interest income. At December 31, the Bank’s holding of other real estate owned totaled approximately $1.1 and $2.1 million for 2014 and 2013 respectively.

Bank Premises and Equipment

Land is carried at cost. Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is based on the estimated useful lives of the various properties and is computed using straight line and accelerated methods. Costs for maintenance and repairs are charged to operations as incurred. Gains and losses on dispositions are included in current operations.

Federal Income Tax

The Company’s income tax expense consists of the following components: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

55

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 1 – Summary of Significant Accounting Policies (Continued)

Federal Income Tax (Continued)

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in tax expense. Based on management’s analysis, the Company did not have any uncertain tax positions as of December 31, 2014 and 2013. With a few exceptions, the Company is no longer subject to U.S. Federal, state or local examinations by tax authorities for years before 2011.

Earnings Per Share

Basic earnings per share represent income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. See Note 12 for additional information.

Stock-Based Compensation

The fair value of restricted common stock is their fair market value on the date of grant. The fair value of restricted stock is amortized as compensation expense on a straight-line basis over the vesting period of the grants. Compensation expense recognized is included in personnel expense in the consolidated statement of income

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of comprehensive income.

The components of other comprehensive income and related tax effects are as follows:

	(In Thousands)
	2014			2013			2012
Net unrealized gain (loss) on available-for-sale securities	$	1,158		$	(8,448	)	$	417
Reclassification adjustment for gain on sale of available-for-sale securities		(494	)		(775	)		(852	)
Net unrealized gains (losses)		664			(9,223	)		(435	)
Tax effect		226			(3,136	)		(147	)
Other comprehensive income (loss)	$	438		$	(6,087	)	$	(288	)

56

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 1 – Summary of Significant Accounting Policies (Continued)

Reclassification

Certain amounts in the 2013 and 2012 consolidated financial statements have been reclassified to conform with the 2014 presentation.

Subsequent Events

On January 16, 2015, the Company announced the authorization by its Board of Directors for the Company’s repurchase, either on the open market, or in privately negotiated transactions, of up to 200,000 shares of its outstanding common stock commencing January 16, 2015 and ending December 31, 2015.

Recent Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” The amendments in this ASU provide guidance for the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The amendments in this ASU are expected to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments apply to all public entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this guidance did not have an impact on the Company’s results of operations or financial position.

In January 2014, the FASB issued ASU 2014-04, “Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” The amendments in this ASU reduce diversity in practice by clarifying when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. The amendments in this ASU clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this ASU are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. An entity can elect to adopt the amendments in this ASU using either a modified retrospective transition method or a prospective transition method. The Company does not expect that the adoption of this ASU will have an impact on the Company’s results of operations or financial position.

In August 2014, the FASB issued ASU 2014-14, “Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Classification of Certain Government – Guaranteed Mortgage Loans upon Foreclosure.” The amendments in this ASU require that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if (1) the loan has a government guarantee that is not separable from the loan before foreclosure; (2) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim; and (3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. The amendments in this

57

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 1 – Summary of Significant Accounting Policies (Continued)

ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The adoption of this guidance is not expected to have a material impact on the Company’s results of operations or financial position.

Note 2 – Business Combination & Asset Purchase

On December 13, 2013, the Bank completed its purchase of a branch office in Custar, Ohio from Croghan Colonial Bank. Deposits of approximately $29.5 million and loans of $11.4 million were included in the purchase. The aggregate acquisition cost of the Custar office was $1.2 million, which was all paid in cash. The new office is located within the Bank’s current market area, expanding our presence in Wood County.

The following table summarizes the estimated values of the assets acquired and the liabilities assumed:

($ in Thousands)
Cash	$	204
Loans		11,436
Accrued Interest on Loans		31
Premises and Equipment		271
Core Deposit Intangible Asset		1,171
Other Assets		1
Total Assets Acquired	$	13,114
Deposits	$	29,466
Accrued Interest on Deposits		17
Other Liabilities		17
Total Liabilities Assumed	$	29,500
Net Liabilities Assumed	$	(16,386	)

The Company also recognized core deposit intangible assets of $2.26 million with the purchase of offices. $1.17 million was recognized with the purchase of the Custar office on December 13, 2013 and $1.09 million with the Hicksville office on July 9, 2010. These are being amortized over an estimated remaining economic useful life of the deposits of 7 years on a straight line basis. In connection with a December 31, 2007 Knisely acquisition, the Company recognized a core deposit intangible asset of $1.1 million, which was fully amortized during 2014. The core deposit intangible is included in other assets on the consolidated balance sheets.

The estimated amortization expense for the years ended December 31, 2014, 2013 and 2012 was $480, $319 and $312 thousand, respectively.

58

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 2 – Business Combination & Asset Purchase (Continued)

Amortization expense of the core deposit intangible assets remaining is as follows:

	Hicksville		Custar		Total
2015	$	155	$	167	$	322
2016		155		167		322
2017		78		167		245
2018		—		167		167
2019		—		167		167
Thereafter		—		162		162
Total	$	388	$	997	$	1,385

Note 3 – Securities

The amortized cost and fair value of securities, with gross unrealized gains and losses, follows:

	(In Thousands)
	2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
Available-for-Sale:
U.S. Treasury	$	25,833	$	—	$	(440	)	$	25,393
U.S. Government agency		120,154		391		(1,311	)		119,234
Mortgage-backed securities		29,067		557		(62	)		29,562
State and local governments		72,765		1,671		(133	)		74,303
Total available-for-sale securities	$	247,819	$	2,619	$	(1,946	)	$	248,492

	(In Thousands)
	2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
Available-for-Sale:
U.S. Treasury	$	26,067	$	—	$	(795	)	$	25,272
U.S. Government agency		174,772		1,386		(3,186	)		172,972
Mortgage-backed securities		44,638		728		(574	)		44,792
State and local governments		79,023		2,909		(459	)		81,473
Total available-for-sale securities	$	324,500	$	5,023	$	(5,014	)	$	324,509

59

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 3 – Securities (Continued)

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

1. The fair value of the security has significantly declined from book value.

2. A downgrade has occurred that lowered the credit rating to below investment grade (below Baa3 by Moody and BBB – by Standard and Poors.)

3. Dividends have been reduced or eliminated or scheduled interest payments have not been made.

4. The underwater security has longer than 10 years to maturity and the loss position had existed for more than 3 years.

5. Management does not possess both the intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.

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

Information pertaining to securities with gross unrealized losses at December 31, 2014 and 2013, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

	2014
	(In Thousands) Less Than Twelve Months					(In Thousands) Twelve Months & Over
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	—		$	—	$	(440	)	$	25,393
U.S. Government agency		(1	)		5,458		(1,310	)		82,803
Mortgage-backed securities		—			—		(62	)		7,900
State and local governments		(31	)		3,442		(102	)		7,756
Total available-for-sales securities	$	(32	)	$	8,900	$	(1,914	)	$	123,852

	2013
	(In Thousands) Less Than Twelve Months					(In Thousands) Twelve Months & Over
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	(795	)	$	25,272	$	—		$	—
U.S. Government agency		(2,783	)		96,241		(403	)		4,598
Mortgage-backed securities		(574	)		23,171		—			—
State and local governments		(459	)		19,594		—			—
Total available-for-sales securities	$	(4,611	)	$	164,278	$	(403	)	$	4,598

60

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 3 – Securities (Continued)

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

Sales of $57.9, $91.0, and $60.5 million for 2014, 2013, and 2012 respectively, generated gross realized gains and losses for the years ended December 31, as presented below:

	(In Thousands)
	2014			2013			2012
Gross realized gains	$	638		$	839		$	852
Gross realized losses		(144	)		(64	)		—
Net realized gains	$	494		$	775		$	852
Tax expense related to net realized gains	$	168		$	264		$	290

The net realized gain on sales and related tax expense is a reclassification out of accumulated other comprehensive income. The net realized gain is included in net gain on sale of securities available-for-sale and the related tax expense is included in income tax expense in the condensed consolidated statements of income and comprehensive income.

The amortized cost and fair value of debt securities at December 31, 2014, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	(In Thousands)
	Amortized Cost		Fair Value
One year or less	$	23,288	$	23,505
After one year through five years		157,000		156,781
After five years through ten years		31,333		31,470
After ten years		7,131		7,174
Total	$	218,752	$	218,930
Mortgage-backed securities		29,067		29,562
Total	$	247,819	$	248,492

Investments with a carrying value and fair value of $176.9 million at December 31, 2014 and $205.2 million at December 31, 2013 were pledged to secure public deposits and securities sold under repurchase agreements.

Other securities include Federal Home Loan Bank of Cincinnati and Farmer Mac stock as of December 31, 2014. Federal Home Loan Bank of Indianapolis stock which was acquired in the Knisely acquisition was completely redeemed in early 2013. The stock acquired had a five-year redemption period.

61

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 4 – Loans

The Company had $459 thousand in loans held for sale in 2014 as compared to $566 thousand in loans held for sale in 2013. Due to materiality, these loans are included in the Consumer Real Estate loan numbers with a portion from 2014 included in Agricultural Real Estate loans as well.

Loans at December 31 are summarized below:

	(In Thousands)
	2014			2013
Loans:
Commercial real estate	$	270,188		$	248,893
Agricultural real estate		50,895			44,301
Consumer real estate		97,550			92,438
Commercial and industrial		100,126			99,498
Agricultural		74,611			65,449
Consumer		24,277			21,406
Industrial Development Bonds		4,698			4,358
	$	622,345		$	576,343
Less: Net deferred loan fees and costs		(419	)		(230	)
		621,926			576,113
Less: Allowance for loan losses		(5,905	)		(5,194	)
Loans - Net	$	616,021		$	570,919

The following is a maturity schedule by major category of loans at December 31, 2014:

	(In Thousands)
	Within One Year		After One Year Within Five Years		After Five Years		Total
Commercial Real Estate	$	27,291	$	92,076	$	150,821	$	270,188
Agricultural Real Estate		3,546		14,289		33,060		50,895
Consumer Real Estate		11,118		19,377		67,055		97,550
Commercial and industrial		58,741		36,159		5,226		100,126
Agricultural		47,831		22,826		3,954		74,611
Consumer		5,652		14,265		4,360		24,277
Industrial Development Bonds		2,499		126		2,073		4,698
	$	156,678	$	199,118	$	266,549	$	622,345

62

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 4 – Loans (Continued)

The distribution of fixed rate loans and variable rate loans by major loan category is as follows as of December 31, 2014:

	(In Thousands)
	Fixed Rate		Variable Rate
Commercial Real Estate	$	190,948	$	79,240
Agricultural Real Estate		36,168		14,727
Consumer Real Estate		77,534		20,016
Commercial and industrial loans		76,625		23,501
Agricultural		69,707		4,904
Consumer, Master Card and Overdrafts		19,566		4,711
Industrial Development Bonds		4,529		169

As of December 31, 2014 and 2013 one to four family residential mortgage loans amounting to $20.8 million and $24.3 million, respectively, have been pledged as security for loans the Bank has received from the Federal Home Loan Bank.

The percentage of delinquent loans has trended downward since the beginning of 2010 from a high of 2.85% of total loans in January 2010 to a low of 0.25% as of the end of December 2013. These percentages do not include nonaccrual loans which are not past due. This level of delinquency is due in part to an adherence to sound underwriting practices over the course of time, an improvement in the financial status of companies to which the Bank extends credit, continued financial stability in the agricultural loan portfolio, and the writing down of uncollectable credits in a timely manner.

Industrial Development Bonds are included in the commercial and industrial category for the remainder of the tables in this Note 4.

The following table represents the contractual aging of the recorded investment in past due loans by portfolio classification of loans as of December 31, 2014 and 2013 net of deferred fees and costs:

December 31, 2014	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Consumer Real Estate	$	713	$	50	$	436	$	1,199	$	96,351	$	97,550	$	—
Ag Real Estate		—		—		—		—		50,895	$	50,895		—
Ag		25		—		—		25		74,586	$	74,611		—
Commercial Real Estate		78		204		709		991		269,197	$	270,188		—
Commercial and Industrial		—		8		—		8		104,816	$	104,824		—
Consumer		25		8		29		62		23,796	$	23,858		—
Total	$	841	$	270	$	1,174	$	2,285	$	619,641	$	621,926	$	—

63

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 4 – Loans (Continued)

December 31, 2013	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Consumer Real Estate	$	778	$	0	$	234	$	1,012	$	91,426	$	92,438	$	—
Ag Real Estate		—		—		—		—		44,301		44,301		—
Ag		—		—		—		—		65,449		65,449		—
Commercial Real Estate		—		—		373		373		248,520		248,893		—
Commercial and Industrial		—		—		26		26		103,830		103,856		—
Consumer		28		2		—		30		21,146		21,176		—
Total	$	806	$	2	$	633	$	1,441	$	574,672	$	576,113	$	—

The following table presents the recorded investment in nonaccrual loans by portfolio class of loans as of December 31, 2014 and December 31, 2013:

	(In Thousands)
	2014		2013
Consumer real estate	$	628	$	483
Agricultural real estate		—		—
Agriculture		—		—
Commercial real estate		709		2,436
Commercial		339		410
Consumer		29		—
Total	$	1,705	$	3,329

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

1. Zero (0) Unclassified. Any loan which has not been assigned a classification.

2. One (1) Excellent. Credit to premier customers having the highest credit rating based on an extremely strong financial condition, which compares favorably with industry standards (upper quartile of The Risk Management Association ratios). Financial statements indicate a sound earnings and financial ratio trend for several years with satisfactory profit margins and excellent liquidity exhibited. Prime credits may also be borrowers with loans fully secured by highly liquid collateral such as traded stocks, bonds, certificates of deposit, savings account, etc. No credit or collateral exceptions exist and the loan adheres to the Bank’s loan policy in every respect. Financing alternatives would be readily available and would qualify for unsecured credit. This grade is summarized by high liquidity, minimum risk, strong ratios, and low handling costs.

3. Two (2) Good. Desirable loans of somewhat less stature than Grade 1, but with strong financial statements. Loan supported by financial statements containing strong balance sheets, generally with a leverage position less than 1.50, and a history of profitability. Probability of serious financial deterioration is unlikely. Possessing a sound repayment source (and a secondary source), which would allow repayment in a reasonable period of time. Individual loans backed by liquid personal assets, established history and unquestionable character.

64

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 4 – Loans (Continued)

4. Three (3) Satisfactory. Satisfactory loans of average or slightly above average risk – having some deficiency or vulnerability to changing economic conditions, but still fully collectible. Projects should normally demonstrate acceptable debt service coverage. Generally, customers should have a leverage position less than 2.00. May be some weakness but with offsetting features of other support readily available. Loans are meeting the terms of repayment.

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

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

a. At inception, the loan was secured with collateral possessing a loan value adequate to protect the Bank from loss;

b. The loan exhibited two or more years of satisfactory repayment with a reasonable reduction of the principal balance;

c. During the period that the loan has been outstanding, there has been no evidence of any credit weakness. Some examples of weakness include slow payment, lack of cooperation by the borrower, breach of loan covenants, or the business is in an industry which is known to be experiencing problems. If any of the credit weaknesses is observed, a lower risk grade is warranted.

5. Four (4) Satisfactory / Monitored. A “4” (Satisfactory/Monitored) risk grade may be established for a loan considered satisfactory but which is of average credit risk due to financial weakness or uncertainty. The loans warrant a higher than average level of monitoring to ensure that weaknesses do not advance. The level of risk in Satisfactory/Monitored classification is considered acceptable and within normal underwriting guidelines, so long as the loan is given management supervision.

6. Five (5) Special Mention. Loans that possess some credit deficiency or potential weakness which deserves close attention, but which do not yet warrant substandard classification. Such loans pose unwarranted financial risk that, if not corrected, could weaken the loan and increase risk in the future. The key distinctions of a 5 (Special Mention) classification are that (1) it is indicative of an unwarranted level of risk, and (2) weaknesses are considered “potential”, versus “defined”, impairments to the primary source of loan repayment and collateral.

7. Six (6) Substandard. One or more of the following characteristics may be exhibited in loans classified substandard:

a. Loans, which possess a defined credit weakness and the likelihood that a loan will be paid from the primary source, are uncertain. Financial deterioration is underway and very close attention is warranted to ensure that the loan is collected without loss.

b. Loans are inadequately protected by the current net worth and paying capacity of the borrower.

c. The primary source of repayment is weakened, and the Bank is forced to rely on a secondary source of repayment such as collateral liquidation or guarantees.

d. Loans are characterized by the distinct possibility that the Bank will sustain some loss if deficiencies are not corrected.

e. Unusual courses of action are needed to maintain a high probability of repayment.

f. The borrower is not generating enough cash flow to repay loan principal; however, continues to make interest payments.

g. The lender is forced into a subordinate position or unsecured collateral position due to flaws in documentation.

h. Loans have been restructured so that payment schedules, terms and collateral represent concessions to the borrower when compared to the normal loan terms.

i. The lender is seriously contemplating foreclosure or legal action due to the apparent deterioration in the loan

j. There is significant deterioration in the market conditions and the borrower is highly vulnerable to these conditions.

65

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 4 – Loans (Continued)

8. Seven (7) Doubtful. One or more of the following characteristics may be exhibited in loans classified Doubtful:

a. Loans have all of the weaknesses of those classified as Substandard. Additionally, however, these weaknesses make collection or liquidation in full based on existing conditions improbable.

b. The primary source of repayment is gone, and there is considerable doubt as to the quality of the secondary source of repayment.

c. The possibility of loss is high, but, because of certain important pending factors which may strengthen the loan, loss classification is deferred until its exact status is known. A Doubtful classification is established deferring the realization of the loss.

9. Eight (8) Loss. Loans are considered uncollectable and of such little value that continuing to carry them as assets on the institution’s financial statements is not feasible. Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

The following table represents the risk category of loans by portfolio class, net of deferred fees, based on the most recent analysis performed as of the time periods shown of December 31, 2014 and December 31, 2013.

	(In Thousands)
	Agriculture Real Estate				Agriculture				Commercial Real Estate				Commercial				Industrial Development Bonds
	2014		2013		2014		2013		2014		2013		2014		2013		2014		2013
1-2	$	4,319	$	3,764	$	11,490	$	9,263	$	1,072	$	1,104	$	1,771	$	2,525	$	—	$	—
3		15,780		14,588		26,871		27,212		34,229		55,060		15,582		21,610		4,289		3,869
4		30,472		25,186		36,225		28,974		225,015		182,277		80,079		72,059		409		489
5		111		729		—		—		7,083		4,987		2,299		2,119		—		—
6		213		34		—		—		2,080		5,092		165		758		—		—
7		—		—		25		—		709		373		230		427		—		—
8		—		—		—		—		—		—		—		—		—		—
Total	$	50,895	$	44,301	$	74,611	$	65,449	$	270,188	$	248,893	$	100,126	$	99,498	$	4,698	$	4,358

For consumer residential real estate, and other, the Company also evaluates credit quality based on the aging status of the loan, which was previously stated, and by payment activity. The following tables present the recorded investment in those classes based on payment activity and assigned risk grading as of December 31, 2014 and December 31, 2013.

	(In Thousands)
	Consumer Real Estate
	2014		2013
Grade
Pass	$	97,007	$	92,226
Special mention (5)		—		—
Substandard (6)		446		18
Doubtful (7)		97		194
Total, net of deferred fees	$	97,550	$	92,438

66

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 4 – Loans (Continued)

	Consumer - Credit Card				Consumer - Other
	2014		2013		2014		2013
Performing	$	3,987	$	3,721	$	19,846	$	17,425
Nonperforming		—		—		25		30
Total, net of deferred fees	$	3,987	$	3,721	$	19,871	$	17,455

Information about impaired loans as of and for the years ended December 31, 2014 and 2013 are as follows:

	(In Thousands)
	2014		2013
Impaired loans without a valuation allowance	$	675	$	924
Impaired loans with a valuation allowance		1,168		1,516
Total impaired loans	$	1,843	$	2,440
Valuation allowance related to impaired loans	$	387	$	516
Total non-accrual loans	$	1,705	$	3,329
Total loans past-due ninety days or more and still accruing	$	—	$	—

	(In Thousands)
	2014		2013		2012
Average investment in impaired loans	$	1,929	$	3,274	$	3,436
Interest income recognized on impaired loans	$	87	$	60	$	26
Interest income recognized on a cash basis on impaired loans	$	51	$	17	$	21

No additional funds are committed to be advanced in connection with impaired loans.

The Bank had approximately $797.2 thousand of its impaired loans classified as trouble debt restructured as of December 31, 2014 as compared to $861.2 thousand of its impaired loans classified as trouble debt restructured as of December 31, 2013.

67

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 4 – Loans (Continued)

The following table represents the years ended December 31, 2014 and 2013.

December 31, 2014	Number of Contracts	Pre- Modification Outstanding		Post- Modification Outstanding		December 31, 2013	Number of Contracts	Pre- Modification Outstanding		Post- Modification Outstanding
Troubled Debt Restructurings	Modified in the Last 12 Months	Recorded Investment		Recorded Investment		Troubled Debt Restructurings	Modified in the Last 12 Months	Recorded Investment		Recorded Investment
Commercial Real Estate		$	—	$	—	Commercial Real Estate		$	—	$	—
Ag Real Estate			—		—	Ag Real Estate			—		—
Commercial and Industrial			—		—	Commercial and Industrial			—		—
Troubled Debt Restructurings That Subsequently Defaulted	Number of Contracts Modified in the Last 12 Months	Recorded Investment				Troubled Debt Restructurings That Subsequently Defaulted	Number of Contracts Modified in the Last 12 Months	Recorded Investment
Commercial Real Estate		$	—			Commercial Real Estate		$	—
Ag Real Estate			—			Ag Real Estate			—
Commercial and Industrial			—			Commercial and Industrial			—

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

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

68

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 4 – Loans (Continued)

The following table presents loans individually evaluated for impairment by portfolio class of loans as of December 31, 2014 and 2013:

	(In Thousands)
	Recorded Investment		Unpaid Principal Balance		Related Allowance		YTD Average Recorded Investment		YTD Interest Income Recognized		YTD Interest Income Recognized Cash Basis
2014
With no related allowance recorded:
Residential	$	204	$	229	$	—	$	52	$	1	$	1
Agriculture real estate		—		—		—		93		7		—
Agriculture		—		—		—		—		—		—
Commercial real estate		471		471		—		740		7		5
Commercial		—		—		—		319		45		18
Consumer		—		—		—		—		—		—
With a specific allowance recorded:
Residential		97		97		36		118		6		6
Agriculture real estate		—		—		—		15		—		—
Agriculture		25		25		25		2		—		—
Commercial real estate		709		709		111		83		21		21
Commercial		326		326		204		506		—		—
Consumer		11		11		11		1		—		—
Totals:
Residential	$	301	$	326	$	36	$	170	$	7	$	7
Agriculture real estate	$	—	$	—	$	—	$	108	$	7	$	—
Agriculture	$	25	$	25	$	25	$	2	$	—	$	—
Commercial real estate	$	1,180	$	1,180	$	111	$	823	$	28	$	26
Commercial	$	326	$	326	$	204	$	825	$	45	$	18
Consumer	$	11	$	11	$	11	$	1	$	—	$	—

69

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 4 – Loans (Continued)

	(In Thousands)
	Recorded Investment		Unpaid Principal Balance		Related Allowance		YTD Average Recorded Investment		YTD Interest Income Recognized		YTD Interest Income Recognized Cash Basis
2013
With no related allowance recorded:
Residential	$	18	$	18	$	—	$	138	$	10	$	10
Agriculture real estate		—		—		—		—		—		—
Agriculture		—		—		—		—		—		—
Commercial real estate		906		906		—		630		21		3
Commercial		—		—		—		203		—		—
Consumer		—		—		—		—		—		—
With a specific allowance recorded:
Residential		282		282		78		204		5		3
Agriculture real estate		88		88		9		72		—		—
Agriculture		—		—		—		—		—		—
Commercial real estate		769		1,116		295		518		22		—
Commercial		377		377		134		1,549		2		1
Consumer		—		—		—		—		—		—
Totals:
Residential	$	300	$	300	$	78	$	342	$	15	$	13
Agriculture real estate	$	88	$	88	$	9	$	72	$	—	$	—
Agriculture	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate	$	1,675	$	2,022	$	295	$	1,148	$	43	$	3
Commercial	$	377	$	377	$	134	$	1,752	$	2	$	1
Consumer	$	—	$	—	$	—	$	—	$	—	$	—

70

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 4 – Loans (Continued)

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

The following is an analysis of the allowance for credit losses for the years ended December 31:

	(In Thousands)
	2014			2013			2012
Allowance for Loan Losses
Balance at beginning of year	$	5,194		$	5,224		$	5,091
Provision for loan loss		1,191			858			738
Loans charged off		(778	)		(1,262	)		(891	)
Recoveries		298			374			286
Balance at ending of year	$	5,905		$	5,194		$	5,224
Allowance for Unfunded Loan Commitments & Letters of Credit	$	207		$	163		$	162
Total Allowance for Credit Losses	$	6,112		$	5,357		$	5,386

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

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

71

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 4 – Loans (Continued)

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

Additional analysis related to the allowance for credit losses as of December 31, 2014 and 2013 is as follows:

	(In Thousands)
	Consumer Real Estate			Agriculture Real Estate		Agriculture		Commercial Real Estate			Commercial and Industrial		Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated			Total
2014
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	257		$	131	$	326	$	2,107		$	1,359	$	292		$	163	$	722		$	5,357
Charge Offs		(168	)		—		—		(229	)		—		(381	)		—		—			(778	)
Recoveries		34			—		44		4			20		196			—		—			298
Provision		414			53		177		485			42		216			—		(196	)		1,191
Other Non-interest expense related to unfunded		—			—		—		—			—		—			44		—			44
Ending Balance	$	537		$	184	$	547	$	2,367		$	1,421	$	323		$	207	$	526		$	6,112
Ending balance: individually evaluated for impairment	$	36		$	—	$	25	$	111		$	204	$	11		$	—	$	—		$	387
Ending balance: collectively evaluated for impairment	$	501		$	184	$	522	$	2,256		$	1,217	$	312		$	207	$	526		$	5,725
Ending balance: loans acquired with deteriorated credit quality	$	2		$	—	$	—	$	—		$	—	$	—		$	—	$	—		$	2
FINANCING RECEIVABLES:
Ending balance, net of deferred fees	$	97,550		$	50,895	$	74,611	$	270,188		$	104,824	$	23,858		$	—	$	—		$	621,926
Ending balance: individually evaluated for impairment	$	301		$	—	$	25	$	1,179		$	327	$	11		$	—	$	—		$	1,843
Ending balance: collectively evaluated for impairment	$	97,249		$	50,895	$	74,586	$	269,009		$	104,497	$	23,847		$	—	$	—		$	620,083
Ending balance: loans acquired with deteriorated credit quality	$	526		$	—	$	—	$	—		$	—	$	—		$	—	$	—		$	526

72

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 4 – Loans (Continued)

	(In Thousands)
	Consumer Real Estate			Agriculture Real Estate		Agriculture		Commercial Real Estate			Commercial and Industrial			Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated		Total
2013
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	368		$	113	$	290	$	1,749		$	2,183		$	268		$	162	$	253	$	5,386
Charge Offs		(147	)		—		—		(164	)		(513	)		(438	)		—		—		(1,262	)
Recoveries		20			—		5		23			141			185			—		—		374
Provision		16			18		31		499			(452	)		277			—		469		858
Other Non-interest expense related to unfunded		—			—		—		—			—			—			1		—		1
Ending Balance	$	257		$	131	$	326	$	2,107		$	1,359		$	292		$	163	$	722	$	5,357
Ending balance: individually evaluated for impairment	$	78		$	9	$	—	$	295		$	134		$	—		$	—	$	—	$	516
Ending balance: collectively evaluated for impairment	$	179		$	122	$	326	$	1,812		$	1,225		$	292		$	163	$	722	$	4,841
Ending balance: loans acquired with deteriorated credit quality	$	1		$	—	$	—	$	—		$	—		$	—		$	—	$	—	$	1
FINANCING RECEIVABLES:
Ending balance, net of deferred fees	$	92,438		$	44,301	$	65,449	$	248,893		$	103,856		$	21,176		$	—	$	—	$	576,113
Ending balance: individually evaluated for impairment	$	300		$	88	$	—	$	1,675		$	377		$	—		$	—	$	—	$	2,440
Ending balance: collectively evaluated for impairment	$	92,138		$	44,213	$	65,449	$	247,218		$	103,479		$	21,176		$	—	$	—	$	573,673
Ending balance: loans acquired with deteriorated credit quality	$	540		$	—	$	—	$	—		$	—		$	—		$	—	$	—	$	540

73

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 5 – Premises and Equipment

The major categories of banking premises and equipment and accumulated depreciation at December 31 are summarized below:

	(In Thousands)
	2014			2013
Land	$	4,984		$	4,360
Buildings (useful life 15-39 years)		21,955			20,593
Furnishings (useful life 3-15 years)		11,429			11,035
		38,368			35,988
Less: Accumulated depreciation		(18,068	)		(17,279	)
Premises and Equipment (Net)	$	20,300		$	18,709

Depreciation expense for the years ended December 31, 2014, 2013 and 2012 amounted to $1.3, $1.2, and $1.2 million, respectively.

Note 6 – Servicing

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of loans serviced for others were $275 and $282 million at December 31, 2014 and 2013, respectively.

The balance of capitalized servicing rights included in other assets at December 31, 2014 and 2013, was $2.0 and $2.1 million respectively. The capitalized addition of servicing rights is included in net gain on sale of loans on the consolidated statement of income.

The fair market value of the capitalized servicing rights as of December 31, 2014 and 2013 was $2.9 million and $2.8 million, respectively. The valuations were completed by stratifying the loans into like groups based on loan type and term. Impairment was measured by estimating the fair value of each stratum, taking into consideration an estimated level of prepayment based upon current market conditions. An average constant prepayment rate of 9.6 and 11.2 were utilized for 2014 and 2013, respectively. All stratums showed positive values compared to carrying value using a discount yield of 6.48% for 2014 and 8.25% for 2013.

The following summarizes mortgage servicing rights capitalized and amortized during each year:

	(In Thousands)
	2014			2013
Beginning Year	$	2,066		$	2,063
Capitalized Additions		301			429
Amortization		(344	)		(426	)
Valuation Allowance		—			—
End of Year	$	2,023		$	2,066

74

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 7 – Deposits

Time deposits at December 31 consist of the following:

	(In Thousands)
	2014		2013
Time deposits under $100,000	$	113,903	$	135,998
Time deposits of $100,000 or more		81,597		100,362
	$	195,500	$	236,360

At December 31, 2014 the scheduled maturities for time deposits are as follows:

	(In Thousands)
2015	$	97,439
2016		49,634
2017		19,586
2018		24,864
2019		3,053
thereafter		924
	$	195,500

Note 8 – Securities Sold Under Agreement to Repurchase

The Bank’s policy requires qualifying securities to be used as collateral for the underlying repurchase agreements. As of December 31, 2014 and 2013 securities with a book value of $65.3 million and $74.7 million, respectively, were pledged to secure the repurchase agreements. The table below presents the daily securities sold under agreement to repurchase and the term repurchase agreements. It does not include the Bank’s Federal Funds purchased.

	Daily Securities Sold Under Agreement to Repurchase
	Amount Outstanding at End of Period (000’s)		Weighted Average Rate End of Period			Maximum Amount Borrowings Outstanding Month End (000’s)		Approximate Average Outstanding in Period (000’s)		Approximate Weighted Average Interest Rate For the Period
2014	$	38,493		0.08	%	$	46,475	$	42,222		0.09	%
2013	$	38,503		0.08	%	$	48,366	$	38,859		0.09	%
	Term CD’s Sold Under Agreement to Repurchase
	Amount Outstanding at End of Period (000’s)		Weighted Average Rate End of Period			Maximum Amount Borrowings Outstanding Month End (000’s)		Approximate Average Outstanding in Period (000’s)		Approximate Weighted Average Interest Rate For the Period
2014	$	17,469		1.25	%	$	17,469	$	17,337		1.24	%
2013	$	17,253		1.25	%	$	17,291	$	17,095		1.25	%

75

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 9 – Federal Home Loan Bank Advances

The Bank has had various loans from the Federal Home Loan Bank. Repayment structures vary, ranging from monthly installments, annual payments or upon maturity. Interest payments are due monthly. Total borrowings were $0.0 million and $4.5 million for December 31, 2014 and 2013, respectively. The advances were secured by $20.8 and $24.3 million of mortgage loans as of December 31, 2014 and 2013, respectively under a blanket collateral agreement.

Note 10 – Federal Income Taxes

The components of income tax expense (benefit) for the years ended December 31 are as follows:

	(In Thousands)
	2014		2013		2012
Current:
Federal	$	3,837	$	3,562	$	4,030
Deferred:
Federal		34		34		(126	)
	$	3,871	$	3,596	$	3,904

The following is a reconciliation of the statutory federal income tax rate to the effective tax rate:

	(In Thousands)
	2014			2013			2012
Income tax at statutory rates	$	4,596		$	4,285		$	4,655
Decrease resulting from:
Tax exempt interest		(634	)		(640	)		(677	)
Change in prior estimates and other		(91	)		(49	)		(74	)
	$	3,871		$	3,596		$	3,904

76

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 10 – Federal Income Taxes (Continued)

Deferred tax assets and liabilities at December 31 are comprised of the following:

	(In Thousands)
	2014			2013
Deferred Tax Assets:
Allowance for loan losses	$	2,030		$	1,766
Other		416			788
Total deferred tax assets		2,446			2,554
Deferred Tax Liabilities:
Accreted discounts on bonds		83			73
FHLB stock dividends		746			859
Mortgage servicing rights		696			702
Other		1,160			1,121
Net unrealized gain on available-for-sale securities		229			3
Total deferred tax liabilities		2,914			2,758
Net Deferred Tax Liability	$	(468	)	$	(204	)

Note 11 – Employee Benefit Plans

The Bank has established a 401(k) profit sharing plan, which allows eligible employees to save at a minimum one percent of eligible compensation on a pre-tax basis, subject to certain Internal Revenue Service limitations. The Bank will match 50% of employee 401(k) contributions up to four percent of total eligible compensation. In addition, the Bank may make a discretionary contribution from time to time. A participant is 100% vested in the participant’s deferral contributions and employer matching contributions. A six-year vesting schedule applies to employer discretionary contributions. Contributions to the 401(k) profit sharing plan for both the employer matching contribution and the discretionary contribution were $779, $670 and $744 thousand for 2014, 2013 and 2012, respectively.

Restricted Stock Awards

The Company has a Long-Term Stock Incentive Plan under which 13,250 shares of restricted stock were issued to 61 employees during 2014, 11,000 shares of restricted stock were issued to 53 employees and 11,000 shares to 54 employees during 2013 and 2012, respectively. Under the plan, the shares vest 100% in three years. During the 3 year vesting period, the employees received dividends or dividend equivalent compensation on the shares. Due to employee termination, there were 780, 620 and 1,135 forfeited during 2014, 2013 and 2012, respectively. Due to retirement, one employee received 210 shares from awards granted in 2009, 2010 and 2011. During 2012, 8,700 shares awarded in 2009 were vested 100%, and 41 employees received the stock. During 2013, 9,160 shares awarded in 2010 were vested 100%, and 45 employees received the stock. During 2014, 10,005 shares awarded in 2011, were vested 100%, and 48 employees received the stock. Due to retirement two employees received 965 shares. Compensation expense applicable to the restricted stock totaled $252, $253 and $219 thousand for the years ending December 31, 2014, 2013 and 2012, respectively.

77

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 11 – Employee Benefit Plans (Continued)

The following table summarizes the activity of restricted stock awards as of December 31:

	Year Ended December 31,
	2014					2013					2012
	Number of Shares			Weighted average fair value per award		Number of Shares			Weighted average fair value per award		Number of Shares			Weighted average fair value per award
Beginning of period		31,890			20.38		30,670			19.05		29,715			18.99
Granted		13,250			25.50		11,000			22.00		11,000			19.95
Vested		(10,970	)		25.39		(9,160	)		21.55		(8,910	)		19.99
Forfeited		(780	)		24.97		(620	)		21.84		(1,135	)		19.99
Nonvested, end of period		33,390			22.77		31,890			20.38		30,670			19.05

As of December 31, 2014, there was $455 thousand of unrecognized compensation cost related to the nonvested portion of restricted stock awards under the plan. Expense for restricted stock awards of $232 thousand, $253 thousand, and $217 thousand was recorded for the years ended December 31, 2014, 2013, and 2012, respectively.

Note 12 – Earnings Per Share

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

	Year Ended
	December 31, 2014			December 31, 2013			December 31, 2012
Earnings per share
Net income	$	9,646		$	9,007		$	9,788
Less: distributed earnings allocated to participating securities		(27	)		(25	)		(23	)
Net earnings available to common shareholders	$	9,619		$	8,982		$	9,765
Weighted average common shares outstanding including participating securities		4,628,178			4,676,547			4,695,876
Less: average unvested restricted shares		(32,211	)		(30,618	)		(29,888	)
Weighted average common shares outstanding		4,595,967			4,645,929			4,665,988
Basic earnings per share	$	2.08		$	1.93		$	2.08

78

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 13 – Related Party Transactions

In the ordinary course of business, the Bank has granted loans to senior officers and directors and their affiliated companies amounting to $1.5 and $5.9 million at December 31, 2014 and 2013, respectively. New loans approved during 2014 were $428 thousand. During 2014, subsequent advances totaled $10.1 million and payments of $10.6 million were received. The difference in related borrowings amounted to $502 thousand, net reduction. Deposits of directors, executive officers and companies in which they have a direct or indirect ownership as of December 31, 2014 and 2013, amounted to $26.1 million and $22.3 million, respectively.

Note 14 – Off Balance Sheet Activities

Credit Related Financial Instruments

The Bank is a party to credit related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing need of its customers. These financial instruments include commitments to extend credit, Standby Letters of Credit, and Commercial Letters of Credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The Bank’s exposure to credit loss is represented by the contractual amount of these commitments. The Bank follows the same credit policies in making commitments as it does for on-balance-sheet instruments. The allowance for credit losses as it relates to unfunded loan commitments (AULC) is included under other liabilities. The AULC as of December 31, 2014 and 2013 was $207 thousand and $163 thousand, respectively.

At December 31, 2014 and 2013, the following financial instruments were outstanding whose contract amounts represent credit risk:

	(In Thousands)
	2014		2013
Commitments to extend credit	$	212,258	$	201,891
Credit card arrangements		15,064		14,818
Standby letters of credit		694		1,567

Commitments to extend credit, credit card arrangements and Standby Letters of Credit all include exposure to some credit loss in the event of nonperformance of the customer. The Bank’s credit policies and procedures for credit commitments and financial guarantees are the same as those for extensions of credit that are recorded in the financial statements. Due to the fact that these instruments have fixed maturity dates, and because many of them expire without being drawn upon, they generally do not present any significant liquidity risk to the Bank.

Collateral Requirements

To reduce credit risk related to the use of credit-related financial instruments, the Bank might deem it necessary to obtain collateral. The amount and nature of the collateral obtained is based on the Bank’s credit evaluation of the customer. Collateral held varies but may include cash, securities, accounts receivable, inventory, property, plant, and real estate.

Legal Contingencies

Various legal claims also arise from time to time in the normal course of business, which, in the opinion of management, will have no material effect on the Company’s consolidated financial statements.

79

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 15 – Minimum Regulatory Capital Requirements

The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and 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 their assets, liabilities and certain off balance-sheet items as calculated under regulatory accounting practices.

The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of: total risk-based capital and Tier I capital to risk-weighted assets (as defined in the regulations), and Tier I capital to adjusted total assets (as defined). Management believes, as of December 31, 2014, that the Bank meets all the capital adequacy requirements to which it is subject.

As of December 31, 2014 the most recent notification from the FDIC indicated the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To remain categorized as well capitalized, the Bank will have to maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as disclosed in the table to follow. There are no conditions or events since the most recent notification that management believes have changed the Bank’s prompt corrective action category.

The Company and the Bank’s actual and required capital amounts and ratios as of December 31, 2014 and 2013 are as follows:

											To Be Well Capitalized
	Actual					For Capital Adequacy Purposes					Under the Prompt Corrective Action Provisions
As of December 31, 2014	(000’s) Amount		Ratio			(000’s) Amount		Ratio			(000’s) Amount		Ratio
Total Risk-Based Capital (to Risk Weighted Assets)
Consolidated	$	114,702		16.68	%	$	55,028		8.00	%	$	N/A		N/A
Farmers & Merchants State Bank		98,154		14.35	%		54,710		8.00	%		68,388		10.00	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated		108,590		15.79	%		27,514		4.00	%		N/A		N/A
Farmers & Merchants State Bank		92,042		13.46	%		27,355		4.00	%		41,033		6.00	%
Tier 1 Capital (to Adjusted Total Assets)
Consolidated		108,590		11.70	%		37,111		4.00	%		N/A		N/A
Farmers & Merchants State Bank		92,042		10.01	%		36,785		4.00	%		45,981		5.00	%

80

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 15 – Minimum Regulatory Capital Requirements (Continued)

											To Be Well Capitalized
	Actual					For Capital Adequacy Purposes					Under the Prompt Corrective Action Provisions
As of December 31, 2013	(000’s) Amount		Ratio			(000’s) Amount		Ratio			(000’s) Amount		Ratio
Total Risk-Based Capital (to Risk Weighted Assets)
Consolidated	$	107,752		16.34	%	$	52,756		8.00	%		N/A		N/A
Farmers & Merchants State Bank		92,838		14.10	%		52,674		8.00	%	$	65,843		10.00	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated		102,395		15.53	%		26,378		4.00	%		N/A		N/A
Farmers & Merchants State Bank		87,481		13.29	%		26,337		4.00	%		39,506		6.00	%
Tier 1 Capital (to Adjusted Total Assets)
Consolidated		102,395		10.88	%		37,644		4.00	%		N/A		N/A
Farmers & Merchants State Bank		87,481		9.40	%		37,228		4.00	%		46,535		5.00	%

Note 16 – Restrictions of Dividends & Inter-company Borrowings

The Bank is restricted as to the amount of dividends that can be paid. Dividends declared by the Bank that exceed the net income for the current year plus retained income for the preceding two years must be approved by federal and state regulatory agencies. Under this formula dividends of $14.7 million may be paid without prior regulatory approval. Regardless of formal regulatory restrictions, the Bank may not pay dividends that would result in its capital levels being reduced below the minimum requirements shown above. Under current Federal Reserve regulations, the Bank is limited as to the amount and type of loans it may make to the Company. These loans are subject to qualifying collateral requirements on which the amount of the loan may be based.

Note 17 – Fair Value of Financial Instruments

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

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

Cash and Cash Equivalents

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

Securities and Other Securities

Fair values for securities, excluding Federal Home Loan Bank stock, are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. The carrying value of Federal Home Loan Bank stock approximates fair value based on the redemption provisions of the Federal Home Loan Bank. The Bank acquired stock in the Federal Home

81

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 17 – Fair Value of Financial Instruments (Continued)

Loan Bank of Indianapolis at a cost of $231.4 thousand through its acquisition of Knisely Bank. There were no borrowings at the time of acquisition associated with Federal Home Loan Bank of Indianapolis. The Bank had requested Federal Home Loan Bank of Indianapolis to buy back its stock when the acquisition of Knisely was completed in January 2008. A five year waiting period was imposed and the stock was ultimately redeemed in full during 2013.

Loans

For those variable-rate loans that re-price frequently, and with no significant change in credit risk, fair values are based on carrying values. The fair values of the fixed rate and all other loans are estimated using discounted cash flow analysis, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality.

Deposits

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

Federal Funds Purchased and Securities Sold Under Agreement to Repurchase

The carrying value of Federal Funds purchased and securities sold under agreement to repurchase approximates fair values.

FHLB Advances

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

Accrued Interest Receivable and Payable

The carrying amounts of accrued interest approximate fair values.

Dividends Payable

The carrying amounts of dividends payable approximate their fair values and are generally paid within forty days of declaration.

Off Balance Sheet Financial Instruments

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

82

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 17 – Fair Value of Financial Instruments (Continued)

The estimated fair values, and related carrying or notional amounts, for on and off-balance sheet financial instruments as of December 31, 2014 and 2013, are reflected below. The aggregate fair values in the table below do not represent the total market value of the Bank’s assets and liabilities. The table excludes the following:

Bank Premises and Equipment, Goodwill, Mortgage Servicing Rights, Other Real Estate Owned, Other Assets, Other Liabilities and Accrued Expenses.

	(In Thousands)
	December 2014										December 2013
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3		Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and Cash Equivalents	$	24,295	$	24,295	$	24,295	$	—	$	—	$	19,263	$	19,263	$	19,263	$	—	$	—
Securities - available for sale		248,492		248,492		25,393		215,168		7,931		324,509		324,509		25,272		288,891		10,346
Other Securities		3,717		3,717		—		—		3,717		4,216		4,216		—		—		4,216
Loans, net		616,021		625,377		—		—		625,377		570,919		579,992		—		—		579,992
Interest receivable		3,578		3,578		—		—		3,578		3,694		3,694		—		—		3,694
Total Assets	$	896,103	$	905,459	$	49,688	$	215,168	$	640,603	$	922,601	$	931,674	$	44,535	$	288,891	$	598,248
Financial Liabilities:
Interest bearing Deposits	$	403,051	$	403,801	$	—	$	—	$	403,801	$	429,652	$	429,750	$	—	$	—	$	429,750
Non-interest bearing Deposits		164,009		164,009		—		164,009		—		110,452		110,452		—		110,452		—
Time Deposits		195,500		196,545		—		—		196,545		236,360		236,027		—		—		236,027
Total Deposits	$	762,560	$	764,355	$	—	$	164,009	$	600,346	$	776,464	$	776,229	$	—	$	110,452	$	665,777
Federal Funds purchased and Securities sold under agreement to repurchase		55,962		55,962		—		—		55,962		69,756		69,756		—		—		69,756
Federal Home Loan Bank advances		—		—		—		—		—		4,500		4,570		—		—		4,570
Interest payable		207		207		—		—		207		223		223		—		—		223
Dividends payable		965		965		—		965		—		967		967		—		967		—
Total Liabilities	$	819,694	$	821,489	$	—	$	164,974	$	656,515	$	851,910	$	851,745	$	—	$	111,419	$	740,326

83

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 17 – Fair Value of Financial Instruments (Continued)

Fair Value Measurements

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2014 and 2013, and the valuation techniques used by the Company to determine those fair values.

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

Available-for-sale securities – When quoted prices are available in an active market, securities are valued using the quoted price and are classified as Level 1. The quoted prices are not adjusted.

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

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

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

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

84

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 17 – Fair Value of Financial Instruments (Continued)

The following summarizes financial assets measured at fair value on a recurring basis as of December 31, 2014 and December 31, 2013 segregated by level or the valuation inputs within the fair value hierarchy utilized to measure fair value:

($ in Thousands)	Quoted Prices in Active		Significant		Significant
December 31, 2014	Active Markets for Identical Assets (Level 1)		Observable Inputs (Level 2)		Observable Inputs (Level 3)
Assets-(Securities Available for Sale)
U.S. Treasury	$	25,393	$	—	$	—
U.S. Government agency		—		119,234		—
Mortgage-backed securities		—		29,562		—
State and local governments		—		66,372		7,931
Total Securities Available for Sale	$	25,393	$	215,168	$	7,931
($ in Thousands)	Quoted Prices in Active		Significant		Significant
December 31, 2013	Active Markets for Identical Assets (Level 1)		Observable Inputs (Level 2)		Observable Inputs (Level 3)
Assets-(Securities Available for Sale)
U.S. Treasury	$	25,272	$	—	$	—
U.S. Government agency		—		172,972		—
Mortgage-backed securities		—		44,792		—
State and local governments		—		71,127		10,346
Total Securities Available for Sale	$	25,272	$	288,891	$	10,346

	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local Governments Tax-Exempt			State and Local Governments Taxable			State and Local Governments Total
Balance at January 1, 2014	$	8,802		$	1,544		$	10,346
Change in Market Value		(1,104	)		(251	)		(1,355	)
Purchases		—			—			—
Sales		—			—			—
Payments & Maturities		(1,060	)		—			(1,060	)
Balance at December 31, 2014	$	6,638		$	1,293		$	7,931

85

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 17 – Fair Value of Financial Instruments (Continued)

	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local Governments Tax-Exempt			State and Local Governments Taxable			State and Local Governments Total
Balance at January 1, 2013	$	14,863		$	1,545		$	16,408
Change in Market Value		(1,852	)		(1	)		(1,853	)
Purchases		519			—			519
Sales		—			—			—
Payments & Maturities		(4,728	)		—			(4,728	)
Balance at December 31, 2013	$	8,802		$	1,544		$	10,346

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

There have been no transfers between Levels 1, 2, and 3 during 2014 and 2013.

The Company also has assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis. At December 31, 2014 and 2013, such assets consist primarily of impaired loans. Impaired loans categorized as Level 3 assets consist of non-homogeneous loans that are considered impaired. The Company estimates the fair value of the loans based on the present value of expected future cash flows using management’s best estimate of key assumptions. These assumptions include future payment ability, timing of payment streams, and estimated realizable values of available collateral (typically based on outside appraisals).

At December 31, 2014 and 2013, impaired loans categorized as Level 3 were $1.5 and $1.9 million, respectively. The specific allocation for impaired loans was $386.9 thousand as of December 31, 2014 and $516.1 thousand as of December 31, 2013, respectively, which are accounted for in the allowance for loan losses (see Note 4).

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

86

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 17 – Fair Value of Financial Instruments (Continued)

The following table presents impaired loans and other real estate owned as recorded at fair value:

	Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2014
($ in Thousands)	Balance at December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Change in fair value for twelve-month period ended Dec. 31,  2014
Impaired loans	$	1,456	$	—	$	—	$	1,456	$	(168	)
Other real estate owned - residential mortgages		21		—		—		21		(8	)
Other real estate owned - commercial		23		—		—		23		(32	)
Total change in fair value									$	(208	)
	Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2013
($ in Thousands)	Balance at December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Change in fair value for twelve-month period ended Dec. 31, 2013
Impaired loans	$	1,924	$	—	$	—	$	1,924	$	(525	)
Other real estate owned - residential mortgages		964		—		—		964		—
Other real estate owned - commercial		1,127		—		—		1,127		(64	)
Total change in fair value									$	(589	)

87

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 17 – Fair Value of Financial Instruments (Continued)

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

	Fair Value at December 31, 2014		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
State and political subdivision securities	$	7,931	Discounted Cash Flow	Credit strength of underlying project or entity / Discount rate	0-5%
Impaired Loans		1,456	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0-50%
Other real estate owned - residential		21	Appraisals	Discount to reflect current market	0-20%
Other real estate owned - commercial		23	Appraisals	Discount to reflect current market	0-20%
	Fair Value at December 31, 2013		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
State and political subdivision securities	$	10,346	Discounted Cash Flow	Credit strength of underlying project or entity / Discount rate	0-5%
Impaired Loans		1,924	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0-50%
Other real estate owned - residential		964	Appraisals	Discount to reflect current market	0-20%
Other real estate owned - commercial		1,127	Appraisals	Discount to reflect current market	0-20%

The Company also has other assets, which under certain conditions, are subject to measurement at fair value. These assets include loans held for sale, bank owned life insurance, and mortgage servicing rights. The Company estimated the fair values of these assets utilizing Level 3 inputs, including, the discounted present value of expected future cash flows. At December 31, 2014, the Company estimates that there is no impairment of these assets and therefore, no impairment charge to other expense was required to adjust these assets to their estimated fair values.

88

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 18 – Condensed Financial Statements of Parent Company

Balance Sheet

	(In Thousands)
	2014		2013
Assets
Cash	$	302	$	322
Related party receivables:
Dividends & Accounts receivable from subsidiary		2,030		951
Accrued interest receivable Municipals		58		49
Note receivable from Bank subsidiary		—		—
Securities - Municipals		14,998		14,956
Investment in subsidiaries		98,088		93,436
Total Assets	$	115,476	$	109,714
Liabilities
Accrued expenses	$	18	$	130
Dividends payable		965		967
Total Liabilities		983		1,097
Stockholders’ Equity		114,493		108,617
Total Liabilities and Stockholders’ Equity	$	115,476	$	109,714

Statement of Income

	(In Thousands)
	2014			2013			2012
Income
Dividends from subsidiary	$	5,725		$	3,830		$	3,870
Interest		—			566			713
Interest Municipals		215			30			—
Total Income		5,940			4,426			4,583
Operating Expenses		577			304			305
Income Before Income Taxes and Equity in Undistributed Earnings of Subsidiaries		5,363			4,122			4,278
Income Taxes		(196	)		89			139
		5,559			4,033			4,139
Equity in undistributed earnings of Subsidiaries		4,087			4,974			5,649
Net Income	$	9,646		$	9,007		$	9,788
Other Comprehensive Loss:
Unrealized gains (losses) on securities	$	438		$	(6,087	)	$	(288	)
Comprehensive Income	$	10,084		$	2,920		$	9,500

89

Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 18 – Condensed Financial Statements of Parent Company (Continued)

Statements of Cash Flows

	(In Thousands)
	2014			2013			2012
Cash Flows from Operating Activities
Net income	$	9,646		$	9,007		$	9,788
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Equity in undistributed net income (Distributions in excess earnings) of subsidiaries		(4,087	)		(4,974	)		(5,649	)
Accretion & Amortization of Securities		146			21
Changes in Assets and Liabilities:
Dividends receivable		(1,025	)		(10	)		260
Other Assets and Liabilities		(12	)		52			282
Net Cash Provided by Operating Activities		4,668			4,096			4,681
Cash Flows from Investing Activities
Investing in Subsidiary		(250	)		—			—
Purchase of Available for Sale Securities		—			(14,992	)		—
Repayment of Subsidiary Subordinated Debt		—			15,000			—
Net Cash Provided by Investing Activities		(250	)		8			—
Cash Flows from Financing Activities
Payment of dividends		(3,862	)		(3,719	)		(3,597	)
Purchase of Treasury Stock		(576	)		(1,236	)		(894	)
Net Cash Used in Financing Activities		(4,438	)		(4,955	)		(4,491	)
Net Change in Cash and Cash Equivalents		(20	)		(851	)		190
Cash and Cash Equivalents
Beginning of year		322			1,173			983
Cash and Cash Equivalents
End of year	$	302		$	322		$	1,173

The intercompany subordinated debt between the Company and the Bank matured during the fourth quarter of 2013. The Company invested the proceeds into tax exempt municipal securities, thereby replacing a revenue stream independent of dividends from the Bank with which to operate. The Company also benefits from a more favorable tax treatment for these holdings.

During the fourth quarter of 2014, the Company established a new subsidiary, Farmers & Merchants Risk Management, Inc. which is a Captive insurance company.

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Farmers & Merchants Bancorp, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2014, 2013, and 2012

Note 19 – Quarterly Financial Data

Quarterly Financial Data – UNAUDITED

	(000’s omitted except per share data)
	Quarter Ended in 2014
	Mar 31			June 30			Sep 30			Dec 31
Summary of Income:
Interest income	$	8,159		$	8,304		$	8,471		$	8,519
Interest expense		944			970			895			907
Net Interest Income		7,215			7,334			7,576			7,612
Provision for loan loss		428			444			282			37
Net interest income after provision of loan loss		6,787			6,890			7,294			7,575
Other income (expense)		(3,955	)		(3,456	)		(3,818	)		(3,800	)
Net income before income taxes		2,832			3,434			3,476			3,775
Income taxes		874			881			1,002			1,114
Net income	$	1,958		$	2,553		$	2,474		$	2,661
Earnings per Common Share	$	0.42		$	0.55		$	0.54		$	0.57
Average common shares outstanding		4,637,172			4,626,309			4,621,298			4,627,338
	Quarter Ended in 2013
	Mar 31			June 30			Sep 30			Dec 31
Summary of Income:
Interest income	$	7,702		$	7,765		$	7,844		$	8,117
Interest expense		1,233			1,184			1,129			1,058
Net Interest Income		6,469			6,581			6,715			7,059
Provision for loan loss		167			112			303			276
Net interest income after provision for loan loss		6,302			6,469			6,412			6,783
Other income (expense)		(3,218	)		(2,958	)		(3,555	)		(3,632	)
Net income before income taxes		3,084			3,511			2,857			3,151
Income taxes		932			1,009			791			864
Net income	$	2,152		$	2,502		$	2,066		$	2,287
Earnings per common share	$	0.46		$	0.53		$	0.45		$	0.49
Average common shares outstanding		4,683,659			4,679,971			4,682,655			4,660,096

ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTING AND FINANCIAL DISCLOSURE

No disagreements exist on accounting and financial disclosures or related matter.

91

ITEM 9a. CONTROLS AND PROCEDURES

MANAGEMENT REPORT REGARDING

DISCLOSURE CONTROLS AND PROCEDURES

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2014, pursuant to Exchange Act 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2014, in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic SEC filings.

MANAGEMENT REPORT REGARDING INTERNAL CONTROL AND

COMPLIANCE WITH DESIGNATED LAWS AND REGULATIONS

Management of Farmers & Merchants Bancorp, Inc. and its subsidiary is responsible for preparing the Bank’s annual financial statements. Management is also responsible for establishing and maintaining internal control over financial reporting presented in conformity with both generally accepted accounting principles and regulatory reporting in conformity with the Federal Financial Institutions Examination Council Instructions for Consolidated Reports of Condition and Income (call report instructions). The Bank’s internal control contains monitoring mechanisms, and actions are taken to correct deficiencies identified.

There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

It is also management’s responsibility to ensure satisfactory compliance with all designated laws and regulations and in particular, those laws and regulations concerning loans to insiders. The federal laws concerning loans to insiders are codified at 12 USC 375a and 375b, and the federal regulations are set forth at 12 CFR 23.5, 31, and 215.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control – Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2014. The registered public accounting firm that audited the financial statements included in this annual report has issued an attestation report on the Company’s internal control over financial reporting which can be found under Item 8 of this form 10-K.

There was no change in the company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended December 31, 2014 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9b. OTHER INFORMATION

None.

92

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

BOARD OF DIRECTORS

The information called for herein is presented below:

Name	Age	Principal Occupation or Employment for Past Five Years	Year First Became Director
Eugene N. Burkholder	62	President, Falor Farm Center, Inc.	2012
Steven A. Everhart	60	Self Employed	2003
Darryl L. Faye	69	Retired CFO in Healthcare Industry	2012
Jo Ellen Hornish	60	CEO Hornish Bros, Inc./Fountain City Leasing, Inc./ Advantage Powder Coating, Inc.	2013
Jack C. Johnson	62	President, Hawk’s Clothing, Inc.	1991
Marcia S. Latta	53	Vice President / Division of University Advancement / University of Findlay	2009
Steven J. Planson	55	President, Planson Farms, Inc.	2008
Anthony J. Rupp	65	President, Rupp Furniture Co.	2000
James C. Saneholtz	68	President, Saneholtz-McKarns, Inc.	1995
Kevin J. Sauder	54	President/CEO, Sauder Woodworking Co.	2004
Paul S. Siebenmorgen	65	President/CEO of the Corporation and The Farmers & Merchants State Bank	2005
Steven J. Wyse	70	Private Investor	1991

Directors are elected annually at the annual meeting of shareholders.

93

EXECUTIVE OFFICERS

Name	Age	Principal Occupation & Offices Held with Corporation & Bank for Past Five Years
Jack C. Johnson	62	Chairman
Paul S. Siebenmorgen	65	President & Chief Executive Officer
Barbara J. Britenriker	53	Executive Vice President Chief Financial Officer
Todd A. Graham	64	Executive Vice President Chief Lending Officer
Edward A. Leininger	58	Executive Vice President Chief Operating Officer
Rex D. Rice	56	Executive Vice President Senior Commercial Banking Director

Any remaining information required by Item 401 of Regulation S-K is presented in the proxy statement to be furnished in connection with the solicitation of proxies on behalf of the Board of Directors of the Registrant for use at its Annual Meeting to be held on April 16, 2015, and is incorporated herein by reference. The information called for under Item 405 of Regulation S-K regarding compliance with Section 16(a) and called for under Item 407(d)(5) regarding the existence of a Financial Expert on the Audit Committee of the Company’s Board of Directors is presented in the proxy statement to be furnished in connection with the solicitation of proxies on behalf of the Board of Directors of the Registrant for use at its Annual Meeting to be held on April 16, 2015, and is incorporated herein by reference.

The Board of Directors of the Company adopted a Code of Business Conduct and Ethics (the “Code”) at its meeting on February 13, 2004. While the Sarbanes-Oxley Act of 2002 mandates the adoption of a code of ethics for the most senior executive officers of all public companies, the Code adopted by the Corporation’s Board of Directors is broader in the activities covered and applies to all officers, directors and employees of the Corporation and the Bank, including the chief executive officer, chief financial officer, principal accounting officer and other senior officers performing accounting, auditing, financial management or similar functions. The administration of the Code has been delegated to the Audit Committee of the Board of Directors, a Committee comprised entirely of “independent directors.” The Code addresses topics such as compliance with laws and regulations, honest and ethical conduct, conflicts of interest, confidentiality and protection of Corporation assets, fair dealing and accurate and timely periodic reports, and also provides for enforcement mechanisms. The Board and management of the Corporation intends to continue to monitor not only the developing legal requirements in this area, but also the best practices of comparable companies, to assure that the Corporation maintains sound corporate governance practices in the future. Annual testing and review of the Code is conducted and attested to by signatures of all officers and directors of the Company.

A copy of the Corporation’s Code is available on the website of the Bank (www.fm-bank.com). In addition, a copy of the Code is available to any shareholder free of charge upon request. Shareholders desiring a copy of the Code should address written requests to Mr. Paul S. Siebenmorgen, President, Chief Executive Officer and Treasurer of Farmers & Merchants Bancorp, Inc., 307 North Defiance Street, Archbold, Ohio 43502, and are asked to mark Code of Business Conduct and Ethics on the outside of the envelope containing the request.

94

ITEM 11. EXECUTIVE COMPENSATION

The information called for herein by Item 402 and paragraphs (e)(4) and (e)(5) of Item 407, Regulations S-K is presented in the proxy statement to be furnished in connection with the solicitation of proxies on behalf of the Board of Directors of the Registrant for use at its Annual Meeting to be held on April 16, 2015, and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information called for by Item 403 of Regulation S-K is presented in the proxy statement to be furnished in connection with the solicitation of proxies on behalf of the Board of Directors of the Registrant for use at its Annual Meeting to be held Thursday, April 16, 2015 and is incorporated herein by reference.

On April 23, 2005 the Company’s shareholders approved the Farmers & Merchants Bancorp, Inc. 2005 Long-Term Stock Incentive Plan. The plan authorizes the issuance of up to 800,000 of the Company’s common shares in the form of stock options, restricted stock, performance shares, and unrestricted stock to employees of the Company and its subsidiaries. To date, the Company has only made awards of restricted stock under the Plan, which awards are subject to time vesting. This requires the executive or employee to remain employed with the Company or the Bank, as the case may be, until the awards have vested or such shares of restricted stock will be forfeited. During 2014, 13,250 shares were awarded to 61 employees and 780 were forfeited due to employee terminations that occurred prior to the applicable vesting dates. In addition, 965 shares had vesting accelerated and were paid to retiring officers. 23,570 shares were purchased during 2014. At year end, the Company held 572,662 shares in Treasury stock and 33,390 unvested shares of restricted stock.

Equity Compensation Plan Information
	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders		—	$	—		711,243
Equity compensation plans not approved by security holders		—	$	—		—
Total		—	$	—		711,243

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information called for herein by Item 404 and paragraph (a) of Item 407 is presented in the proxy statement to be furnished in connection with the solicitation of proxies on behalf of the Board of Directors of the Registrant for use at its Annual Meeting to be held on April 16, 2015, and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information called for by this Item is presented in the proxy statement to be furnished in connection with the solicitation of proxies on behalf of the Board of Directors of the Registrant for use at its Annual Meeting to be held on April 16, 2015, and is incorporated herein by reference.

95

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES

a. The Following documents are filed as part of this report.

(1) Financial Statements (included in this 10-K under Item 8)

Report of Independent Accountants

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Changes in Shareholders’ Equity

Consolidated Statements of Cash Flows

Note to Consolidated Financial Statements

(2) Financial Statement Schedules

Five Year Summary of Operations

b. Exhibits Required by Item 601 of Regulation S-K

(3.1)	a. Amended Articles of Incorporation are incorporated by reference to the Company’s Quarterly Report on Form 10-Q that was filed with the Commission on August 1, 2006.
(3.2)	Code of Regulations are incorporated by reference to the Company’s Quarterly Report on Form 10-Q that was filed with the Commission on May 10, 2004.
(10.1)	Form of Change in Control Agreement executed by and between the Company and each of Paul S. Siebenmorgen and Barbara J. Britenriker, respectively, on December 26, 2012 (incorporated by reference to the Annual Report on Form 10-K filed with the Commission on February 25, 2013).
(10.2)	Form of Change in Control Agreement executed by and between the Company and each of Edward A. Leininger and Rex D. Rice, respectively, on December 26, 2012 (incorporated by reference to the Annual Report on Form 10-K filed with the Commission on February 25, 2013).
(10.3)	2005 Long-Term Stock Incentive Plan (incorporated by reference to the Quarterly Report on Form 10-Q filed with the Commission on October 27, 2005).
(10.4)	Form on Restricted Stock Agreement (incorporated by reference to the Quarterly Report on Form 10-Q filed with the Commission on October 27, 2005).

96

ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES (Continued)

(21)	Subsidiaries of Farmers & Merchants Bancorp, Inc.
(31.1)	Certification of the Chief Executive Officer Required under Rule 13(a)-14(a)/15d-14(a)
(31.2)	Certification of the Chief Financial Officer Required under Rule 13(a)-14(a)/15d-14(a)
(32.1)	Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(32.2)	Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document (1)
101.SCH	XBRL Taxonomy Extension Schema Document (1)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB	XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document (1)

97

FARMERS & MERCHANTS BANCORP, INC

Signatures

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934. The registrant has duly caused

this report to be signed on its behalf by the undersigned, hereunto duly authorized.

By	/s/ Paul S. Siebenmorgen	Date:	February 25, 2015
	Paul S. Siebenmorgen
	Chief Executive Officer
	Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Paul S. Siebenmorgen	Date:	February 25, 2015	/s/ Barbara J. Britenriker	Date:	February 25, 2015
Paul S. Siebenmorgen			Barbara J. Britenriker
Chief Executive Officer (Principal Executive Officer)			Chief Financial Officer
			(Principal Financial Officer/Principal Accounting Officer)
/s/ Eugene N. Burkholder	Date:	February 25, 2015	/s/ Steven A. Everhart	Date:	February 25, 2015
Dexter L. Benecke, Director			Steven A. Everhart, Director
/s/ Darryl L. Faye	Date:	February 25, 2015	/s/ Jo Ellen Hornish	Date:	February 25, 2015
Darryl L. Faye, Director			Jo Ellen Hornish, Director
/s/ Jack C. Johnson	Date:	February 25, 2015	/s/ Marcia S. Latta	Date:	February 25, 2015
Jack C. Johnson, Director			Marcia S. Latta, Director
/s/ Steven J. Planson	Date:	February 25, 2015	/s/ Anthony J. Rupp	Date:	February 25, 2015
Steven J. Planson, Director			Anthony J. Rupp, Director
/s/ James C. Saneholtz	Date:	February 25, 2015	/s/ Kevin J. Sauder	Date:	February 25, 2015
James C. Saneholtz, Director			Kevin J. Sauder, Director
/s/ Steven J. Wyse	Date:	February 25, 2015
Steven J. Wyse, Director

98

EX-21

Exhibit 21

SUBSIDIARIES OF FARMERS & MERCHANTS BANCORP, INC

FARMERS & MERCHANTS STATE BANK

FARMERS & MERCHANTS RISK MANAGEMENT, INC.

[Remainder of this page intentionally left blank.]

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Paul S. Siebenmorgen, President and Chief Executive Officer of Farmers & Merchants Bancorp, Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Farmers & Merchants Bancorp, Inc.;

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(s) 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(s) 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: February 25, 2015

/s/ Paul S. Siebenmorgen

Paul S. Siebenmorgen, President and CEO

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Barbara J. Britenriker, Chief Financial Officer of Farmers & Merchants Bancorp, Inc., certify that:

1. I have reviewed this annual report on Form 10-K of Farmers & Merchants Bancorp, Inc.;

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(s) 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(s) 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: February 25, 2015

/s/ Barbara J. Britenriker

Barbara J. Britenriker, Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ENACTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

FARMERS & MERCHANTS BANCORP, INC

In connection with the Annual Report on Form 10-K of Farmers & Merchants Bancorp, Inc. for the year ended December 31, 2014, as filed with the Securities and Exchange Commission (the “Report”), I, Paul S. Siebenmorgen, Chief Executive Officer, of the Company, certify, pursuant to 18 U.S.C. 1350, as added by 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirement of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and;

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

Date: February 25, 2015	/s/ Paul S. Siebenmorgen
	Paul S. Siebenmorgen
	Chief Executive Officer

A signed original of this written statement required by section 906 has been provided to Farmers & Merchants Bancorp, Inc. and will be retained by Farmers & Merchants Bancorp, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ENACTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

FARMERS & MERCHANTS BANCORP, INC

In connection with the Annual Report on Form 10-K of Farmers & Merchants Bancorp, Inc. for the year ended December 31, 2014, as filed with the Securities and Exchange Commission (the “Report”), I, Barbara J. Britenriker, Chief Financial Officer, of the Company, certify, pursuant to 18 U.S.C. 1350, as added by 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirement of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and;

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

Date: February 25, 2015	/s/ Barbara J. Britenriker
	Barbara J. Britenriker
	Chief Financial Officer

A signed original of this written statement required by section 906 has been provided to Farmers & Merchants Bancorp, Inc. and will be retained by Farmers & Merchants Bancorp, Inc. and furnished to the Securities and Exchange Commission or it

XML

Off Balance Sheet Activities (Tables)

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Outstanding Financial Instruments Whose Contract Amounts Represent Credit Risk

At December 31, 2014 and 2013, the following financial instruments were outstanding whose contract amounts represent credit risk:

	(In Thousands)
	2014		2013
Commitments to extend credit	$	212,258	$	201,891
Credit card arrangements		15,064		14,818
Standby letters of credit		694		1,567

XML

Loans - Additional Information (Detail) (USD $)	1 Months Ended	12 Months Ended
	Jan. 31, 2010	Dec. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Residential mortgage loan		$ 20,800,000	$ 24,300,000
Percentage of delinquent loan	2.85%
Delinquent loans least percentage			0.25%
Impaired loans classified as troubled debt restructured		797,200	861,200
Maximum time for re-evaluation (in months)		12 months
Re-evaluation period for real estate		2 years
Unsecured consumer loans, credit card credits and overdraft lines of credit reach		90 days
Delinquent period for charging down consumer loans		120 days
Delinquent period for charging down commercial and agricultural credits		120 days
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans held for sale		$ 459,000	$ 566,000
Maximum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Leverage position of balance sheet		1.50
Leverage position of customers		2.00
Minimum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Repayment period of loan with a reasonable reduction of principal balance		2 years

XML

Business Combination & Asset Purchase - Amortization Expense of Core Deposit Intangible Assets (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014
Business Acquisition [Line Items]
2015	$ 322
2016	322
2017	245
2018	167
2019	167
Thereafter	162
Total	1,385
Hicksville [Member]
Business Acquisition [Line Items]
2015	155
2016	155
2017	78
Total	388
Custar [Member]
Business Acquisition [Line Items]
2015	167
2016	167
2017	167
2018	167
2019	167
Thereafter	162
Total	$ 997

XML

Servicing - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Transfers and Servicing [Abstract]
Loans serviced for others unpaid principal amount	$ 275	$ 282
Capitalized service right assets included in other assets	2.0	2.1
Fair market value of the capitalized servicing rights	$ 2.9	$ 2.8
Prepayment rate	9.60%	11.20%
Discount yield	6.48%	8.25%

XML

Loans - Loans (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Loans:
Loans - Gross	$ 622,345	$ 576,343
Less: Net deferred loan fees and costs	(419)	(230)
Loans after net deferred loan fees and costs	621,926	576,113
Less: Allowance for loan losses	(5,905)	(5,194)	(5,224)	(5,091)
Loans - Net	616,021	570,919
Commercial Real Estate [Member]
Loans:
Loans - Gross	270,188	248,893
Agricultural Real Estate [Member]
Loans:
Loans - Gross	50,895	44,301
Consumer Real Estate [Member]
Loans:
Loans - Gross	97,550	92,438
Commercial and Industrial [Member]
Loans:
Loans - Gross	100,126	99,498
Agricultural [Member]
Loans:
Loans - Gross	74,611	65,449
Consumer [Member]
Loans:
Loans - Gross	24,277	21,406
Industrial Development Bonds [Member]
Loans:
Loans - Gross	$ 4,698	$ 4,358

XML

Federal Income Taxes - Reconciliation of the Statutory Federal Income Tax Rate to the Effective Tax Rate (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Effective Income Tax Rate Reconciliation, Amount [Abstract]
Income tax at statutory rates									$ 4,596	$ 4,285	$ 4,655
Decrease resulting from:
Tax exempt interest									(634)	(640)	(677)
Change in prior estimates and other									(91)	(49)	(74)
Total	$ 1,114	$ 1,002	$ 881	$ 874	$ 864	$ 791	$ 1,009	$ 932	$ 3,871	$ 3,596	$ 3,904

XML

Business Combination & Asset Purchase - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 13, 2014	Jul. 09, 2010
Loans At Acquisition Date [Line Items]
Deposits at close included in purchase	$ 29,500,000	$ 29,500,000
Loans included in purchase		11,400,000
Aggregate acquisition cost		(15,215,000)
Recognition of core deposit intangible asset with acquired purchase	2,260,000
Number of years amortized over an estimated remaining economic useful life of deposits	7 years
Amortization expense	480,000	319,000	312,000
Custar [Member]
Loans At Acquisition Date [Line Items]
Aggregate acquisition cost		1,200,000
Recognition of core deposit intangible asset with acquired purchase				1,170,000
Hicksville [Member]
Loans At Acquisition Date [Line Items]
Recognition of core deposit intangible asset with acquired purchase					1,090,000
Knisely [Member]
Loans At Acquisition Date [Line Items]
Recognition of core deposit intangible asset with acquired purchase	$ 1,100,000

XML

Servicing (Tables)

12 Months Ended

Dec. 31, 2014

Transfers and Servicing [Abstract]

Summary of Mortgage Servicing Rights Capitalized and Amortized

The following summarizes mortgage servicing rights capitalized and amortized during each year:

	(In Thousands)
	2014			2013
Beginning Year	$	2,066		$	2,063
Capitalized Additions		301			429
Amortization		(344	)		(426	)
Valuation Allowance		—			—
End of Year	$	2,023		$	2,066

XML

Federal Income Taxes - Components of Deferred Tax Assets and Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Deferred Tax Assets:
Allowance for loan losses	$ 2,030	$ 1,766
Other	416	788
Total deferred tax assets	2,446	2,554
Deferred Tax Liabilities:
Accreted discounts on bonds	83	73
FHLB stock dividends	746	859
Mortgage servicing rights	696	702
Other	1,160	1,121
Net unrealized gain on available-for-sale securities	229	3
Total deferred tax liabilities	2,914	2,758
Net Deferred Tax Liability	$ (468)	$ (204)

XML

Deposits - Scheduled Maturities for Time Deposits (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Maturities of Time Deposits [Abstract]
2015	$ 97,439
2016	49,634
2017	19,586
2018	24,864
2019	3,053
thereafter	924
Total	$ 195,500	$ 236,360

XML

Fair Value of Financial Instruments - Estimated Fair Values and Related Carrying or Notional Amounts (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Financial Assets:
Cash and Cash Equivalents	$ 24,295	$ 19,263
Securities - available for sale	248,492	324,509
Other Securities	3,717	4,216
Financial Liabilities:
Non-interest bearing Deposits	164,009	110,452
Time Deposits	195,500	236,360
Total deposits	762,560	776,464
Federal Funds purchased and Securities sold under agreement to repurchase	55,962	69,756
Federal Home Loan Bank advances	0	4,500
Dividends payable	965	967
Carrying Amount [Member]
Financial Assets:
Cash and Cash Equivalents	24,295	19,263
Securities - available for sale	248,492	324,509
Other Securities	3,717	4,216
Loans, net	616,021	570,919
Interest receivable	3,578	3,694
Total Assets	896,103	922,601
Financial Liabilities:
Interest bearing Deposits	403,051	429,652
Non-interest bearing Deposits	164,009	110,452
Time Deposits	195,500	236,360
Total deposits	762,560	776,464
Federal Funds purchased and Securities sold under agreement to repurchase	55,962	69,756
Federal Home Loan Bank advances		4,500
Interest payable	207	223
Dividends payable	965	967
Total Liabilities	819,694	851,910
Fair Value [Member]
Financial Assets:
Cash and Cash Equivalents	24,295	19,263
Securities - available for sale	248,492	324,509
Other Securities	3,717	4,216
Loans, net	625,377	579,992
Interest receivable	3,578	3,694
Total Assets	905,459	931,674
Financial Liabilities:
Interest bearing Deposits	403,801	429,750
Non-interest bearing Deposits	164,009	110,452
Time Deposits	196,545	236,027
Total deposits	764,355	776,229
Federal Funds purchased and Securities sold under agreement to repurchase	55,962	69,756
Federal Home Loan Bank advances		4,570
Interest payable	207	223
Dividends payable	965	967
Total Liabilities	821,489	851,745
Level 1 [Member]
Financial Assets:
Cash and Cash Equivalents	24,295	19,263
Securities - available for sale	25,393	25,272
Other Securities
Loans, net
Interest receivable
Total Assets	49,688	44,535
Financial Liabilities:
Interest bearing Deposits
Non-interest bearing Deposits
Time Deposits
Total deposits
Federal Funds purchased and Securities sold under agreement to repurchase
Federal Home Loan Bank advances
Interest payable
Dividends payable
Total Liabilities
Level 2 [Member]
Financial Assets:
Cash and Cash Equivalents
Securities - available for sale	215,168	288,891
Other Securities
Loans, net
Interest receivable
Total Assets	215,168	288,891
Financial Liabilities:
Interest bearing Deposits
Non-interest bearing Deposits	164,009	110,452
Time Deposits
Total deposits	164,009	110,452
Federal Funds purchased and Securities sold under agreement to repurchase
Federal Home Loan Bank advances
Interest payable
Dividends payable	965	967
Total Liabilities	164,974	111,419
Level 3 [Member]
Financial Assets:
Cash and Cash Equivalents
Securities - available for sale	7,931	10,346
Other Securities	3,717	4,216
Loans, net	625,377	579,992
Interest receivable	3,578	3,694
Total Assets	640,603	598,248
Financial Liabilities:
Interest bearing Deposits	403,801	429,750
Non-interest bearing Deposits
Time Deposits	196,545	236,027
Total deposits	600,346	665,777
Federal Funds purchased and Securities sold under agreement to repurchase	55,962	69,756
Federal Home Loan Bank advances		4,570
Interest payable	207	223
Dividends payable
Total Liabilities	$ 656,515	$ 740,326

XML

Loans - Distribution of Fixed Rate Loans and Variable Rate Loans by Major Loan Category (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	$ 190,948
Distribution of variable rate loans by major loan category, Variable Rate	79,240
Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	36,168
Distribution of variable rate loans by major loan category, Variable Rate	14,727
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	77,534
Distribution of variable rate loans by major loan category, Variable Rate	20,016
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	76,625
Distribution of variable rate loans by major loan category, Variable Rate	23,501
Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	69,707
Distribution of variable rate loans by major loan category, Variable Rate	4,904
Consumer Master Card and Overdrafts [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	19,566
Distribution of variable rate loans by major loan category, Variable Rate	4,711
Industrial Development Bonds [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Distribution of fixed rate loans by major loan category, Fixed Rate	4,529
Distribution of variable rate loans by major loan category, Variable Rate	$ 169

XML

Federal Home Loan Bank Advances - Additional Information (Detail) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Total Borrowings	$ 0	$ 4,500,000
Mortgage Loans at Cost [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Advances, secured by mortgage loans	$ 20,800,000	$ 24,300,000

XML

Minimum Regulatory Capital Requirements - Summary of Bank's Actual and Required Capital Amounts and Ratios (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total Risk-Based Capital to Risk Weighted Assets Actual, Amount	$ 114,702	$ 107,752
Tier 1 Capital to Risk Weighted Assets Actual, Amount	108,590	102,395
Tier 1 Capital to Adjusted Total Assets Actual, Amount	108,590	102,395
Total Risk-Based Capital to Risk Weighted Assets Actual, Ratio	16.68%	16.34%
Tier 1 Capital to Risk Weighted Assets Actual, Ratio	15.79%	15.53%
Tier 1 Capital to Adjusted Total Assets Actual, Ratio	11.70%	10.88%
Total Risk-Based Capital to Risk Weighted Assets For Capital Adequacy Purposes, Amount	55,028	52,756
Tier 1 Capital to Risk Weighted Assets For Capital Adequacy Purposes, Amount	27,514	26,378
Tier 1 Capital to Adjusted Total Assets For Capital Adequacy Purposes, Amount	37,111	37,644
Total Risk-Based Capital to Risk Weighted Assets For Capital Adequacy Purposes, Ratio	8.00%	8.00%
Tier 1 Capital to Risk Weighted Assets For Capital Adequacy Purposes, Ratio	4.00%	4.00%
Tier 1 Capital to Adjusted Total Assets For Capital Adequacy Purposes, Ratio	4.00%	4.00%
Farmers & Merchants State Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total Risk-Based Capital to Risk Weighted Assets Actual, Amount	98,154	92,838
Tier 1 Capital to Risk Weighted Assets Actual, Amount	92,042	87,481
Tier 1 Capital to Adjusted Total Assets Actual, Amount	92,042	87,481
Total Risk-Based Capital to Risk Weighted Assets Actual, Ratio	14.35%	14.10%
Tier 1 Capital to Risk Weighted Assets Actual, Ratio	13.46%	13.29%
Tier 1 Capital to Adjusted Total Assets Actual, Ratio	10.01%	9.40%
Total Risk-Based Capital to Risk Weighted Assets For Capital Adequacy Purposes, Amount	54,710	52,674
Tier 1 Capital to Risk Weighted Assets For Capital Adequacy Purposes, Amount	27,355	26,337
Tier 1 Capital to Adjusted Total Assets For Capital Adequacy Purposes, Amount	36,785	37,228
Total Risk-Based Capital to Risk Weighted Assets For Capital Adequacy Purposes, Ratio	8.00%	8.00%
Tier 1 Capital to Risk Weighted Assets For Capital Adequacy Purposes, Ratio	4.00%	4.00%
Tier 1 Capital to Adjusted Total Assets For Capital Adequacy Purposes, Ratio	4.00%	4.00%
Total Risk-Based Capital to Risk Weighted Assets To Be Well Capitalized Under the Prompt Corrective Action Provisions, Amount	68,388	65,843
Tier 1 Capital to Risk Weighted Assets To Be Well Capitalized Under the Prompt Corrective Action Provisions, Amount	41,033	39,506
Tier 1 Capital to Adjusted Total Assets To Be Well Capitalized Under the Prompt Corrective Action Provisions, Amount	$ 45,981	$ 46,535
Total Risk-Based Capital to Risk Weighted Assets To Be Well Capitalized Under the Prompt Corrective Action Provisions, Ratio	10.00%	10.00%
Tier 1 Capital to Risk Weighted Assets To Be Well Capitalized Under the Prompt Corrective Action Provisions, Ratio	6.00%	6.00%
Tier 1 Capital to Adjusted Total Assets To Be Well Capitalized Under the Prompt Corrective Action Provisions, Ratio	5.00%	5.00%

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Employee Benefit Plans - Activity of Restricted Stock Awards (Detail) (Restricted Stock Awards [Member], USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Number of Shares, Beginning of period	31,890	30,670	29,715
Number of Shares, Granted	13,250	11,000	11,000
Number of Shares, Vested	(10,970)	(9,160)	(8,910)
Number of Shares, Forfeited	(780)	(620)	(1,135)
Number of Shares, Nonvested, end of period	33,390	31,890	30,670
Weighted average fair value per award, Beginning of period	$ 20.38	$ 19.05	$ 18.99
Weighted average fair value per award, Granted	$ 25.50	$ 22.00	$ 19.95
Weighted average fair value per award, Vested	$ 25.39	$ 21.55	$ 19.99
Weighted average fair value per award, Forfeited	$ 24.97	$ 21.84	$ 19.99
Weighted average fair value per award, Nonvested, end of period	$ 22.77	$ 20.38	$ 19.05

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Restrictions of Dividends & Inter-company Borrowings - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2014
Equity [Abstract]
Dividends may be paid without prior regulatory approval	$ 14.7

XML

Federal Income Taxes - Components of Income Tax Expense (Benefit) (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Current:
Federal									$ 3,837	$ 3,562	$ 4,030
Deferred:
Federal									34	34	(126)
Total	$ 1,114	$ 1,002	$ 881	$ 874	$ 864	$ 791	$ 1,009	$ 932	$ 3,871	$ 3,596	$ 3,904

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Servicing - Summary of Mortgage Servicing Rights Capitalized and Amortized (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Servicing Assets at Fair Value [Line Items]
End of Year	$ 2,023	$ 2,066
Mortgage Servicing Rights [Member]
Servicing Assets at Fair Value [Line Items]
Beginning Year	2,066	2,063
Capitalized Additions	301	429
Amortization	(344)	(426)
Valuation Allowance	0	0
End of Year	$ 2,023	$ 2,066

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Condensed Financial Statements of Parent Company

12 Months Ended

Dec. 31, 2014

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Financial Statements of Parent Company

Note 18 – Condensed Financial Statements of Parent Company

Balance Sheet

	(In Thousands)
	2014		2013
Assets
Cash	$	302	$	322
Related party receivables:
Dividends & Accounts receivable from subsidiary		2,030		951
Accrued interest receivable Municipals		58		49
Note receivable from Bank subsidiary		—		—
Securities - Municipals		14,998		14,956
Investment in subsidiaries		98,088		93,436
Total Assets	$	115,476	$	109,714
Liabilities
Accrued expenses	$	18	$	130
Dividends payable		965		967
Total Liabilities		983		1,097
Stockholders’ Equity		114,493		108,617
Total Liabilities and Stockholders’ Equity	$	115,476	$	109,714

Statement of Income

	(In Thousands)
	2014			2013			2012
Income
Dividends from subsidiary	$	5,725		$	3,830		$	3,870
Interest		—			566			713
Interest Municipals		215			30			—
Total Income		5,940			4,426			4,583
Operating Expenses		577			304			305
Income Before Income Taxes and Equity in Undistributed Earnings of Subsidiaries		5,363			4,122			4,278
Income Taxes		(196	)		89			139
		5,559			4,033			4,139
Equity in undistributed earnings of Subsidiaries		4,087			4,974			5,649
Net Income	$	9,646		$	9,007		$	9,788
Other Comprehensive Loss:
Unrealized gains (losses) on securities	$	438		$	(6,087	)	$	(288	)
Comprehensive Income	$	10,084		$	2,920		$	9,500

Statements of Cash Flows

	(In Thousands)
	2014			2013			2012
Cash Flows from Operating Activities
Net income	$	9,646		$	9,007		$	9,788
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Equity in undistributed net income (Distributions in excess earnings) of subsidiaries		(4,087	)		(4,974	)		(5,649	)
Accretion & Amortization of Securities		146			21
Changes in Assets and Liabilities:
Dividends receivable		(1,025	)		(10	)		260
Other Assets and Liabilities		(12	)		52			282
Net Cash Provided by Operating Activities		4,668			4,096			4,681
Cash Flows from Investing Activities
Investing in Subsidiary		(250	)		—			—
Purchase of Available for Sale Securities		—			(14,992	)		—
Repayment of Subsidiary Subordinated Debt		—			15,000			—
Net Cash Provided by Investing Activities		(250	)		8			—
Cash Flows from Financing Activities
Payment of dividends		(3,862	)		(3,719	)		(3,597	)
Purchase of Treasury Stock		(576	)		(1,236	)		(894	)
Net Cash Used in Financing Activities		(4,438	)		(4,955	)		(4,491	)
Net Change in Cash and Cash Equivalents		(20	)		(851	)		190
Cash and Cash Equivalents
Beginning of year		322			1,173			983
Cash and Cash Equivalents
End of year	$	302		$	322		$	1,173

The intercompany subordinated debt between the Company and the Bank matured during the fourth quarter of 2013. The Company invested the proceeds into tax exempt municipal securities, thereby replacing a revenue stream independent of dividends from the Bank with which to operate. The Company also benefits from a more favorable tax treatment for these holdings.

During the fourth quarter of 2014, the Company established a new subsidiary, Farmers & Merchants Risk Management, Inc. which is a Captive insurance company.

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Securities - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Realized gains and losses on sales	$ 57.9	$ 91.0	$ 60.5
Investments with a carrying value and fair value	$ 176.9	$ 205.2
Redemption period	5 years
Minimum [Member]
Schedule of Available-for-sale Securities [Line Items]
Underwater security	10 years
Loss position existed	3 years

XML

Condensed Financial Statements of Parent Company (Tables)

12 Months Ended

Dec. 31, 2014

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Schedule Of Condensed Balance Sheet

Balance Sheet

	(In Thousands)
	2014		2013
Assets
Cash	$	302	$	322
Related party receivables:
Dividends & Accounts receivable from subsidiary		2,030		951
Accrued interest receivable Municipals		58		49
Note receivable from Bank subsidiary		—		—
Securities - Municipals		14,998		14,956
Investment in subsidiaries		98,088		93,436
Total Assets	$	115,476	$	109,714
Liabilities
Accrued expenses	$	18	$	130
Dividends payable		965		967
Total Liabilities		983		1,097
Stockholders’ Equity		114,493		108,617
Total Liabilities and Stockholders’ Equity	$	115,476	$	109,714

Schedule Of Condensed Income Statement

Statement of Income

	(In Thousands)
	2014			2013			2012
Income
Dividends from subsidiary	$	5,725		$	3,830		$	3,870
Interest		—			566			713
Interest Municipals		215			30			—
Total Income		5,940			4,426			4,583
Operating Expenses		577			304			305
Income Before Income Taxes and Equity in Undistributed Earnings of Subsidiaries		5,363			4,122			4,278
Income Taxes		(196	)		89			139
		5,559			4,033			4,139
Equity in undistributed earnings of Subsidiaries		4,087			4,974			5,649
Net Income	$	9,646		$	9,007		$	9,788
Other Comprehensive Loss:
Unrealized gains (losses) on securities	$	438		$	(6,087	)	$	(288	)
Comprehensive Income	$	10,084		$	2,920		$	9,500

Schedule Of Condensed Cash Flow Statement

Statements of Cash Flows

	(In Thousands)
	2014			2013			2012
Cash Flows from Operating Activities
Net income	$	9,646		$	9,007		$	9,788
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Equity in undistributed net income (Distributions in excess earnings) of subsidiaries		(4,087	)		(4,974	)		(5,649	)
Accretion & Amortization of Securities		146			21
Changes in Assets and Liabilities:
Dividends receivable		(1,025	)		(10	)		260
Other Assets and Liabilities		(12	)		52			282
Net Cash Provided by Operating Activities		4,668			4,096			4,681
Cash Flows from Investing Activities
Investing in Subsidiary		(250	)		—			—
Purchase of Available for Sale Securities		—			(14,992	)		—
Repayment of Subsidiary Subordinated Debt		—			15,000			—
Net Cash Provided by Investing Activities		(250	)		8			—
Cash Flows from Financing Activities
Payment of dividends		(3,862	)		(3,719	)		(3,597	)
Purchase of Treasury Stock		(576	)		(1,236	)		(894	)
Net Cash Used in Financing Activities		(4,438	)		(4,955	)		(4,491	)
Net Change in Cash and Cash Equivalents		(20	)		(851	)		190
Cash and Cash Equivalents
Beginning of year		322			1,173			983
Cash and Cash Equivalents
End of year	$	302		$	322		$	1,173

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Securities Sold Under Agreement to Repurchase - Daily Securities Sold under Agreement to Repurchase (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Daily Securities Sold Under Agreement to Repurchase [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amount Outstanding at End of Period	$ 38,493	$ 38,503
Weighted Average Rate End of Period	0.08%	0.08%
Maximum Amount Borrowings Outstanding Month End	46,475	48,366
Approximate Average Outstanding in Period	42,222	38,859
Approximate Weighted Average Interest Rate For the Period	0.09%	0.09%
Term CDs Sold Under Agreement to Repurchase [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amount Outstanding at End of Period	17,469	17,253
Weighted Average Rate End of Period	1.25%	1.25%
Maximum Amount Borrowings Outstanding Month End	17,469	17,291
Approximate Average Outstanding in Period	$ 17,337	$ 17,095
Approximate Weighted Average Interest Rate For the Period	1.24%	1.25%

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Quarterly Financial Data - Summary of Quarterly Financial Data (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Summary of Income:
Interest income	$ 8,519	$ 8,471	$ 8,304	$ 8,159	$ 8,117	$ 7,844	$ 7,765	$ 7,702	$ 33,453	$ 31,428	$ 33,273
Interest expense	907	895	970	944	1,058	1,129	1,184	1,233	3,716	4,604	6,250
Net Interest Income	7,612	7,576	7,334	7,215	7,059	6,715	6,581	6,469	29,737	26,824	27,023
Provision for loan loss	37	282	444	428	276	303	112	167	1,191	858	738
Net interest income after provision for loan loss	7,575	7,294	6,890	6,787	6,783	6,412	6,469	6,302	28,546	25,966	26,285
Other income (expense)	(3,800)	(3,818)	(3,456)	(3,955)	(3,632)	(3,555)	(2,958)	(3,218)
Income Before Income Taxes	3,775	3,476	3,434	2,832	3,151	2,857	3,511	3,084	13,517	12,603	13,692
Income Taxes	1,114	1,002	881	874	864	791	1,009	932	3,871	3,596	3,904
Net income	$ 2,661	$ 2,474	$ 2,553	$ 1,958	$ 2,287	$ 2,066	$ 2,502	$ 2,152	$ 9,646	$ 9,007	$ 9,788
Earnings per Common Share	$ 0.57	$ 0.54	$ 0.55	$ 0.42	$ 0.49	$ 0.45	$ 0.53	$ 0.46	$ 2.08	$ 1.93	$ 2.08
Average common shares outstanding	4,627,338	4,621,298	4,626,309	4,637,172	4,660,096	4,682,655	4,679,971	4,683,659	4,595,967	4,645,929	4,665,988

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Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2014

Compensation and Retirement Disclosure [Abstract]

Activity of Restricted Stock Awards

The following table summarizes the activity of restricted stock awards as of December 31:

	Year Ended December 31,
	2014					2013					2012
	Number of Shares			Weighted average fair value per award		Number of Shares			Weighted average fair value per award		Number of Shares			Weighted average fair value per award
Beginning of period		31,890			20.38		30,670			19.05		29,715			18.99
Granted		13,250			25.50		11,000			22.00		11,000			19.95
Vested		(10,970	)		25.39		(9,160	)		21.55		(8,910	)		19.99
Forfeited		(780	)		24.97		(620	)		21.84		(1,135	)		19.99
Nonvested, end of period		33,390			22.77		31,890			20.38		30,670			19.05

XML

Securities - Gross Realized Gains and Losses (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Available-for-sale Securities, Gross Realized Gain (Loss), Disclosures [Abstract]
Gross realized gains	$ 638	$ 839	$ 852
Gross realized losses	(144)	(64)
Net realized gains	494	775	852
Tax expense related to net realized gains	$ 168	$ 264	$ 290

XML

Premises and Equipment - Major Categories of Banking Premises and Equipment and Accumulated Depreciation (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Property, Plant and Equipment [Line Items]
Premises and Equipment (Gross)	$ 38,368	$ 35,988
Less: Accumulated depreciation	(18,068)	(17,279)
Premises and Equipment (Net)	20,300	18,709
Land [Member]
Property, Plant and Equipment [Line Items]
Premises and Equipment (Gross)	4,984	4,360
Buildings [Member]
Property, Plant and Equipment [Line Items]
Premises and Equipment (Gross)	21,955	20,593
Furnishings [Member]
Property, Plant and Equipment [Line Items]
Premises and Equipment (Gross)	$ 11,429	$ 11,035

XML

Loans - Recorded Investment in Those Classes Based on Payment Activity and Assigned Risk Grading (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Consumer - Credit Card [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	$ 3,987	$ 3,721
Consumer - Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	19,871	17,455
Performing [Member] | Consumer - Credit Card [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	3,987	3,721
Performing [Member] | Consumer - Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	19,846	17,425
Nonperforming [Member] | Consumer - Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	25	30
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	97,550	92,438
Consumer Real Estate [Member] | Pass [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	97,007	92,226
Consumer Real Estate [Member] | 6 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	446	18
Consumer Real Estate [Member] | 7 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Net	$ 97	$ 194

XML

Business Combination & Asset Purchase - Estimated Values of Assets Acquired and Liabilities Assumed (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Business Combinations [Abstract]
Cash	$ 204
Loans	11,436
Accrued Interest on Loans	31
Premises and Equipment	271
Core Deposit Intangible Asset	1,171
Other Assets	1
Total Assets Acquired	13,114
Deposits	29,466
Accrued Interest on Deposits	17
Other Liabilities	17
Total Liabilities Assumed	29,500	29,500
Net Liabilities Assumed	$ (16,386)

XML

Business Combination & Asset Purchase

12 Months Ended

Dec. 31, 2014

Business Combinations [Abstract]

Business Combination & Asset Purchase

Note 2 – Business Combination & Asset Purchase

On December 13, 2013, the Bank completed its purchase of a branch office in Custar, Ohio from Croghan Colonial Bank. Deposits of approximately $29.5 million and loans of $11.4 million were included in the purchase. The aggregate acquisition cost of the Custar office was $1.2 million, which was all paid in cash. The new office is located within the Bank’s current market area, expanding our presence in Wood County.

The following table summarizes the estimated values of the assets acquired and the liabilities assumed:

($ in Thousands)
Cash	$	204
Loans		11,436
Accrued Interest on Loans		31
Premises and Equipment		271
Core Deposit Intangible Asset		1,171
Other Assets		1
Total Assets Acquired	$	13,114
Deposits	$	29,466
Accrued Interest on Deposits		17
Other Liabilities		17
Total Liabilities Assumed	$	29,500
Net Liabilities Assumed	$	(16,386	)

The Company also recognized core deposit intangible assets of $2.26 million with the purchase of offices. $1.17 million was recognized with the purchase of the Custar office on December 13, 2013 and $1.09 million with the Hicksville office on July 9, 2010. These are being amortized over an estimated remaining economic useful life of the deposits of 7 years on a straight line basis. In connection with a December 31, 2007 Knisely acquisition, the Company recognized a core deposit intangible asset of $1.1 million, which was fully amortized during 2014. The core deposit intangible is included in other assets on the consolidated balance sheets.

The estimated amortization expense for the years ended December 31, 2014, 2013 and 2012 was $480, $319 and $312 thousand, respectively.

Amortization expense of the core deposit intangible assets remaining is as follows:

	Hicksville		Custar		Total
2015	$	155	$	167	$	322
2016		155		167		322
2017		78		167		245
2018		—		167		167
2019		—		167		167
Thereafter		—		162		162
Total	$	388	$	997	$	1,385

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Loans - Schedule of Impaired Loans (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Receivables [Abstract]
Impaired loans without a valuation allowance	$ 675	$ 924
Impaired loans with a valuation allowance	1,168	1,516
Total impaired loans	1,843	2,440
Valuation allowance related to impaired loans	387	516
Total non-accrual loans	1,705	3,329
Total loans past-due ninety days or more and still accruing	0	0	0
Average investment in impaired loans	1,929	3,274	3,436
Interest income recognized on impaired loans	87	60	26
Interest income recognized on a cash basis on impaired loans	$ 51	$ 17	$ 21

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Quarterly Financial Data (Tables)

12 Months Ended

Dec. 31, 2014

Quarterly Financial Information Disclosure [Abstract]

Summary of Quarterly Financial Data

	(000’s omitted except per share data)
	Quarter Ended in 2014
	Mar 31			June 30			Sep 30			Dec 31
Summary of Income:
Interest income	$	8,159		$	8,304		$	8,471		$	8,519
Interest expense		944			970			895			907
Net Interest Income		7,215			7,334			7,576			7,612
Provision for loan loss		428			444			282			37
Net interest income after provision of loan loss		6,787			6,890			7,294			7,575
Other income (expense)		(3,955	)		(3,456	)		(3,818	)		(3,800	)
Net income before income taxes		2,832			3,434			3,476			3,775
Income taxes		874			881			1,002			1,114
Net income	$	1,958		$	2,553		$	2,474		$	2,661
Earnings per Common Share	$	0.42		$	0.55		$	0.54		$	0.57
Average common shares outstanding		4,637,172			4,626,309			4,621,298			4,627,338
	Quarter Ended in 2013
	Mar 31			June 30			Sep 30			Dec 31
Summary of Income:
Interest income	$	7,702		$	7,765		$	7,844		$	8,117
Interest expense		1,233			1,184			1,129			1,058
Net Interest Income		6,469			6,581			6,715			7,059
Provision for loan loss		167			112			303			276
Net interest income after provision for loan loss		6,302			6,469			6,412			6,783
Other income (expense)		(3,218	)		(2,958	)		(3,555	)		(3,632	)
Net income before income taxes		3,084			3,511			2,857			3,151
Income taxes		932			1,009			791			864
Net income	$	2,152		$	2,502		$	2,066		$	2,287
Earnings per common share	$	0.46		$	0.53		$	0.45		$	0.49
Average common shares outstanding		4,683,659			4,679,971			4,682,655			4,660,096

XML

Business Combination & Asset Purchase (Tables)

12 Months Ended

Dec. 31, 2014

Business Combinations [Abstract]

Estimated Values of Assets Acquired and Liabilities Assumed

The following table summarizes the estimated values of the assets acquired and the liabilities assumed:

($ in Thousands)
Cash	$	204
Loans		11,436
Accrued Interest on Loans		31
Premises and Equipment		271
Core Deposit Intangible Asset		1,171
Other Assets		1
Total Assets Acquired	$	13,114
Deposits	$	29,466
Accrued Interest on Deposits		17
Other Liabilities		17
Total Liabilities Assumed	$	29,500
Net Liabilities Assumed	$	(16,386	)

Amortization Expense of Core Deposit Intangible Assets

Amortization expense of the core deposit intangible assets remaining is as follows:

	Hicksville		Custar		Total
2015	$	155	$	167	$	322
2016		155		167		322
2017		78		167		245
2018		—		167		167
2019		—		167		167
Thereafter		—		162		162
Total	$	388	$	997	$	1,385

XML

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Components of Other Comprehensive Income and Related Tax Effects

The components of other comprehensive income and related tax effects are as follows:

	(In Thousands)
	2014			2013			2012
Net unrealized gain (loss) on available-for-sale securities	$	1,158		$	(8,448	)	$	417
Reclassification adjustment for gain on sale of available-for-sale securities		(494	)		(775	)		(852	)
Net unrealized gains (losses)		664			(9,223	)		(435	)
Tax effect		226			(3,136	)		(147	)
Other comprehensive income (loss)	$	438		$	(6,087	)	$	(288	)

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Loans - Maturity Schedule by Major Category of Loans (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Maturity schedule by major category of loans, Within One Year	$ 156,678
Maturity schedule by major category of loans, After One Year Within Five Years	199,118
Maturity schedule by major category of loans, After Five Years	266,549
Maturity schedule by major category of loans, Total	622,345	576,343
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Maturity schedule by major category of loans, Within One Year	27,291
Maturity schedule by major category of loans, After One Year Within Five Years	92,076
Maturity schedule by major category of loans, After Five Years	150,821
Maturity schedule by major category of loans, Total	270,188	248,893
Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Maturity schedule by major category of loans, Within One Year	3,546
Maturity schedule by major category of loans, After One Year Within Five Years	14,289
Maturity schedule by major category of loans, After Five Years	33,060
Maturity schedule by major category of loans, Total	50,895	44,301
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Maturity schedule by major category of loans, Within One Year	11,118
Maturity schedule by major category of loans, After One Year Within Five Years	19,377
Maturity schedule by major category of loans, After Five Years	67,055
Maturity schedule by major category of loans, Total	97,550	92,438
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Maturity schedule by major category of loans, Within One Year	58,741
Maturity schedule by major category of loans, After One Year Within Five Years	36,159
Maturity schedule by major category of loans, After Five Years	5,226
Maturity schedule by major category of loans, Total	100,126	99,498
Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Maturity schedule by major category of loans, Within One Year	47,831
Maturity schedule by major category of loans, After One Year Within Five Years	22,826
Maturity schedule by major category of loans, After Five Years	3,954
Maturity schedule by major category of loans, Total	74,611	65,449
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Maturity schedule by major category of loans, Within One Year	5,652
Maturity schedule by major category of loans, After One Year Within Five Years	14,265
Maturity schedule by major category of loans, After Five Years	4,360
Maturity schedule by major category of loans, Total	24,277	21,406
Industrial Development Bonds [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Maturity schedule by major category of loans, Within One Year	2,499
Maturity schedule by major category of loans, After One Year Within Five Years	126
Maturity schedule by major category of loans, After Five Years	2,073
Maturity schedule by major category of loans, Total	$ 4,698	$ 4,358

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Summary of Significant Accounting Policies - Additional Information (Detail) (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2014 Multiplier	Dec. 31, 2013	Jan. 16, 2015
Summary Of Significant Accounting Policies [Line Items]
Period for federal funds purchased and sold	1 day
Average aggregate reserve	$ 7.1	$ 6.5
Loan non-accrual classification period	90 days
Days to charged consumer loans to the value of the collateral	120 days
Maximum time for re-evaluation (in months)	12 months
Re-evaluation period for real estate	2 years
Excess fair value of goodwill amount	48
Percentage of carrying value for excess fair value	50.16%
Factor multiplication of value of goodwill	12
Other real estate owned	$ 1.1	$ 2.1
Percentage of likelihood of realization of recognized tax benefit, minimum	50.00%
Subsequent Event [Member]
Summary Of Significant Accounting Policies [Line Items]
Stock Repurchase Program, Number of Shares Authorized to be Repurchased			200,000
Maximum [Member]
Summary Of Significant Accounting Policies [Line Items]
Maturity period of cash equivalents	3 months

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Securities (Tables)

12 Months Ended

Dec. 31, 2014

Investments, Debt and Equity Securities [Abstract]

Amortized Cost and Fair Value of Securities with Gross Unrealized Gains and Losses

The amortized cost and fair value of securities, with gross unrealized gains and losses, follows:

	(In Thousands)
	2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
Available-for-Sale:
U.S. Treasury	$	25,833	$	—	$	(440	)	$	25,393
U.S. Government agency		120,154		391		(1,311	)		119,234
Mortgage-backed securities		29,067		557		(62	)		29,562
State and local governments		72,765		1,671		(133	)		74,303
Total available-for-sale securities	$	247,819	$	2,619	$	(1,946	)	$	248,492

	(In Thousands)
	2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
Available-for-Sale:
U.S. Treasury	$	26,067	$	—	$	(795	)	$	25,272
U.S. Government agency		174,772		1,386		(3,186	)		172,972
Mortgage-backed securities		44,638		728		(574	)		44,792
State and local governments		79,023		2,909		(459	)		81,473
Total available-for-sale securities	$	324,500	$	5,023	$	(5,014	)	$	324,509

Gross Unrealized Losses, Aggregated by Investment Category and Length of Time

Information pertaining to securities with gross unrealized losses at December 31, 2014 and 2013, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

	2014
	(In Thousands) Less Than Twelve Months					(In Thousands) Twelve Months & Over
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	—		$	—	$	(440	)	$	25,393
U.S. Government agency		(1	)		5,458		(1,310	)		82,803
Mortgage-backed securities		—			—		(62	)		7,900
State and local governments		(31	)		3,442		(102	)		7,756
Total available-for-sales securities	$	(32	)	$	8,900	$	(1,914	)	$	123,852

	2013
	(In Thousands) Less Than Twelve Months					(In Thousands) Twelve Months & Over
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	(795	)	$	25,272	$	—		$	—
U.S. Government agency		(2,783	)		96,241		(403	)		4,598
Mortgage-backed securities		(574	)		23,171		—			—
State and local governments		(459	)		19,594		—			—
Total available-for-sales securities	$	(4,611	)	$	164,278	$	(403	)	$	4,598

Gross Realized Gains and Losses

Generated gross realized gains and losses for the years ended December 31, as presented below:

	(In Thousands)
	2014			2013			2012
Gross realized gains	$	638		$	839		$	852
Gross realized losses		(144	)		(64	)		—
Net realized gains	$	494		$	775		$	852
Tax expense related to net realized gains	$	168		$	264		$	290

Amortized Cost and Fair Value of Debt Securities, by Contractual Maturity

The amortized cost and fair value of debt securities at December 31, 2014, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	(In Thousands)
	Amortized Cost		Fair Value
One year or less	$	23,288	$	23,505
After one year through five years		157,000		156,781
After five years through ten years		31,333		31,470
After ten years		7,131		7,174
Total	$	218,752	$	218,930
Mortgage-backed securities		29,067		29,562
Total	$	247,819	$	248,492

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Loans (Tables)

12 Months Ended

Dec. 31, 2014

Receivables [Abstract]

Loans

Loans at December 31 are summarized below:

	(In Thousands)
	2014			2013
Loans:
Commercial real estate	$	270,188		$	248,893
Agricultural real estate		50,895			44,301
Consumer real estate		97,550			92,438
Commercial and industrial		100,126			99,498
Agricultural		74,611			65,449
Consumer		24,277			21,406
Industrial Development Bonds		4,698			4,358
	$	622,345		$	576,343
Less: Net deferred loan fees and costs		(419	)		(230	)
		621,926			576,113
Less: Allowance for loan losses		(5,905	)		(5,194	)
Loans - Net	$	616,021		$	570,919

Maturity Schedule by Major Category of Loans

The following is a maturity schedule by major category of loans at December 31, 2014:

	(In Thousands)
	Within One Year		After One Year Within Five Years		After Five Years		Total
Commercial Real Estate	$	27,291	$	92,076	$	150,821	$	270,188
Agricultural Real Estate		3,546		14,289		33,060		50,895
Consumer Real Estate		11,118		19,377		67,055		97,550
Commercial and industrial		58,741		36,159		5,226		100,126
Agricultural		47,831		22,826		3,954		74,611
Consumer		5,652		14,265		4,360		24,277
Industrial Development Bonds		2,499		126		2,073		4,698
	$	156,678	$	199,118	$	266,549	$	622,345

Distribution of Fixed Rate Loans and Variable Rate Loans by Major Loan Category

The distribution of fixed rate loans and variable rate loans by major loan category is as follows as of December 31, 2014:

	(In Thousands)
	Fixed Rate		Variable Rate
Commercial Real Estate	$	190,948	$	79,240
Agricultural Real Estate		36,168		14,727
Consumer Real Estate		77,534		20,016
Commercial and industrial loans		76,625		23,501
Agricultural		69,707		4,904
Consumer, Master Card and Overdrafts		19,566		4,711
Industrial Development Bonds		4,529		169

Contractual Aging of Recorded Investment in Past Due Loans by Portfolio Classification of Loans

The following table represents the contractual aging of the recorded investment in past due loans by portfolio classification of loans as of December 31, 2014 and 2013 net of deferred fees and costs:

December 31, 2014	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Consumer Real Estate	$	713	$	50	$	436	$	1,199	$	96,351	$	97,550	$	—
Ag Real Estate		—		—		—		—		50,895	$	50,895		—
Ag		25		—		—		25		74,586	$	74,611		—
Commercial Real Estate		78		204		709		991		269,197	$	270,188		—
Commercial and Industrial		—		8		—		8		104,816	$	104,824		—
Consumer		25		8		29		62		23,796	$	23,858		—
Total	$	841	$	270	$	1,174	$	2,285	$	619,641	$	621,926	$	—

December 31, 2013	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Consumer Real Estate	$	778	$	0	$	234	$	1,012	$	91,426	$	92,438	$	—
Ag Real Estate		—		—		—		—		44,301		44,301		—
Ag		—		—		—		—		65,449		65,449		—
Commercial Real Estate		—		—		373		373		248,520		248,893		—
Commercial and Industrial		—		—		26		26		103,830		103,856		—
Consumer		28		2		—		30		21,146		21,176		—
Total	$	806	$	2	$	633	$	1,441	$	574,672	$	576,113	$	—

Recorded Investment in Nonaccrual Loans by Portfolio Class of Loans

The following table presents the recorded investment in nonaccrual loans by portfolio class of loans as of December 31, 2014 and December 31, 2013:

	(In Thousands)
	2014		2013
Consumer real estate	$	628	$	483
Agricultural real estate		—		—
Agriculture		—		—
Commercial real estate		709		2,436
Commercial		339		410
Consumer		29		—
Total	$	1,705	$	3,329

Risk Category of Loans by Portfolio Class

The following table represents the risk category of loans by portfolio class, net of deferred fees, based on the most recent analysis performed as of the time periods shown of December 31, 2014 and December 31, 2013.

	(In Thousands)
	Agriculture Real Estate				Agriculture				Commercial Real Estate				Commercial				Industrial Development Bonds
	2014		2013		2014		2013		2014		2013		2014		2013		2014		2013
1-2	$	4,319	$	3,764	$	11,490	$	9,263	$	1,072	$	1,104	$	1,771	$	2,525	$	—	$	—
3		15,780		14,588		26,871		27,212		34,229		55,060		15,582		21,610		4,289		3,869
4		30,472		25,186		36,225		28,974		225,015		182,277		80,079		72,059		409		489
5		111		729		—		—		7,083		4,987		2,299		2,119		—		—
6		213		34		—		—		2,080		5,092		165		758		—		—
7		—		—		25		—		709		373		230		427		—		—
8		—		—		—		—		—		—		—		—		—		—
Total	$	50,895	$	44,301	$	74,611	$	65,449	$	270,188	$	248,893	$	100,126	$	99,498	$	4,698	$	4,358

Recorded Investment in Those Classes Based on Payment Activity and Assigned Risk Grading

The following tables present the recorded investment in those classes based on payment activity and assigned risk grading as of December 31, 2014 and December 31, 2013.

	(In Thousands)
	Consumer Real Estate
	2014		2013
Grade
Pass	$	97,007	$	92,226
Special mention (5)		—		—
Substandard (6)		446		18
Doubtful (7)		97		194
Total, net of deferred fees	$	97,550	$	92,438

	Consumer - Credit Card				Consumer - Other
	2014		2013		2014		2013
Performing	$	3,987	$	3,721	$	19,846	$	17,425
Nonperforming		—		—		25		30
Total, net of deferred fees	$	3,987	$	3,721	$	19,871	$	17,455

Schedule of Impaired Loans

Information about impaired loans as of and for the years ended December 31, 2014 and 2013 are as follows:

	(In Thousands)
	2014		2013
Impaired loans without a valuation allowance	$	675	$	924
Impaired loans with a valuation allowance		1,168		1,516
Total impaired loans	$	1,843	$	2,440
Valuation allowance related to impaired loans	$	387	$	516
Total non-accrual loans	$	1,705	$	3,329
Total loans past-due ninety days or more and still accruing	$	—	$	—

	(In Thousands)
	2014		2013		2012
Average investment in impaired loans	$	1,929	$	3,274	$	3,436
Interest income recognized on impaired loans	$	87	$	60	$	26
Interest income recognized on a cash basis on impaired loans	$	51	$	17	$	21

Impaired Loans Classified as Troubled Debt Restructured

The following table represents the years ended December 31, 2014 and 2013.

December 31, 2014	Number of Contracts	Pre- Modification Outstanding		Post- Modification Outstanding		December 31, 2013	Number of Contracts	Pre- Modification Outstanding		Post- Modification Outstanding
Troubled Debt Restructurings	Modified in the Last 12 Months	Recorded Investment		Recorded Investment		Troubled Debt Restructurings	Modified in the Last 12 Months	Recorded Investment		Recorded Investment
Commercial Real Estate		$	—	$	—	Commercial Real Estate		$	—	$	—
Ag Real Estate			—		—	Ag Real Estate			—		—
Commercial and Industrial			—		—	Commercial and Industrial			—		—
Troubled Debt Restructurings That Subsequently Defaulted	Number of Contracts Modified in the Last 12 Months	Recorded Investment				Troubled Debt Restructurings That Subsequently Defaulted	Number of Contracts Modified in the Last 12 Months	Recorded Investment
Commercial Real Estate		$	—			Commercial Real Estate		$	—
Ag Real Estate			—			Ag Real Estate			—
Commercial and Industrial			—			Commercial and Industrial			—

Loans Individually Evaluated for Impairment by Portfolio Class of Loans

The following table presents loans individually evaluated for impairment by portfolio class of loans as of December 31, 2014 and 2013:

	(In Thousands)
	Recorded Investment		Unpaid Principal Balance		Related Allowance		YTD Average Recorded Investment		YTD Interest Income Recognized		YTD Interest Income Recognized Cash Basis
2014
With no related allowance recorded:
Residential	$	204	$	229	$	—	$	52	$	1	$	1
Agriculture real estate		—		—		—		93		7		—
Agriculture		—		—		—		—		—		—
Commercial real estate		471		471		—		740		7		5
Commercial		—		—		—		319		45		18
Consumer		—		—		—		—		—		—
With a specific allowance recorded:
Residential		97		97		36		118		6		6
Agriculture real estate		—		—		—		15		—		—
Agriculture		25		25		25		2		—		—
Commercial real estate		709		709		111		83		21		21
Commercial		326		326		204		506		—		—
Consumer		11		11		11		1		—		—
Totals:
Residential	$	301	$	326	$	36	$	170	$	7	$	7
Agriculture real estate	$	—	$	—	$	—	$	108	$	7	$	—
Agriculture	$	25	$	25	$	25	$	2	$	—	$	—
Commercial real estate	$	1,180	$	1,180	$	111	$	823	$	28	$	26
Commercial	$	326	$	326	$	204	$	825	$	45	$	18
Consumer	$	11	$	11	$	11	$	1	$	—	$	—

	(In Thousands)
	Recorded Investment		Unpaid Principal Balance		Related Allowance		YTD Average Recorded Investment		YTD Interest Income Recognized		YTD Interest Income Recognized Cash Basis
2013
With no related allowance recorded:
Residential	$	18	$	18	$	—	$	138	$	10	$	10
Agriculture real estate		—		—		—		—		—		—
Agriculture		—		—		—		—		—		—
Commercial real estate		906		906		—		630		21		3
Commercial		—		—		—		203		—		—
Consumer		—		—		—		—		—		—
With a specific allowance recorded:
Residential		282		282		78		204		5		3
Agriculture real estate		88		88		9		72		—		—
Agriculture		—		—		—		—		—		—
Commercial real estate		769		1,116		295		518		22		—
Commercial		377		377		134		1,549		2		1
Consumer		—		—		—		—		—		—
Totals:
Residential	$	300	$	300	$	78	$	342	$	15	$	13
Agriculture real estate	$	88	$	88	$	9	$	72	$	—	$	—
Agriculture	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate	$	1,675	$	2,022	$	295	$	1,148	$	43	$	3
Commercial	$	377	$	377	$	134	$	1,752	$	2	$	1
Consumer	$	—	$	—	$	—	$	—	$	—	$	—

Summary of Activities in Allowance for Credit Losses

The following is an analysis of the allowance for credit losses for the years ended December 31:

	(In Thousands)
	2014			2013			2012
Allowance for Loan Losses
Balance at beginning of year	$	5,194		$	5,224		$	5,091
Provision for loan loss		1,191			858			738
Loans charged off		(778	)		(1,262	)		(891	)
Recoveries		298			374			286
Balance at ending of year	$	5,905		$	5,194		$	5,224
Allowance for Unfunded Loan Commitments & Letters of Credit	$	207		$	163		$	162
Total Allowance for Credit Losses	$	6,112		$	5,357		$	5,386

Analysis of Allowance for Credit Losses

Additional analysis related to the allowance for credit losses as of December 31, 2014 and 2013 is as follows:

	(In Thousands)
	Consumer Real Estate			Agriculture Real Estate		Agriculture		Commercial Real Estate			Commercial and Industrial		Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated			Total
2014
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	257		$	131	$	326	$	2,107		$	1,359	$	292		$	163	$	722		$	5,357
Charge Offs		(168	)		—		—		(229	)		—		(381	)		—		—			(778	)
Recoveries		34			—		44		4			20		196			—		—			298
Provision		414			53		177		485			42		216			—		(196	)		1,191
Other Non-interest expense related to unfunded		—			—		—		—			—		—			44		—			44
Ending Balance	$	537		$	184	$	547	$	2,367		$	1,421	$	323		$	207	$	526		$	6,112
Ending balance: individually evaluated for impairment	$	36		$	—	$	25	$	111		$	204	$	11		$	—	$	—		$	387
Ending balance: collectively evaluated for impairment	$	501		$	184	$	522	$	2,256		$	1,217	$	312		$	207	$	526		$	5,725
Ending balance: loans acquired with deteriorated credit quality	$	2		$	—	$	—	$	—		$	—	$	—		$	—	$	—		$	2
FINANCING RECEIVABLES:
Ending balance, net of deferred fees	$	97,550		$	50,895	$	74,611	$	270,188		$	104,824	$	23,858		$	—	$	—		$	621,926
Ending balance: individually evaluated for impairment	$	301		$	—	$	25	$	1,179		$	327	$	11		$	—	$	—		$	1,843
Ending balance: collectively evaluated for impairment	$	97,249		$	50,895	$	74,586	$	269,009		$	104,497	$	23,847		$	—	$	—		$	620,083
Ending balance: loans acquired with deteriorated credit quality	$	526		$	—	$	—	$	—		$	—	$	—		$	—	$	—		$	526

	(In Thousands)
	Consumer Real Estate			Agriculture Real Estate		Agriculture		Commercial Real Estate			Commercial and Industrial			Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated		Total
2013
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	368		$	113	$	290	$	1,749		$	2,183		$	268		$	162	$	253	$	5,386
Charge Offs		(147	)		—		—		(164	)		(513	)		(438	)		—		—		(1,262	)
Recoveries		20			—		5		23			141			185			—		—		374
Provision		16			18		31		499			(452	)		277			—		469		858
Other Non-interest expense related to unfunded		—			—		—		—			—			—			1		—		1
Ending Balance	$	257		$	131	$	326	$	2,107		$	1,359		$	292		$	163	$	722	$	5,357
Ending balance: individually evaluated for impairment	$	78		$	9	$	—	$	295		$	134		$	—		$	—	$	—	$	516
Ending balance: collectively evaluated for impairment	$	179		$	122	$	326	$	1,812		$	1,225		$	292		$	163	$	722	$	4,841
Ending balance: loans acquired with deteriorated credit quality	$	1		$	—	$	—	$	—		$	—		$	—		$	—	$	—	$	1
FINANCING RECEIVABLES:
Ending balance, net of deferred fees	$	92,438		$	44,301	$	65,449	$	248,893		$	103,856		$	21,176		$	—	$	—	$	576,113
Ending balance: individually evaluated for impairment	$	300		$	88	$	—	$	1,675		$	377		$	—		$	—	$	—	$	2,440
Ending balance: collectively evaluated for impairment	$	92,138		$	44,213	$	65,449	$	247,218		$	103,479		$	21,176		$	—	$	—	$	573,673
Ending balance: loans acquired with deteriorated credit quality	$	540		$	—	$	—	$	—		$	—		$	—		$	—	$	—	$	540

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 1 – Summary of Significant Accounting Policies

Nature of Operations

The Farmers & Merchants Bancorp, Inc. (the Company) through its bank subsidiary, The Farmers & Merchants State Bank (the Bank) provides a variety of financial services to individuals and small businesses through its offices in Northwest Ohio and Northeast Indiana.

Consolidation Policy

The consolidated financial statements include the accounts of Farmers & Merchants Bancorp, Inc. and its wholly-owned subsidiaries, The Farmers & Merchants State Bank (the Bank), a commercial banking institution and Farmers & Merchants Risk Management, Inc. (the Captive), a Captive insurance company. All significant inter-company balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and the valuation of mortgage servicing rights, goodwill, available for sale investment securities, other real estate owned and impaired loans. Actual results could differ from those estimates.

The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. In connection with the determination of the estimated losses on loans, management obtains independent appraisals for significant collateral.

The Bank’s loans are generally secured by specific items of collateral including real property, consumer assets, and business assets. Although the Bank has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent on local economic conditions in the agricultural industry.

While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based on changes in local economic conditions. In addition regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the Bank to recognize additional losses based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans may change materially in the near term. However, the amount of the change that is reasonably possible cannot be estimated.

Cash and Cash Equivalents

For purposes of the consolidated statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. This includes cash on hand, amounts due from banks, and federal funds sold. Generally, federal funds are purchased for one day periods.

Restrictions on Cash and Amounts Due from Banks

The Bank is required to maintain average balances on hand with the Federal Reserve Bank. The aggregate reserve was $7.1 million for December 31, 2014 and it was $6.5 million for December 31, 2013. The Company and its subsidiaries maintain cash balances with high quality credit institutions. At times such balances may be in excess of the federally insured limits.

Securities

Debt securities are classified as available-for-sale. Securities available-for-sale are carried at fair value with unrealized gains and losses reported in other comprehensive income. Realized gains and losses on securities available for sale are included in other income (expense) and, when applicable, are reported as a reclassification adjustment, net of tax, in other comprehensive income (loss). Gains and losses on sales of securities are determined on the specific-identification method.

Declines in the fair value of securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. The related write-downs are included in earnings as realized losses.

Other Securities

Other Securities consists of Federal Home Loan Bank of Cincinnati and Indianapolis stock and Farmer Mac stock. The Federal Home Loan Bank of Indianapolis stock was completely redeemed during 2013. These stocks are carried at cost and are held to enable the Bank to conduct business with the entities. The Federal Home Loan Banks sell and purchase their stock at par. The Federal Home Loan Bank of Cincinnati stock is held as collateral security for all indebtedness of the Bank to the Federal Home Loan Bank. The Federal Home Loan Bank of Cincinnati is evaluated for impairment as conditions warrant.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at the amount of unpaid principal, reduced by unearned discounts and deferred loan fees and costs, as well as, by the allowance for loan losses. Interest income is accrued on a daily basis based on the principal outstanding.

Generally, a loan is classified as nonaccrual and the accrual of interest income is generally discontinued when a loan becomes ninety days past due as to principal or interest and these loans are placed on a “cash basis” for purposes of income recognition. Management may elect to continue the accrual of interest when the estimated net realizable value of collateral is sufficient to cover the principal and accrued interest, and the loan is in the process of collection. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest receivable is charged against income.

Loan origination and commitment fees and certain direct loan origination costs are deferred and amortized as a net adjustment to the related loan’s yield. The Bank is generally amortizing these costs over the contractual life of such loans.

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses charged to income. Loans deemed to be uncollectable and changes in the allowance relating to loans are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based on management’s periodic review of the collectability of the loans in light of historical experiences, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are subject to revision as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. The unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and agricultural loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

At 120 days delinquent, secured consumer loans are charged down to the value of the collateral, if repossession of the collateral is assured and/or in the process of repossession. Consumer mortgage loan deficiencies are charged down upon the sale of the collateral or sooner upon the recognition of collateral deficiency.

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

Large groups of homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer loans for impairment, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

For more information regarding the actual composition and classification of loans involved in the establishment of the allowance for loan loss, please see Note 4 provided here with the notes to consolidated financial statements.

Loans Held for Sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized in a valuation allowance by charges to income.

Servicing Assets

Servicing assets are recognized as separate assets when rights are acquired through purchase or sale of financial assets. Capitalized servicing rights are reported in other assets and are amortized into noninterest expense in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as interest rates and terms. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market based assumptions. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the capitalized amount for the stratum. Fees received for servicing loans owned by investors are based on a percentage of the outstanding monthly principal balance of such loans and are included in operating income as loan payments are received. Costs of servicing loans are charged to expense as incurred.

Goodwill and other Intangible Assets

Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed at least annually. If possible impairment is likely, the Bank will utilize the assistance of an independent third party for impairment and any such impairment is recognized in the period identified. The Bank considered the following qualitative factors to determine if impairment was likely: 1) the Bank continued to perform above peer and remains profitable with capital growth, 2) the Bank had improved asset quality and does not see any change in the trend, 3) the Bank had strong liquidity and capital positions, 4) in quantitative testing done by an independent source in 2014, the excess fair value of capital was $48 million or 50.16% over the carrying value and was nearly 12 times the value of the goodwill being carried and 5) the Bank was unaware of any likely circumstances that would indicate the fair value of the entity would be greatly decreased in the near future. Therefore, the Bank concluded it is unlikely impairment of Goodwill has occurred from the goodwill established from the Bank’s acquisition which occurred on December 31, 2007.

Other intangible assets consist of core deposit intangible assets arising from business acquisitions. They are initially measured at fair value and then are amortized on a straight line method over their estimated useful lives and evaluated for impairment.

Off Balance Sheet Instruments

In the ordinary course of business, the Bank has entered into commitments to extend credit, including commitments under credit card arrangements, commercial letters of credit and standby letters of credit. Such financial instruments are recorded when they are funded.

Foreclosed Real Estate

Foreclosed real estate held for sale is carried at the lower of fair value minus estimated costs to sell, or cost. Costs of holding foreclosed real estate are charged to expense in the current period, except for significant property improvements, which are capitalized. Valuations are periodically performed by management and an allowance is established by a charge to non-interest expense if the carrying value exceeds the fair value minus estimated costs to sell. Foreclosed real estate is classified as other real estate owned. The net income from operations of foreclosed real estate held for sale is reported in non-interest income. At December 31, the Bank’s holding of other real estate owned totaled approximately $1.1 and $2.1 million for 2014 and 2013 respectively.

Bank Premises and Equipment

Land is carried at cost. Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is based on the estimated useful lives of the various properties and is computed using straight line and accelerated methods. Costs for maintenance and repairs are charged to operations as incurred. Gains and losses on dispositions are included in current operations.

Federal Income Tax

The Company’s income tax expense consists of the following components: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in tax expense. Based on management’s analysis, the Company did not have any uncertain tax positions as of December 31, 2014 and 2013. With a few exceptions, the Company is no longer subject to U.S. Federal, state or local examinations by tax authorities for years before 2011.

Earnings Per Share

Basic earnings per share represent income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. See Note 12 for additional information.

Stock-Based Compensation

The fair value of restricted common stock is their fair market value on the date of grant. The fair value of restricted stock is amortized as compensation expense on a straight-line basis over the vesting period of the grants. Compensation expense recognized is included in personnel expense in the consolidated statement of income

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of comprehensive income.

The components of other comprehensive income and related tax effects are as follows:

	(In Thousands)
	2014			2013			2012
Net unrealized gain (loss) on available-for-sale securities	$	1,158		$	(8,448	)	$	417
Reclassification adjustment for gain on sale of available-for-sale securities		(494	)		(775	)		(852	)
Net unrealized gains (losses)		664			(9,223	)		(435	)
Tax effect		226			(3,136	)		(147	)
Other comprehensive income (loss)	$	438		$	(6,087	)	$	(288	)

Reclassification

Certain amounts in the 2013 and 2012 consolidated financial statements have been reclassified to conform with the 2014 presentation.

Subsequent Events

On January 16, 2015, the Company announced the authorization by its Board of Directors for the Company’s repurchase, either on the open market, or in privately negotiated transactions, of up to 200,000 shares of its outstanding common stock commencing January 16, 2015 and ending December 31, 2015.

Recent Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” The amendments in this ASU provide guidance for the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The amendments in this ASU are expected to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments apply to all public entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this guidance did not have an impact on the Company’s results of operations or financial position.

In January 2014, the FASB issued ASU 2014-04, “Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” The amendments in this ASU reduce diversity in practice by clarifying when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. The amendments in this ASU clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this ASU are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. An entity can elect to adopt the amendments in this ASU using either a modified retrospective transition method or a prospective transition method. The Company does not expect that the adoption of this ASU will have an impact on the Company’s results of operations or financial position.

In August 2014, the FASB issued ASU 2014-14, “Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Classification of Certain Government – Guaranteed Mortgage Loans upon Foreclosure.” The amendments in this ASU require that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if (1) the loan has a government guarantee that is not separable from the loan before foreclosure; (2) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim; and (3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The adoption of this guidance is not expected to have a material impact on the Company’s results of operations or financial position.

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Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2014

Property, Plant and Equipment [Abstract]

Major Categories of Banking Premises and Equipment and Accumulated Depreciation

The major categories of banking premises and equipment and accumulated depreciation at December 31 are summarized below:

	(In Thousands)
	2014			2013
Land	$	4,984		$	4,360
Buildings (useful life 15-39 years)		21,955			20,593
Furnishings (useful life 3-15 years)		11,429			11,035
		38,368			35,988
Less: Accumulated depreciation		(18,068	)		(17,279	)
Premises and Equipment (Net)	$	20,300		$	18,709

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Related Party Transactions - Additional Information (Detail) (Directors and Executive Officers [Member], USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Directors and Executive Officers [Member]
Related Party Transaction [Line Items]
Granted loans to affiliate companies	$ 1,500,000	$ 5,900,000
New loans approved	428,000
Subsequent advances	10,100,000
Payment received	10,600,000
Difference in related borrowings amounts	502,000
Ownership interest amount	$ 26,100,000	$ 22,300,000

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Minimum Regulatory Capital Requirements (Tables)

12 Months Ended

Dec. 31, 2014

Banking and Thrift [Abstract]

Summary of Bank's Actual and Required Capital Amounts and Ratios

The Company and the Bank’s actual and required capital amounts and ratios as of December 31, 2014 and 2013 are as follows:

											To Be Well Capitalized
	Actual					For Capital Adequacy Purposes					Under the Prompt Corrective Action Provisions
As of December 31, 2014	(000’s) Amount		Ratio			(000’s) Amount		Ratio			(000’s) Amount		Ratio
Total Risk-Based Capital (to Risk Weighted Assets)
Consolidated	$	114,702		16.68	%	$	55,028		8.00	%	$	N/A		N/A
Farmers & Merchants State Bank		98,154		14.35	%		54,710		8.00	%		68,388		10.00	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated		108,590		15.79	%		27,514		4.00	%		N/A		N/A
Farmers & Merchants State Bank		92,042		13.46	%		27,355		4.00	%		41,033		6.00	%
Tier 1 Capital (to Adjusted Total Assets)
Consolidated		108,590		11.70	%		37,111		4.00	%		N/A		N/A
Farmers & Merchants State Bank		92,042		10.01	%		36,785		4.00	%		45,981		5.00	%

											To Be Well Capitalized
	Actual					For Capital Adequacy Purposes					Under the Prompt Corrective Action Provisions
As of December 31, 2013	(000’s) Amount		Ratio			(000’s) Amount		Ratio			(000’s) Amount		Ratio
Total Risk-Based Capital (to Risk Weighted Assets)
Consolidated	$	107,752		16.34	%	$	52,756		8.00	%		N/A		N/A
Farmers & Merchants State Bank		92,838		14.10	%		52,674		8.00	%	$	65,843		10.00	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated		102,395		15.53	%		26,378		4.00	%		N/A		N/A
Farmers & Merchants State Bank		87,481		13.29	%		26,337		4.00	%		39,506		6.00	%
Tier 1 Capital (to Adjusted Total Assets)
Consolidated		102,395		10.88	%		37,644		4.00	%		N/A		N/A
Farmers & Merchants State Bank		87,481		9.40	%		37,228		4.00	%		46,535		5.00	%

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Securities - Amortized Cost and Fair Value of Debt Securities, by Contractual Maturity (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Available-for-sale Securities, Debt Maturities [Abstract]
Amortized Cost, One year or less	$ 23,288
Amortized Cost, After one year through five years	157,000
Amortized Cost, After five years through ten years	31,333
Amortized Cost, After ten years	7,131
Amortized Cost, Total	218,752
Amortized Cost, Mortgage-backed securities	29,067
Total, Amortized Cost	247,819
Fair Value, One year or less	23,505
Fair Value, After one year through five years	156,781
Fair Value, After five years through ten years	31,470
Fair Value, After ten years	7,174
Fair Value, Total	218,930
Fair Value, Mortgage-backed securities	29,562
Total, Fair Value	$ 248,492	$ 324,509

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Deposits - Time Deposits (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Time Deposits [Abstract]
Time deposits under $100,000	$ 113,903	$ 135,998
Time deposits of $100,000 or more	81,597	100,362
Total	$ 195,500	$ 236,360

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Consolidated Balance Sheet (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Assets
Cash and due from banks	$ 22,246	$ 18,265
Federal Funds Sold	2,049	998
Total cash and cash equivalents	24,295	19,263
Securities - available for sale	248,492	324,509
Other Securities, at cost	3,717	4,216
Loans, net	616,021	570,919
Premises and equipment	20,300	18,709
Goodwill	4,074	4,074
Mortgage Servicing Rights	2,023	2,066
Other Real Estate Owned	1,094	2,091
Other assets	21,197	20,091
Total Assets	941,213	965,938
Deposits
Noninterest-bearing	164,009	110,452
Interest-bearing
NOW accounts	179,862	215,185
Savings	223,189	214,467
Time	195,500	236,360
Total deposits	762,560	776,464
Federal Funds purchased and Securities sold under agreement to repurchase	55,962	69,756
Federal Home Loan Bank (FHLB) Advances	0	4,500
Dividend payable	965	967
Accrued expenses and other liabilities	7,233	5,634
Total liabilities	826,720	857,321
Commitments and Contingencies
Stockholders' Equity
Common stock - No par value - 6,500,000 shares authorized; 5,200,000 shares issued & outstanding	12,222	12,312
Treasury Stock - 572,662 shares 2014, 561,562 shares 2013	(11,928)	(11,611)
Retained earnings	113,755	107,910
Accumulated other comprehensive income	444	6
Total stockholders' equity	114,493	108,617
Total Liabilities and Stockholders' Equity	$ 941,213	$ 965,938

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Summary of Significant Accounting Policies - Components of Other Comprehensive Income and Related Tax Effects (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, Net of Tax [Abstract]
Net unrealized gain (loss) on available-for-sale securities	$ 1,158	$ (8,448)	$ 417
Reclassification adjustment for gain on sale of available-for-sale securities	(494)	(775)	(852)
Net unrealized gains (losses)	664	(9,223)	(435)
Tax effect	226	(3,136)	(147)
Other comprehensive income (loss)	$ 438	$ (6,087)	$ (288)

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Condensed Financial Statements of Parent Company - Statements of Cash Flows (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Cash Flows from Operating Activities
Net income	$ 9,646	$ 9,007	$ 9,788
Changes in Assets and Liabilities:
Net cash provided by operating activities	19,159	16,993	14,214
Cash Flows from Investing Activities
Net cash provided by (used in) investing activities	22,507	(31,957)	(26,454)
Cash Flows from Financing Activities
Payment of dividends	(3,864)	(3,719)	(3,597)
Purchase of Treasury Stock	(576)	(1,236)	(894)
Net cash provided by (used in) financing activities	(36,634)	(9,865)	13,189
Net Change in Cash and Cash Equivalents	5,032	(24,829)	949
Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning of Year	19,263	44,092	43,143
Cash and Cash Equivalents - End of Year	24,295	19,263	44,092
Farmers & Merchants State Bank [Member]
Cash Flows from Operating Activities
Net income	9,646	9,007	9,788
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Equity in undistributed net income (Distributions in excess earnings) of subsidiaries	(4,087)	(4,974)	(5,649)
Accretion & Amortization of Securities	146	21
Changes in Assets and Liabilities:
Dividends receivable	(1,025)	(10)	260
Other Assets and Liabilities	(12)	52	282
Net cash provided by operating activities	4,668	4,096	4,681
Cash Flows from Investing Activities
Investing in Subsidiary	(250)
Purchase of Available for Sale Securities		(14,992)
Repayment of Subsidiary Subordinated Debt		15,000
Net cash provided by (used in) investing activities	(250)	8
Cash Flows from Financing Activities
Payment of dividends	(3,862)	(3,719)	(3,597)
Purchase of Treasury Stock	(576)	(1,236)	(894)
Net cash provided by (used in) financing activities	(4,438)	(4,955)	(4,491)
Net Change in Cash and Cash Equivalents	(20)	(851)	190
Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning of Year	322	1,173	983
Cash and Cash Equivalents - End of Year	$ 302	$ 322	$ 1,173

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Consolidated Statement of Changes to Shareholders Equity (Parenthetical) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Issuance of shares of restricted stock, Shares	13,250	11,000	11,000
Cash dividends declared, per share	$ 0.84	$ 0.81	$ 0.78
Common Stock [Member]
Issuance of shares of restricted stock, Shares	13,250	11,000	11,000
Issuance of shares of restricted stock, forfeitures	780	620	1,135

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Condensed Financial Statements of Parent Company - Balance Sheet (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Related party receivables:
Total Assets	$ 941,213	$ 965,938
Liabilities
Dividends payable	965	967
Total liabilities	826,720	857,321
Stockholders' Equity	114,493	108,617	110,489	105,339
Total Liabilities and Stockholders' Equity	941,213	965,938
Farmers & Merchants State Bank [Member]
Assets
Cash	302	322
Related party receivables:
Dividends & Accounts receivable from subsidiary	2,030	951
Accrued interest receivable Municipals	58	49
Note receivable from Bank subsidiary	0	0
Securities - Municipals	14,998	14,956
Investment in subsidiaries	98,088	93,436
Total Assets	115,476	109,714
Liabilities
Accrued expenses	18	130
Dividends payable	965	967
Total liabilities	983	1,097
Stockholders' Equity	114,493	108,617
Total Liabilities and Stockholders' Equity	$ 115,476	$ 109,714

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Loans - Recorded Investment in Nonaccrual Loans by Portfolio Class of Loans (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investment in nonaccrual loans	$ 1,705	$ 3,329
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investment in nonaccrual loans	628	483
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investment in nonaccrual loans	709	2,436
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investment in nonaccrual loans	339	410
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investment in nonaccrual loans	$ 29

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Securities Sold Under Agreement to Repurchase (Tables)

12 Months Ended

Dec. 31, 2014

Banking and Thrift [Abstract]

Daily Securities under Agreement to Repurchase

The table below presents the daily securities sold under agreement to repurchase and the term repurchase agreements. It does not include the Bank’s Federal Funds purchased.

	Daily Securities Sold Under Agreement to Repurchase
	Amount Outstanding at End of Period (000’s)		Weighted Average Rate End of Period			Maximum Amount Borrowings Outstanding Month End (000’s)		Approximate Average Outstanding in Period (000’s)		Approximate Weighted Average Interest Rate For the Period
2014	$	38,493		0.08	%	$	46,475	$	42,222		0.09	%
2013	$	38,503		0.08	%	$	48,366	$	38,859		0.09	%
	Term CD’s Sold Under Agreement to Repurchase
	Amount Outstanding at End of Period (000’s)		Weighted Average Rate End of Period			Maximum Amount Borrowings Outstanding Month End (000’s)		Approximate Average Outstanding in Period (000’s)		Approximate Weighted Average Interest Rate For the Period
2014	$	17,469		1.25	%	$	17,469	$	17,337		1.24	%
2013	$	17,253		1.25	%	$	17,291	$	17,095		1.25	%

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Loans - Summary of Activities in Allowance for Credit Losses (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Allowance for Loan Losses
Balance at beginning of year				$ 5,194				$ 5,224	$ 5,194	$ 5,224	$ 5,091
Provision for loan loss	37	282	444	428	276	303	112	167	1,191	858	738
Loans charged off									(778)	(1,262)	(891)
Recoveries									298	374	286
Balance at ending of year	5,905				5,194				5,905	5,194	5,224
Allowance for Unfunded Loan Commitments & Letters of Credit	207				163				207	163	162
Total Allowance for Credit Losses	$ 6,112				$ 5,357				$ 6,112	$ 5,357	$ 5,386

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Minimum Regulatory Capital Requirements

12 Months Ended

Dec. 31, 2014

Banking and Thrift [Abstract]

Minimum Regulatory Capital Requirements

Note 15 – Minimum Regulatory Capital Requirements

The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and 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 their assets, liabilities and certain off balance-sheet items as calculated under regulatory accounting practices.

The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of: total risk-based capital and Tier I capital to risk-weighted assets (as defined in the regulations), and Tier I capital to adjusted total assets (as defined). Management believes, as of December 31, 2014, that the Bank meets all the capital adequacy requirements to which it is subject.

As of December 31, 2014 the most recent notification from the FDIC indicated the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To remain categorized as well capitalized, the Bank will have to maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as disclosed in the table to follow. There are no conditions or events since the most recent notification that management believes have changed the Bank’s prompt corrective action category.

The Company and the Bank’s actual and required capital amounts and ratios as of December 31, 2014 and 2013 are as follows:

											To Be Well Capitalized
	Actual					For Capital Adequacy Purposes					Under the Prompt Corrective Action Provisions
As of December 31, 2014	(000’s) Amount		Ratio			(000’s) Amount		Ratio			(000’s) Amount		Ratio
Total Risk-Based Capital (to Risk Weighted Assets)
Consolidated	$	114,702		16.68	%	$	55,028		8.00	%	$	N/A		N/A
Farmers & Merchants State Bank		98,154		14.35	%		54,710		8.00	%		68,388		10.00	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated		108,590		15.79	%		27,514		4.00	%		N/A		N/A
Farmers & Merchants State Bank		92,042		13.46	%		27,355		4.00	%		41,033		6.00	%
Tier 1 Capital (to Adjusted Total Assets)
Consolidated		108,590		11.70	%		37,111		4.00	%		N/A		N/A
Farmers & Merchants State Bank		92,042		10.01	%		36,785		4.00	%		45,981		5.00	%

											To Be Well Capitalized
	Actual					For Capital Adequacy Purposes					Under the Prompt Corrective Action Provisions
As of December 31, 2013	(000’s) Amount		Ratio			(000’s) Amount		Ratio			(000’s) Amount		Ratio
Total Risk-Based Capital (to Risk Weighted Assets)
Consolidated	$	107,752		16.34	%	$	52,756		8.00	%		N/A		N/A
Farmers & Merchants State Bank		92,838		14.10	%		52,674		8.00	%	$	65,843		10.00	%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated		102,395		15.53	%		26,378		4.00	%		N/A		N/A
Farmers & Merchants State Bank		87,481		13.29	%		26,337		4.00	%		39,506		6.00	%
Tier 1 Capital (to Adjusted Total Assets)
Consolidated		102,395		10.88	%		37,644		4.00	%		N/A		N/A
Farmers & Merchants State Bank		87,481		9.40	%		37,228		4.00	%		46,535		5.00	%

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Federal Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Components of Income Tax Expense (Benefit)

The components of income tax expense (benefit) for the years ended December 31 are as follows:

	(In Thousands)
	2014		2013		2012
Current:
Federal	$	3,837	$	3,562	$	4,030
Deferred:
Federal		34		34		(126	)
	$	3,871	$	3,596	$	3,904

Reconciliation of the Statutory Federal Income Tax Rate to the Effective Tax Rate

The following is a reconciliation of the statutory federal income tax rate to the effective tax rate:

	(In Thousands)
	2014			2013			2012
Income tax at statutory rates	$	4,596		$	4,285		$	4,655
Decrease resulting from:
Tax exempt interest		(634	)		(640	)		(677	)
Change in prior estimates and other		(91	)		(49	)		(74	)
	$	3,871		$	3,596		$	3,904

Components of Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities at December 31 are comprised of the following:

	(In Thousands)
	2014			2013
Deferred Tax Assets:
Allowance for loan losses	$	2,030		$	1,766
Other		416			788
Total deferred tax assets		2,446			2,554
Deferred Tax Liabilities:
Accreted discounts on bonds		83			73
FHLB stock dividends		746			859
Mortgage servicing rights		696			702
Other		1,160			1,121
Net unrealized gain on available-for-sale securities		229			3
Total deferred tax liabilities		2,914			2,758
Net Deferred Tax Liability	$	(468	)	$	(204	)

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Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2014

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Note 17 – Fair Value of Financial Instruments

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

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

Cash and Cash Equivalents

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

Securities and Other Securities

Fair values for securities, excluding Federal Home Loan Bank stock, are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. The carrying value of Federal Home Loan Bank stock approximates fair value based on the redemption provisions of the Federal Home Loan Bank. The Bank acquired stock in the Federal Home Loan Bank of Indianapolis at a cost of $231.4 thousand through its acquisition of Knisely Bank. There were no borrowings at the time of acquisition associated with Federal Home Loan Bank of Indianapolis. The Bank had requested Federal Home Loan Bank of Indianapolis to buy back its stock when the acquisition of Knisely was completed in January 2008. A five year waiting period was imposed and the stock was ultimately redeemed in full during 2013.

Loans

For those variable-rate loans that re-price frequently, and with no significant change in credit risk, fair values are based on carrying values. The fair values of the fixed rate and all other loans are estimated using discounted cash flow analysis, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality.

Deposits

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

Federal Funds Purchased and Securities Sold Under Agreement to Repurchase

The carrying value of Federal Funds purchased and securities sold under agreement to repurchase approximates fair values.

FHLB Advances

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

Accrued Interest Receivable and Payable

The carrying amounts of accrued interest approximate fair values.

Dividends Payable

The carrying amounts of dividends payable approximate their fair values and are generally paid within forty days of declaration.

Off Balance Sheet Financial Instruments

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

The estimated fair values, and related carrying or notional amounts, for on and off-balance sheet financial instruments as of December 31, 2014 and 2013, are reflected below. The aggregate fair values in the table below do not represent the total market value of the Bank’s assets and liabilities. The table excludes the following:

Bank Premises and Equipment, Goodwill, Mortgage Servicing Rights, Other Real Estate Owned, Other Assets, Other Liabilities and Accrued Expenses.

	(In Thousands)
	December 2014										December 2013
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3		Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and Cash Equivalents	$	24,295	$	24,295	$	24,295	$	—	$	—	$	19,263	$	19,263	$	19,263	$	—	$	—
Securities - available for sale		248,492		248,492		25,393		215,168		7,931		324,509		324,509		25,272		288,891		10,346
Other Securities		3,717		3,717		—		—		3,717		4,216		4,216		—		—		4,216
Loans, net		616,021		625,377		—		—		625,377		570,919		579,992		—		—		579,992
Interest receivable		3,578		3,578		—		—		3,578		3,694		3,694		—		—		3,694
Total Assets	$	896,103	$	905,459	$	49,688	$	215,168	$	640,603	$	922,601	$	931,674	$	44,535	$	288,891	$	598,248
Financial Liabilities:
Interest bearing Deposits	$	403,051	$	403,801	$	—	$	—	$	403,801	$	429,652	$	429,750	$	—	$	—	$	429,750
Non-interest bearing Deposits		164,009		164,009		—		164,009		—		110,452		110,452		—		110,452		—
Time Deposits		195,500		196,545		—		—		196,545		236,360		236,027		—		—		236,027
Total Deposits	$	762,560	$	764,355	$	—	$	164,009	$	600,346	$	776,464	$	776,229	$	—	$	110,452	$	665,777
Federal Funds purchased and Securities sold under agreement to repurchase		55,962		55,962		—		—		55,962		69,756		69,756		—		—		69,756
Federal Home Loan Bank advances		—		—		—		—		—		4,500		4,570		—		—		4,570
Interest payable		207		207		—		—		207		223		223		—		—		223
Dividends payable		965		965		—		965		—		967		967		—		967		—
Total Liabilities	$	819,694	$	821,489	$	—	$	164,974	$	656,515	$	851,910	$	851,745	$	—	$	111,419	$	740,326

Fair Value Measurements

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2014 and 2013, and the valuation techniques used by the Company to determine those fair values.

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

Available-for-sale securities – When quoted prices are available in an active market, securities are valued using the quoted price and are classified as Level 1. The quoted prices are not adjusted.

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

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

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

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

The following summarizes financial assets measured at fair value on a recurring basis as of December 31, 2014 and December 31, 2013 segregated by level or the valuation inputs within the fair value hierarchy utilized to measure fair value:

($ in Thousands)	Quoted Prices in Active		Significant		Significant
December 31, 2014	Active Markets for Identical Assets (Level 1)		Observable Inputs (Level 2)		Observable Inputs (Level 3)
Assets-(Securities Available for Sale)
U.S. Treasury	$	25,393	$	—	$	—
U.S. Government agency		—		119,234		—
Mortgage-backed securities		—		29,562		—
State and local governments		—		66,372		7,931
Total Securities Available for Sale	$	25,393	$	215,168	$	7,931
($ in Thousands)	Quoted Prices in Active		Significant		Significant
December 31, 2013	Active Markets for Identical Assets (Level 1)		Observable Inputs (Level 2)		Observable Inputs (Level 3)
Assets-(Securities Available for Sale)
U.S. Treasury	$	25,272	$	—	$	—
U.S. Government agency		—		172,972		—
Mortgage-backed securities		—		44,792		—
State and local governments		—		71,127		10,346
Total Securities Available for Sale	$	25,272	$	288,891	$	10,346

	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local Governments Tax-Exempt			State and Local Governments Taxable			State and Local Governments Total
Balance at January 1, 2014	$	8,802		$	1,544		$	10,346
Change in Market Value		(1,104	)		(251	)		(1,355	)
Purchases		—			—			—
Sales		—			—			—
Payments & Maturities		(1,060	)		—			(1,060	)
Balance at December 31, 2014	$	6,638		$	1,293		$	7,931

	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local Governments Tax-Exempt			State and Local Governments Taxable			State and Local Governments Total
Balance at January 1, 2013	$	14,863		$	1,545		$	16,408
Change in Market Value		(1,852	)		(1	)		(1,853	)
Purchases		519			—			519
Sales		—			—			—
Payments & Maturities		(4,728	)		—			(4,728	)
Balance at December 31, 2013	$	8,802		$	1,544		$	10,346

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

There have been no transfers between Levels 1, 2, and 3 during 2014 and 2013.

The Company also has assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis. At December 31, 2014 and 2013, such assets consist primarily of impaired loans. Impaired loans categorized as Level 3 assets consist of non-homogeneous loans that are considered impaired. The Company estimates the fair value of the loans based on the present value of expected future cash flows using management’s best estimate of key assumptions. These assumptions include future payment ability, timing of payment streams, and estimated realizable values of available collateral (typically based on outside appraisals).

At December 31, 2014 and 2013, impaired loans categorized as Level 3 were $1.5 and $1.9 million, respectively. The specific allocation for impaired loans was $386.9 thousand as of December 31, 2014 and $516.1 thousand as of December 31, 2013, respectively, which are accounted for in the allowance for loan losses (see Note 4).

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

The following table presents impaired loans and other real estate owned as recorded at fair value:

	Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2014
($ in Thousands)	Balance at December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Change in fair value for twelve-month period ended Dec. 31,  2014
Impaired loans	$	1,456	$	—	$	—	$	1,456	$	(168	)
Other real estate owned - residential mortgages		21		—		—		21		(8	)
Other real estate owned - commercial		23		—		—		23		(32	)
Total change in fair value									$	(208	)
	Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2013
($ in Thousands)	Balance at December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Change in fair value for twelve-month period ended Dec. 31, 2013
Impaired loans	$	1,924	$	—	$	—	$	1,924	$	(525	)
Other real estate owned - residential mortgages		964		—		—		964		—
Other real estate owned - commercial		1,127		—		—		1,127		(64	)
Total change in fair value									$	(589	)

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

	Fair Value at December 31, 2014		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
State and political subdivision securities	$	7,931	Discounted Cash Flow	Credit strength of underlying project or entity / Discount rate	0-5%
Impaired Loans		1,456	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0-50%
Other real estate owned - residential		21	Appraisals	Discount to reflect current market	0-20%
Other real estate owned - commercial		23	Appraisals	Discount to reflect current market	0-20%
	Fair Value at December 31, 2013		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
State and political subdivision securities	$	10,346	Discounted Cash Flow	Credit strength of underlying project or entity / Discount rate	0-5%
Impaired Loans		1,924	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0-50%
Other real estate owned - residential		964	Appraisals	Discount to reflect current market	0-20%
Other real estate owned - commercial		1,127	Appraisals	Discount to reflect current market	0-20%

The Company also has other assets, which under certain conditions, are subject to measurement at fair value. These assets include loans held for sale, bank owned life insurance, and mortgage servicing rights. The Company estimated the fair values of these assets utilizing Level 3 inputs, including, the discounted present value of expected future cash flows. At December 31, 2014, the Company estimates that there is no impairment of these assets and therefore, no impairment charge to other expense was required to adjust these assets to their estimated fair values.

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Premises and Equipment - Major Categories of Banking Premises and Equipment and Accumulated Depreciation (Parenthetical) (Detail)	12 Months Ended
	Dec. 31, 2014
Minimum [Member] | Buildings [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	15 years
Minimum [Member] | Furnishings [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	3 years
Maximum [Member] | Buildings [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	39 years
Maximum [Member] | Furnishings [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	15 years

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Consolidated Statement of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Cash Flows from Operating Activities
Net income	$ 9,646	$ 9,007	$ 9,788
Adjustments to reconcile net income to net cash from operating activities:
Depreciation	1,293	1,184	1,154
Amortization of securities, net	1,430	2,149	3,075
Amortization of servicing rights	344	426	768
Amortization of core deposit intangible	480	319	312
Compensation expense related to stock awards	232	253	217
Provision for loan loss	1,191	858	738
Gain on sale of loans held for sale	(647)	(1,123)	(2,041)
Originations of loans held for sale	(37,432)	(62,360)	(96,472)
Proceeds from sale of loans held for sale	41,992	65,391	95,435
Loss on sale of other assets	157	144	634
Gain on sales of securities	(494)	(775)	(852)
Change in other assets and other liabilities, net	971	1,520	1,458
Net cash provided by operating activities	19,159	16,993	14,214
Activity in securities:
Maturities, prepayments and calls	17,817	33,228	42,851
Sales	57,928	91,039	60,513
Purchases		(103,320)	(134,435)
Proceeds from redemption of FHLB stock	499
Proceeds from sales of assets	24	1,138	1,146
Additions to premises and equipment	(2,908)	(2,063)	(1,774)
Loan and lease originations and principal collections, net	(50,853)	(67,194)	5,245
Net cash received for acquisition		15,215
Net cash provided by (used in) investing activities	22,507	(31,957)	(26,454)
Cash Flows from Financing Activities
Net increase (decrease) in deposits	(13,904)	(16,254)	23,870
Net change in federal funds purchased and securities sold under agreements to repurchase	(13,794)	18,444	(1,128)
Repayment of FHLB advances	(4,500)	(7,100)	(5,062)
Purchase of Treasury Stock	(576)	(1,236)	(894)
Cash dividends paid on common stock	(3,864)	(3,719)	(3,597)
Net cash provided by (used in) financing activities	(36,634)	(9,865)	13,189
Net Increase (Decrease) in Cash and Cash Equivalents	5,032	(24,829)	949
Cash and Cash Equivalents - Beginning of Year	19,263	44,092	43,143
Cash and Cash Equivalents - End of Year	24,295	19,263	44,092
Cash paid during the year for:
Interest	3,732	4,679	6,304
Income taxes	4,285	3,240	4,085
Noncash investing activities:
Transfer of loans to other real estate owned	$ 139	$ 1,053	$ 562

XML

Consolidated Balance Sheet (Parenthetical) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Statement of Financial Position [Abstract]
Common stock, no par value	$ 0	$ 0
Common stock, shares authorized	6,500,000	6,500,000
Common stock, shares issued	5,200,000	5,200,000
Common stock, shares outstanding	5,200,000	5,200,000
Treasury Stock, shares	572,662	561,562

XML

Federal Income Taxes

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Federal Income Taxes

Note 10 – Federal Income Taxes

The components of income tax expense (benefit) for the years ended December 31 are as follows:

	(In Thousands)
	2014		2013		2012
Current:
Federal	$	3,837	$	3,562	$	4,030
Deferred:
Federal		34		34		(126	)
	$	3,871	$	3,596	$	3,904

The following is a reconciliation of the statutory federal income tax rate to the effective tax rate:

	(In Thousands)
	2014			2013			2012
Income tax at statutory rates	$	4,596		$	4,285		$	4,655
Decrease resulting from:
Tax exempt interest		(634	)		(640	)		(677	)
Change in prior estimates and other		(91	)		(49	)		(74	)
	$	3,871		$	3,596		$	3,904

Deferred tax assets and liabilities at December 31 are comprised of the following:

	(In Thousands)
	2014			2013
Deferred Tax Assets:
Allowance for loan losses	$	2,030		$	1,766
Other		416			788
Total deferred tax assets		2,446			2,554
Deferred Tax Liabilities:
Accreted discounts on bonds		83			73
FHLB stock dividends		746			859
Mortgage servicing rights		696			702
Other		1,160			1,121
Net unrealized gain on available-for-sale securities		229			3
Total deferred tax liabilities		2,914			2,758
Net Deferred Tax Liability	$	(468	)	$	(204	)

XML

Fair Value of Instruments - Quantitative Information about Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
U.S. Government Agency [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 7,931	$ 10,346
Valuation Technique	Discounted Cash Flow	Discounted Cash Flow
Unobservable Inputs	Credit strength of underlying project or entity / Discount rate	Credit strength of underlying project or entity / Discount rate
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	1,456	1,924
Valuation Technique	Collateral based measurements	Collateral based measurements
Unobservable Inputs	Discount to reflect current market conditions and ultimate collectability	Discount to reflect current market conditions and ultimate collectability
Other real estate owned - residential [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	21	964
Valuation Technique	Appraisals	Appraisals
Unobservable Inputs	Discount to reflect current market	Discount to reflect current market
Other real estate owned - commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 23	$ 1,127
Valuation Technique	Appraisals	Appraisals
Unobservable Inputs	Discount to reflect current market	Discount to reflect current market
Minimum [Member] | U.S. Government Agency [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average	0.00%	0.00%
Minimum [Member] | Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average	0.00%	0.00%
Minimum [Member] | Other real estate owned - residential [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average	0.00%	0.00%
Minimum [Member] | Other real estate owned - commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average	0.00%	0.00%
Maximum [Member] | U.S. Government Agency [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average	5.00%	5.00%
Maximum [Member] | Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average	50.00%	50.00%
Maximum [Member] | Other real estate owned - residential [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average	20.00%	20.00%
Maximum [Member] | Other real estate owned - commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Weighted Average	20.00%	20.00%

XML

Fair Value of Financial Instruments - Changes in the Level 3 Fair Value Category of Unobservable Inputs (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	$ 324,509
Purchases		103,320	134,435
Sales	57,928	91,039	60,513
Ending Balance	248,492	324,509
State and Local Governments [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Ending Balance	74,303	81,473
Level 3 [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Ending Balance	7,931	10,346
Level 3 [Member] | State and Local Governments [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	10,346	16,408
Change in Market Value	(1,355)	(1,853)
Purchases		519
Sales	0	0
Payments & Maturities	(1,060)	(4,728)
Ending Balance	7,931	10,346
Level 3 [Member] | State and Local Governments [Member] | Tax - Exempt [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	8,802	14,863
Change in Market Value	(1,104)	(1,852)
Purchases		519
Sales	0	0
Payments & Maturities	(1,060)	(4,728)
Ending Balance	6,638	8,802
Level 3 [Member] | State and Local Governments [Member] | Taxable [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	1,544	1,545
Change in Market Value	(251)	(1)
Purchases
Sales	0	0
Payments & Maturities
Ending Balance	$ 1,293	$ 1,544

XML

Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2014	Feb. 25, 2015	Jun. 30, 2014
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	FY
Trading Symbol	FMB
Entity Registrant Name	FARMERS & MERCHANTS BANCORP INC
Entity Central Index Key	0000792966
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		4,627,338
Entity Public Float			$ 113,061,326

XML

Employee Benefit Plans

12 Months Ended

Dec. 31, 2014

Compensation and Retirement Disclosure [Abstract]

Employee Benefit Plans

Note 11 – Employee Benefit Plans

The Bank has established a 401(k) profit sharing plan, which allows eligible employees to save at a minimum one percent of eligible compensation on a pre-tax basis, subject to certain Internal Revenue Service limitations. The Bank will match 50% of employee 401(k) contributions up to four percent of total eligible compensation. In addition, the Bank may make a discretionary contribution from time to time. A participant is 100% vested in the participant’s deferral contributions and employer matching contributions. A six-year vesting schedule applies to employer discretionary contributions. Contributions to the 401(k) profit sharing plan for both the employer matching contribution and the discretionary contribution were $779, $670 and $744 thousand for 2014, 2013 and 2012, respectively.

Restricted Stock Awards

The Company has a Long-Term Stock Incentive Plan under which 13,250 shares of restricted stock were issued to 61 employees during 2014, 11,000 shares of restricted stock were issued to 53 employees and 11,000 shares to 54 employees during 2013 and 2012, respectively. Under the plan, the shares vest 100% in three years. During the 3 year vesting period, the employees received dividends or dividend equivalent compensation on the shares. Due to employee termination, there were 780, 620 and 1,135 forfeited during 2014, 2013 and 2012, respectively. Due to retirement, one employee received 210 shares from awards granted in 2009, 2010 and 2011. During 2012, 8,700 shares awarded in 2009 were vested 100%, and 41 employees received the stock. During 2013, 9,160 shares awarded in 2010 were vested 100%, and 45 employees received the stock. During 2014, 10,005 shares awarded in 2011, were vested 100%, and 48 employees received the stock. Due to retirement two employees received 965 shares. Compensation expense applicable to the restricted stock totaled $252, $253 and $219 thousand for the years ending December 31, 2014, 2013 and 2012, respectively.

The following table summarizes the activity of restricted stock awards as of December 31:

	Year Ended December 31,
	2014					2013					2012
	Number of Shares			Weighted average fair value per award		Number of Shares			Weighted average fair value per award		Number of Shares			Weighted average fair value per award
Beginning of period		31,890			20.38		30,670			19.05		29,715			18.99
Granted		13,250			25.50		11,000			22.00		11,000			19.95
Vested		(10,970	)		25.39		(9,160	)		21.55		(8,910	)		19.99
Forfeited		(780	)		24.97		(620	)		21.84		(1,135	)		19.99
Nonvested, end of period		33,390			22.77		31,890			20.38		30,670			19.05

As of December 31, 2014, there was $455 thousand of unrecognized compensation cost related to the nonvested portion of restricted stock awards under the plan. Expense for restricted stock awards of $232 thousand, $253 thousand, and $217 thousand was recorded for the years ended December 31, 2014, 2013, and 2012, respectively.

XML

Employee Benefit Plans - Additional Information (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2014 Employees	Dec. 31, 2013	Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Minimum percentage of eligible compensation on a pre-tax basis for eligible employees to save	1.00%
Employee contribution matching percentage	50.00%
Percentage of total eligible compensation, contribution by Bank, maximum limit	4.00%
Vesting percentage in participant's deferral contributions and employer matching contributions	100.00%
Vesting period	6 years
Employer matching contribution and the discretionary contribution	$ 779	$ 670	$ 744
Restricted stock awards, shares issued	13,250	11,000	11,000
Number of employees, received the stock	2
Two employees received shares from awards granted due to retirement	965
Expense for restricted stock awards	232	253	217
Awards grants originated in 2009, 2010 and 2011 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of employees, received the stock	1
One employee received shares from awards granted due to retirement	210
Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
Stock issued to number of employees	61	53	54
Shares vest under the plan	100.00%	100.00%	100.00%
Shares forfeited due to employee termination	780	620	1,135
Number of shares vested	10,970	9,160	8,910
Number of employees, received the stock	48	45	41
Compensation expense	252	253	219
Unrecognized compensation cost related to the nonvested portion of restricted stock awards under the plan	$ 455
Restricted Stock Awards [Member] | 2009 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vested			8,700
Restricted Stock Awards [Member] | 2010 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vested		9,160
Restricted Stock Awards [Member] | 2011 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares vested	10,005

XML

Fair Value of Financial Instruments - Financial Assets Measured at Fair Value on Recurring Basis (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	$ 248,492	$ 324,509
U.S. Treasury [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	25,393	25,272
U.S. Government Agency [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	119,234	172,972
Mortgage-backed Securities [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	29,562	44,792
State and Local Governments [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	74,303	81,473
Level 1 [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	25,393	25,272
Level 1 [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	25,393	25,272
Level 1 [Member] | U.S. Treasury [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	25,393	25,272
Level 1 [Member] | U.S. Government Agency [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale
Level 1 [Member] | Mortgage-backed Securities [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale
Level 1 [Member] | State and Local Governments [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale
Level 2 [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	215,168	288,891
Level 2 [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	215,168	288,891
Level 2 [Member] | U.S. Treasury [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale
Level 2 [Member] | U.S. Government Agency [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	119,234	172,972
Level 2 [Member] | Mortgage-backed Securities [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	29,562	44,792
Level 2 [Member] | State and Local Governments [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	66,372	71,127
Level 3 [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	7,931	10,346
Level 3 [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	7,931	10,346
Level 3 [Member] | U.S. Treasury [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale
Level 3 [Member] | U.S. Government Agency [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale
Level 3 [Member] | Mortgage-backed Securities [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale
Level 3 [Member] | State and Local Governments [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	7,931	10,346	16,408
Level 3 [Member] | State and Local Governments [Member] | Fair Value on a Recurring Basis [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Total Securities Available for Sale	$ 7,931	$ 10,346

XML

Consolidated Statement of Income & Comprehensive Income (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Interest Income
Loans, including fees	$ 28,070	$ 24,978	$ 26,489
Debt securities:
U.S. Treasury and government agency	3,171	4,151	4,427
Municipalities	2,037	2,080	2,112
Dividends	156	185	199
Federal funds sold	7	11	20
Other	12	23	26
Total interest income	33,453	31,428	33,273
Interest Expense
Deposits	3,458	4,193	5,574
Federal funds purchased and securities sold under agreements to repurchase	254	248	242
Borrowed funds	4	163	434
Total interest expense	3,716	4,604	6,250
Net Interest Income - Before provision for loan losses	29,737	26,824	27,023
Provision for Loan Losses	1,191	858	738
Net Interest Income After Provision For Loan Losses	28,546	25,966	26,285
Noninterest Income
Customer service fees	5,224	5,194	5,204
Other service charges and fees	3,819	3,746	3,499
Net gain on sale of loans	647	1,123	2,041
Net gain on sale of securities	494	775	852
Total noninterest income	10,184	10,838	11,596
Noninterest Expense
Salaries and Wages	10,186	9,553	9,039
Employee benefits	3,324	3,219	3,288
Net occupancy expense	1,107	1,251	1,419
Furniture and equipment	1,541	1,349	1,400
Data processing	1,250	1,212	1,119
Franchise taxes	781	953	946
Net loss on sale of other assets owned	157	144	634
FDIC Assessment	503	535	467
Mortgage servicing rights amortization	344	426	768
Other general and administrative	6,020	5,559	5,109
Total other operating expenses	25,213	24,201	24,189
Income Before Income Taxes	13,517	12,603	13,692
Income Taxes	3,871	3,596	3,904
Net Income	9,646	9,007	9,788
Other Comprehensive Income(Loss) (Net of Tax):
Net unrealized gain (loss) on available for sale securities	1,158	(8,448)	417
Reclassification adjustment for gain on sale of available for sale securities	(494)	(775)	(852)
Net unrealized gain (loss) on available for sale securities	664	(9,223)	(435)
Tax effect	226	(3,136)	(147)
Other comprehensive income (loss)	438	(6,087)	(288)
Comprehensive Income	$ 10,084	$ 2,920	$ 9,500
Earnings Per Share - Basic and Diluted	$ 2.08	$ 1.93	$ 2.08
Weighted Average Shares Outstanding	4,628,178	4,676,547	4,695,876

XML

Premises and Equipment

12 Months Ended

Dec. 31, 2014

Property, Plant and Equipment [Abstract]

Premises and Equipment

Note 5 – Premises and Equipment

The major categories of banking premises and equipment and accumulated depreciation at December 31 are summarized below:

	(In Thousands)
	2014			2013
Land	$	4,984		$	4,360
Buildings (useful life 15-39 years)		21,955			20,593
Furnishings (useful life 3-15 years)		11,429			11,035
		38,368			35,988
Less: Accumulated depreciation		(18,068	)		(17,279	)
Premises and Equipment (Net)	$	20,300		$	18,709

Depreciation expense for the years ended December 31, 2014, 2013 and 2012 amounted to $1.3, $1.2, and $1.2 million, respectively.

XML

Loans

12 Months Ended

Dec. 31, 2014

Receivables [Abstract]

Loans

Note 4 – Loans

The Company had $459 thousand in loans held for sale in 2014 as compared to $566 thousand in loans held for sale in 2013. Due to materiality, these loans are included in the Consumer Real Estate loan numbers with a portion from 2014 included in Agricultural Real Estate loans as well.

Loans at December 31 are summarized below:

	(In Thousands)
	2014			2013
Loans:
Commercial real estate	$	270,188		$	248,893
Agricultural real estate		50,895			44,301
Consumer real estate		97,550			92,438
Commercial and industrial		100,126			99,498
Agricultural		74,611			65,449
Consumer		24,277			21,406
Industrial Development Bonds		4,698			4,358
	$	622,345		$	576,343
Less: Net deferred loan fees and costs		(419	)		(230	)
		621,926			576,113
Less: Allowance for loan losses		(5,905	)		(5,194	)
Loans - Net	$	616,021		$	570,919

The following is a maturity schedule by major category of loans at December 31, 2014:

	(In Thousands)
	Within One Year		After One Year Within Five Years		After Five Years		Total
Commercial Real Estate	$	27,291	$	92,076	$	150,821	$	270,188
Agricultural Real Estate		3,546		14,289		33,060		50,895
Consumer Real Estate		11,118		19,377		67,055		97,550
Commercial and industrial		58,741		36,159		5,226		100,126
Agricultural		47,831		22,826		3,954		74,611
Consumer		5,652		14,265		4,360		24,277
Industrial Development Bonds		2,499		126		2,073		4,698
	$	156,678	$	199,118	$	266,549	$	622,345

The distribution of fixed rate loans and variable rate loans by major loan category is as follows as of December 31, 2014:

	(In Thousands)
	Fixed Rate		Variable Rate
Commercial Real Estate	$	190,948	$	79,240
Agricultural Real Estate		36,168		14,727
Consumer Real Estate		77,534		20,016
Commercial and industrial loans		76,625		23,501
Agricultural		69,707		4,904
Consumer, Master Card and Overdrafts		19,566		4,711
Industrial Development Bonds		4,529		169

As of December 31, 2014 and 2013 one to four family residential mortgage loans amounting to $20.8 million and $24.3 million, respectively, have been pledged as security for loans the Bank has received from the Federal Home Loan Bank.

The percentage of delinquent loans has trended downward since the beginning of 2010 from a high of 2.85% of total loans in January 2010 to a low of 0.25% as of the end of December 2013. These percentages do not include nonaccrual loans which are not past due. This level of delinquency is due in part to an adherence to sound underwriting practices over the course of time, an improvement in the financial status of companies to which the Bank extends credit, continued financial stability in the agricultural loan portfolio, and the writing down of uncollectable credits in a timely manner.

Industrial Development Bonds are included in the commercial and industrial category for the remainder of the tables in this Note 4.

The following table represents the contractual aging of the recorded investment in past due loans by portfolio classification of loans as of December 31, 2014 and 2013 net of deferred fees and costs:

December 31, 2014	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Consumer Real Estate	$	713	$	50	$	436	$	1,199	$	96,351	$	97,550	$	—
Ag Real Estate		—		—		—		—		50,895	$	50,895		—
Ag		25		—		—		25		74,586	$	74,611		—
Commercial Real Estate		78		204		709		991		269,197	$	270,188		—
Commercial and Industrial		—		8		—		8		104,816	$	104,824		—
Consumer		25		8		29		62		23,796	$	23,858		—
Total	$	841	$	270	$	1,174	$	2,285	$	619,641	$	621,926	$	—

December 31, 2013	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 Days and Accruing
Consumer Real Estate	$	778	$	0	$	234	$	1,012	$	91,426	$	92,438	$	—
Ag Real Estate		—		—		—		—		44,301		44,301		—
Ag		—		—		—		—		65,449		65,449		—
Commercial Real Estate		—		—		373		373		248,520		248,893		—
Commercial and Industrial		—		—		26		26		103,830		103,856		—
Consumer		28		2		—		30		21,146		21,176		—
Total	$	806	$	2	$	633	$	1,441	$	574,672	$	576,113	$	—

The following table presents the recorded investment in nonaccrual loans by portfolio class of loans as of December 31, 2014 and December 31, 2013:

	(In Thousands)
	2014		2013
Consumer real estate	$	628	$	483
Agricultural real estate		—		—
Agriculture		—		—
Commercial real estate		709		2,436
Commercial		339		410
Consumer		29		—
Total	$	1,705	$	3,329

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

1. Zero (0) Unclassified. Any loan which has not been assigned a classification.

2. One (1) Excellent. Credit to premier customers having the highest credit rating based on an extremely strong financial condition, which compares favorably with industry standards (upper quartile of The Risk Management Association ratios). Financial statements indicate a sound earnings and financial ratio trend for several years with satisfactory profit margins and excellent liquidity exhibited. Prime credits may also be borrowers with loans fully secured by highly liquid collateral such as traded stocks, bonds, certificates of deposit, savings account, etc. No credit or collateral exceptions exist and the loan adheres to the Bank’s loan policy in every respect. Financing alternatives would be readily available and would qualify for unsecured credit. This grade is summarized by high liquidity, minimum risk, strong ratios, and low handling costs.

3. Two (2) Good. Desirable loans of somewhat less stature than Grade 1, but with strong financial statements. Loan supported by financial statements containing strong balance sheets, generally with a leverage position less than 1.50, and a history of profitability. Probability of serious financial deterioration is unlikely. Possessing a sound repayment source (and a secondary source), which would allow repayment in a reasonable period of time. Individual loans backed by liquid personal assets, established history and unquestionable character.

4. Three (3) Satisfactory. Satisfactory loans of average or slightly above average risk – having some deficiency or vulnerability to changing economic conditions, but still fully collectible. Projects should normally demonstrate acceptable debt service coverage. Generally, customers should have a leverage position less than 2.00. May be some weakness but with offsetting features of other support readily available. Loans are meeting the terms of repayment.

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

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

a. At inception, the loan was secured with collateral possessing a loan value adequate to protect the Bank from loss;

b. The loan exhibited two or more years of satisfactory repayment with a reasonable reduction of the principal balance;

c. During the period that the loan has been outstanding, there has been no evidence of any credit weakness. Some examples of weakness include slow payment, lack of cooperation by the borrower, breach of loan covenants, or the business is in an industry which is known to be experiencing problems. If any of the credit weaknesses is observed, a lower risk grade is warranted.

5. Four (4) Satisfactory / Monitored. A “4” (Satisfactory/Monitored) risk grade may be established for a loan considered satisfactory but which is of average credit risk due to financial weakness or uncertainty. The loans warrant a higher than average level of monitoring to ensure that weaknesses do not advance. The level of risk in Satisfactory/Monitored classification is considered acceptable and within normal underwriting guidelines, so long as the loan is given management supervision.

6. Five (5) Special Mention. Loans that possess some credit deficiency or potential weakness which deserves close attention, but which do not yet warrant substandard classification. Such loans pose unwarranted financial risk that, if not corrected, could weaken the loan and increase risk in the future. The key distinctions of a 5 (Special Mention) classification are that (1) it is indicative of an unwarranted level of risk, and (2) weaknesses are considered “potential”, versus “defined”, impairments to the primary source of loan repayment and collateral.

7. Six (6) Substandard. One or more of the following characteristics may be exhibited in loans classified substandard:

a. Loans, which possess a defined credit weakness and the likelihood that a loan will be paid from the primary source, are uncertain. Financial deterioration is underway and very close attention is warranted to ensure that the loan is collected without loss.

b. Loans are inadequately protected by the current net worth and paying capacity of the borrower.

c. The primary source of repayment is weakened, and the Bank is forced to rely on a secondary source of repayment such as collateral liquidation or guarantees.

d. Loans are characterized by the distinct possibility that the Bank will sustain some loss if deficiencies are not corrected.

e. Unusual courses of action are needed to maintain a high probability of repayment.

f. The borrower is not generating enough cash flow to repay loan principal; however, continues to make interest payments.

g. The lender is forced into a subordinate position or unsecured collateral position due to flaws in documentation.

h. Loans have been restructured so that payment schedules, terms and collateral represent concessions to the borrower when compared to the normal loan terms.

i. The lender is seriously contemplating foreclosure or legal action due to the apparent deterioration in the loan

j. There is significant deterioration in the market conditions and the borrower is highly vulnerable to these conditions.

8. Seven (7) Doubtful. One or more of the following characteristics may be exhibited in loans classified Doubtful:

a. Loans have all of the weaknesses of those classified as Substandard. Additionally, however, these weaknesses make collection or liquidation in full based on existing conditions improbable.

b. The primary source of repayment is gone, and there is considerable doubt as to the quality of the secondary source of repayment.

c. The possibility of loss is high, but, because of certain important pending factors which may strengthen the loan, loss classification is deferred until its exact status is known. A Doubtful classification is established deferring the realization of the loss.

9. Eight (8) Loss. Loans are considered uncollectable and of such little value that continuing to carry them as assets on the institution’s financial statements is not feasible. Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

The following table represents the risk category of loans by portfolio class, net of deferred fees, based on the most recent analysis performed as of the time periods shown of December 31, 2014 and December 31, 2013.

	(In Thousands)
	Agriculture Real Estate				Agriculture				Commercial Real Estate				Commercial				Industrial Development Bonds
	2014		2013		2014		2013		2014		2013		2014		2013		2014		2013
1-2	$	4,319	$	3,764	$	11,490	$	9,263	$	1,072	$	1,104	$	1,771	$	2,525	$	—	$	—
3		15,780		14,588		26,871		27,212		34,229		55,060		15,582		21,610		4,289		3,869
4		30,472		25,186		36,225		28,974		225,015		182,277		80,079		72,059		409		489
5		111		729		—		—		7,083		4,987		2,299		2,119		—		—
6		213		34		—		—		2,080		5,092		165		758		—		—
7		—		—		25		—		709		373		230		427		—		—
8		—		—		—		—		—		—		—		—		—		—
Total	$	50,895	$	44,301	$	74,611	$	65,449	$	270,188	$	248,893	$	100,126	$	99,498	$	4,698	$	4,358

For consumer residential real estate, and other, the Company also evaluates credit quality based on the aging status of the loan, which was previously stated, and by payment activity. The following tables present the recorded investment in those classes based on payment activity and assigned risk grading as of December 31, 2014 and December 31, 2013.

	(In Thousands)
	Consumer Real Estate
	2014		2013
Grade
Pass	$	97,007	$	92,226
Special mention (5)		—		—
Substandard (6)		446		18
Doubtful (7)		97		194
Total, net of deferred fees	$	97,550	$	92,438

	Consumer - Credit Card				Consumer - Other
	2014		2013		2014		2013
Performing	$	3,987	$	3,721	$	19,846	$	17,425
Nonperforming		—		—		25		30
Total, net of deferred fees	$	3,987	$	3,721	$	19,871	$	17,455

Information about impaired loans as of and for the years ended December 31, 2014 and 2013 are as follows:

	(In Thousands)
	2014		2013
Impaired loans without a valuation allowance	$	675	$	924
Impaired loans with a valuation allowance		1,168		1,516
Total impaired loans	$	1,843	$	2,440
Valuation allowance related to impaired loans	$	387	$	516
Total non-accrual loans	$	1,705	$	3,329
Total loans past-due ninety days or more and still accruing	$	—	$	—

	(In Thousands)
	2014		2013		2012
Average investment in impaired loans	$	1,929	$	3,274	$	3,436
Interest income recognized on impaired loans	$	87	$	60	$	26
Interest income recognized on a cash basis on impaired loans	$	51	$	17	$	21

No additional funds are committed to be advanced in connection with impaired loans.

The Bank had approximately $797.2 thousand of its impaired loans classified as trouble debt restructured as of December 31, 2014 as compared to $861.2 thousand of its impaired loans classified as trouble debt restructured as of December 31, 2013.

The following table represents the years ended December 31, 2014 and 2013.

December 31, 2014	Number of Contracts	Pre- Modification Outstanding		Post- Modification Outstanding		December 31, 2013	Number of Contracts	Pre- Modification Outstanding		Post- Modification Outstanding
Troubled Debt Restructurings	Modified in the Last 12 Months	Recorded Investment		Recorded Investment		Troubled Debt Restructurings	Modified in the Last 12 Months	Recorded Investment		Recorded Investment
Commercial Real Estate		$	—	$	—	Commercial Real Estate		$	—	$	—
Ag Real Estate			—		—	Ag Real Estate			—		—
Commercial and Industrial			—		—	Commercial and Industrial			—		—
Troubled Debt Restructurings That Subsequently Defaulted	Number of Contracts Modified in the Last 12 Months	Recorded Investment				Troubled Debt Restructurings That Subsequently Defaulted	Number of Contracts Modified in the Last 12 Months	Recorded Investment
Commercial Real Estate		$	—			Commercial Real Estate		$	—
Ag Real Estate			—			Ag Real Estate			—
Commercial and Industrial			—			Commercial and Industrial			—

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

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

The following table presents loans individually evaluated for impairment by portfolio class of loans as of December 31, 2014 and 2013:

	(In Thousands)
	Recorded Investment		Unpaid Principal Balance		Related Allowance		YTD Average Recorded Investment		YTD Interest Income Recognized		YTD Interest Income Recognized Cash Basis
2014
With no related allowance recorded:
Residential	$	204	$	229	$	—	$	52	$	1	$	1
Agriculture real estate		—		—		—		93		7		—
Agriculture		—		—		—		—		—		—
Commercial real estate		471		471		—		740		7		5
Commercial		—		—		—		319		45		18
Consumer		—		—		—		—		—		—
With a specific allowance recorded:
Residential		97		97		36		118		6		6
Agriculture real estate		—		—		—		15		—		—
Agriculture		25		25		25		2		—		—
Commercial real estate		709		709		111		83		21		21
Commercial		326		326		204		506		—		—
Consumer		11		11		11		1		—		—
Totals:
Residential	$	301	$	326	$	36	$	170	$	7	$	7
Agriculture real estate	$	—	$	—	$	—	$	108	$	7	$	—
Agriculture	$	25	$	25	$	25	$	2	$	—	$	—
Commercial real estate	$	1,180	$	1,180	$	111	$	823	$	28	$	26
Commercial	$	326	$	326	$	204	$	825	$	45	$	18
Consumer	$	11	$	11	$	11	$	1	$	—	$	—

	(In Thousands)
	Recorded Investment		Unpaid Principal Balance		Related Allowance		YTD Average Recorded Investment		YTD Interest Income Recognized		YTD Interest Income Recognized Cash Basis
2013
With no related allowance recorded:
Residential	$	18	$	18	$	—	$	138	$	10	$	10
Agriculture real estate		—		—		—		—		—		—
Agriculture		—		—		—		—		—		—
Commercial real estate		906		906		—		630		21		3
Commercial		—		—		—		203		—		—
Consumer		—		—		—		—		—		—
With a specific allowance recorded:
Residential		282		282		78		204		5		3
Agriculture real estate		88		88		9		72		—		—
Agriculture		—		—		—		—		—		—
Commercial real estate		769		1,116		295		518		22		—
Commercial		377		377		134		1,549		2		1
Consumer		—		—		—		—		—		—
Totals:
Residential	$	300	$	300	$	78	$	342	$	15	$	13
Agriculture real estate	$	88	$	88	$	9	$	72	$	—	$	—
Agriculture	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate	$	1,675	$	2,022	$	295	$	1,148	$	43	$	3
Commercial	$	377	$	377	$	134	$	1,752	$	2	$	1
Consumer	$	—	$	—	$	—	$	—	$	—	$	—

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

The following is an analysis of the allowance for credit losses for the years ended December 31:

	(In Thousands)
	2014			2013			2012
Allowance for Loan Losses
Balance at beginning of year	$	5,194		$	5,224		$	5,091
Provision for loan loss		1,191			858			738
Loans charged off		(778	)		(1,262	)		(891	)
Recoveries		298			374			286
Balance at ending of year	$	5,905		$	5,194		$	5,224
Allowance for Unfunded Loan Commitments & Letters of Credit	$	207		$	163		$	162
Total Allowance for Credit Losses	$	6,112		$	5,357		$	5,386

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

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

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

Additional analysis related to the allowance for credit losses as of December 31, 2014 and 2013 is as follows:

	(In Thousands)
	Consumer Real Estate			Agriculture Real Estate		Agriculture		Commercial Real Estate			Commercial and Industrial		Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated			Total
2014
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	257		$	131	$	326	$	2,107		$	1,359	$	292		$	163	$	722		$	5,357
Charge Offs		(168	)		—		—		(229	)		—		(381	)		—		—			(778	)
Recoveries		34			—		44		4			20		196			—		—			298
Provision		414			53		177		485			42		216			—		(196	)		1,191
Other Non-interest expense related to unfunded		—			—		—		—			—		—			44		—			44
Ending Balance	$	537		$	184	$	547	$	2,367		$	1,421	$	323		$	207	$	526		$	6,112
Ending balance: individually evaluated for impairment	$	36		$	—	$	25	$	111		$	204	$	11		$	—	$	—		$	387
Ending balance: collectively evaluated for impairment	$	501		$	184	$	522	$	2,256		$	1,217	$	312		$	207	$	526		$	5,725
Ending balance: loans acquired with deteriorated credit quality	$	2		$	—	$	—	$	—		$	—	$	—		$	—	$	—		$	2
FINANCING RECEIVABLES:
Ending balance, net of deferred fees	$	97,550		$	50,895	$	74,611	$	270,188		$	104,824	$	23,858		$	—	$	—		$	621,926
Ending balance: individually evaluated for impairment	$	301		$	—	$	25	$	1,179		$	327	$	11		$	—	$	—		$	1,843
Ending balance: collectively evaluated for impairment	$	97,249		$	50,895	$	74,586	$	269,009		$	104,497	$	23,847		$	—	$	—		$	620,083
Ending balance: loans acquired with deteriorated credit quality	$	526		$	—	$	—	$	—		$	—	$	—		$	—	$	—		$	526

	(In Thousands)
	Consumer Real Estate			Agriculture Real Estate		Agriculture		Commercial Real Estate			Commercial and Industrial			Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated		Total
2013
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	368		$	113	$	290	$	1,749		$	2,183		$	268		$	162	$	253	$	5,386
Charge Offs		(147	)		—		—		(164	)		(513	)		(438	)		—		—		(1,262	)
Recoveries		20			—		5		23			141			185			—		—		374
Provision		16			18		31		499			(452	)		277			—		469		858
Other Non-interest expense related to unfunded		—			—		—		—			—			—			1		—		1
Ending Balance	$	257		$	131	$	326	$	2,107		$	1,359		$	292		$	163	$	722	$	5,357
Ending balance: individually evaluated for impairment	$	78		$	9	$	—	$	295		$	134		$	—		$	—	$	—	$	516
Ending balance: collectively evaluated for impairment	$	179		$	122	$	326	$	1,812		$	1,225		$	292		$	163	$	722	$	4,841
Ending balance: loans acquired with deteriorated credit quality	$	1		$	—	$	—	$	—		$	—		$	—		$	—	$	—	$	1
FINANCING RECEIVABLES:
Ending balance, net of deferred fees	$	92,438		$	44,301	$	65,449	$	248,893		$	103,856		$	21,176		$	—	$	—	$	576,113
Ending balance: individually evaluated for impairment	$	300		$	88	$	—	$	1,675		$	377		$	—		$	—	$	—	$	2,440
Ending balance: collectively evaluated for impairment	$	92,138		$	44,213	$	65,449	$	247,218		$	103,479		$	21,176		$	—	$	—	$	573,673
Ending balance: loans acquired with deteriorated credit quality	$	540		$	—	$	—	$	—		$	—		$	—		$	—	$	—	$	540

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Restrictions of Dividends & Inter-company Borrowings

12 Months Ended

Dec. 31, 2014

Equity [Abstract]

Restrictions of Dividends & Inter-company Borrowings

Note 16 – Restrictions of Dividends & Inter-company Borrowings

The Bank is restricted as to the amount of dividends that can be paid. Dividends declared by the Bank that exceed the net income for the current year plus retained income for the preceding two years must be approved by federal and state regulatory agencies. Under this formula dividends of $14.7 million may be paid without prior regulatory approval. Regardless of formal regulatory restrictions, the Bank may not pay dividends that would result in its capital levels being reduced below the minimum requirements shown above. Under current Federal Reserve regulations, the Bank is limited as to the amount and type of loans it may make to the Company. These loans are subject to qualifying collateral requirements on which the amount of the loan may be based.

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Earnings Per Share

12 Months Ended

Dec. 31, 2014

Earnings Per Share [Abstract]

Earnings Per Share

Note 12 – Earnings Per Share

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

	Year Ended
	December 31, 2014			December 31, 2013			December 31, 2012
Earnings per share
Net income	$	9,646		$	9,007		$	9,788
Less: distributed earnings allocated to participating securities		(27	)		(25	)		(23	)
Net earnings available to common shareholders	$	9,619		$	8,982		$	9,765
Weighted average common shares outstanding including participating securities		4,628,178			4,676,547			4,695,876
Less: average unvested restricted shares		(32,211	)		(30,618	)		(29,888	)
Weighted average common shares outstanding		4,595,967			4,645,929			4,665,988
Basic earnings per share	$	2.08		$	1.93		$	2.08

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Off Balance Sheet Activities - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Commitments and Contingencies Disclosure [Abstract]
Allowance for credit losses relates to unfunded loan commitments	$ 207	$ 163

XML

Securities Sold Under Agreement to Repurchase

12 Months Ended

Dec. 31, 2014

Banking and Thrift [Abstract]

Securities Sold Under Agreement to Repurchase

Note 8 – Securities Sold Under Agreement to Repurchase

The Bank’s policy requires qualifying securities to be used as collateral for the underlying repurchase agreements. As of December 31, 2014 and 2013 securities with a book value of $65.3 million and $74.7 million, respectively, were pledged to secure the repurchase agreements. The table below presents the daily securities sold under agreement to repurchase and the term repurchase agreements. It does not include the Bank’s Federal Funds purchased.

	Daily Securities Sold Under Agreement to Repurchase
	Amount Outstanding at End of Period (000’s)		Weighted Average Rate End of Period			Maximum Amount Borrowings Outstanding Month End (000’s)		Approximate Average Outstanding in Period (000’s)		Approximate Weighted Average Interest Rate For the Period
2014	$	38,493		0.08	%	$	46,475	$	42,222		0.09	%
2013	$	38,503		0.08	%	$	48,366	$	38,859		0.09	%
	Term CD’s Sold Under Agreement to Repurchase
	Amount Outstanding at End of Period (000’s)		Weighted Average Rate End of Period			Maximum Amount Borrowings Outstanding Month End (000’s)		Approximate Average Outstanding in Period (000’s)		Approximate Weighted Average Interest Rate For the Period
2014	$	17,469		1.25	%	$	17,469	$	17,337		1.24	%
2013	$	17,253		1.25	%	$	17,291	$	17,095		1.25	%

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Loans - Risk Category of Loans by Portfolio Class (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	$ 622,345	$ 576,343
Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	50,895	44,301
Agricultural Real Estate [Member] | 1-2 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	4,319	3,764
Agricultural Real Estate [Member] | 3 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	15,780	14,588
Agricultural Real Estate [Member] | 4 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	30,472	25,186
Agricultural Real Estate [Member] | 5 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	111	729
Agricultural Real Estate [Member] | 6 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	213	34
Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	74,611	65,449
Agricultural [Member] | 1-2 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	11,490	9,263
Agricultural [Member] | 3 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	26,871	27,212
Agricultural [Member] | 4 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	36,225	28,974
Agricultural [Member] | 7 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	25
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	270,188	248,893
Commercial Real Estate [Member] | 1-2 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	1,072	1,104
Commercial Real Estate [Member] | 3 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	34,229	55,060
Commercial Real Estate [Member] | 4 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	225,015	182,277
Commercial Real Estate [Member] | 5 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	7,083	4,987
Commercial Real Estate [Member] | 6 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	2,080	5,092
Commercial Real Estate [Member] | 7 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	709	373
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	100,126	99,498
Commercial and Industrial [Member] | 1-2 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	1,771	2,525
Commercial and Industrial [Member] | 3 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	15,582	21,610
Commercial and Industrial [Member] | 4 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	80,079	72,059
Commercial and Industrial [Member] | 5 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	2,299	2,119
Commercial and Industrial [Member] | 6 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	165	758
Commercial and Industrial [Member] | 7 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	230	427
Industrial Development Bonds [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	4,698	4,358
Industrial Development Bonds [Member] | 3 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	4,289	3,869
Industrial Development Bonds [Member] | 4 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans - Gross	$ 409	$ 489

XML

Servicing

12 Months Ended

Dec. 31, 2014

Transfers and Servicing [Abstract]

Servicing

Note 6 – Servicing

Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of loans serviced for others were $275 and $282 million at December 31, 2014 and 2013, respectively.

The balance of capitalized servicing rights included in other assets at December 31, 2014 and 2013, was $2.0 and $2.1 million respectively. The capitalized addition of servicing rights is included in net gain on sale of loans on the consolidated statement of income.

The fair market value of the capitalized servicing rights as of December 31, 2014 and 2013 was $2.9 million and $2.8 million, respectively. The valuations were completed by stratifying the loans into like groups based on loan type and term. Impairment was measured by estimating the fair value of each stratum, taking into consideration an estimated level of prepayment based upon current market conditions. An average constant prepayment rate of 9.6 and 11.2 were utilized for 2014 and 2013, respectively. All stratums showed positive values compared to carrying value using a discount yield of 6.48% for 2014 and 8.25% for 2013.

The following summarizes mortgage servicing rights capitalized and amortized during each year:

	(In Thousands)
	2014			2013
Beginning Year	$	2,066		$	2,063
Capitalized Additions		301			429
Amortization		(344	)		(426	)
Valuation Allowance		—			—
End of Year	$	2,023		$	2,066

XML

Deposits

12 Months Ended

Dec. 31, 2014

Banking and Thrift [Abstract]

Deposits

Note 7 – Deposits

Time deposits at December 31 consist of the following:

	(In Thousands)
	2014		2013
Time deposits under $100,000	$	113,903	$	135,998
Time deposits of $100,000 or more		81,597		100,362
	$	195,500	$	236,360

At December 31, 2014 the scheduled maturities for time deposits are as follows:

	(In Thousands)
2015	$	97,439
2016		49,634
2017		19,586
2018		24,864
2019		3,053
thereafter		924
	$	195,500

XML

Federal Home Loan Bank Advances

12 Months Ended

Dec. 31, 2014

Banking and Thrift [Abstract]

Federal Home Loan Bank Advances

Note 9 – Federal Home Loan Bank Advances

The Bank has had various loans from the Federal Home Loan Bank. Repayment structures vary, ranging from monthly installments, annual payments or upon maturity. Interest payments are due monthly. Total borrowings were $0.0 million and $4.5 million for December 31, 2014 and 2013, respectively. The advances were secured by $20.8 and $24.3 million of mortgage loans as of December 31, 2014 and 2013, respectively under a blanket collateral agreement.

XML

Loans - Loans Individually Evaluated for Impairment by Portfolio Class of Loans (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Residential [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	$ 301	$ 300
Unpaid Principal Balance	326	300
Related Allowance	36	78
Average Recorded Investment	170	342
Interest Income Recognized	7	15
Interest Income Recognized Cash Basis	7	13
Agricultural Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment		88
Unpaid Principal Balance		88
Related Allowance		9
Average Recorded Investment	108	72
Interest Income Recognized	7
Agricultural [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	25
Unpaid Principal Balance	25
Related Allowance	25
Average Recorded Investment	2
Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	1,180	1,675
Unpaid Principal Balance	1,180	2,022
Related Allowance	111	295
Average Recorded Investment	823	1,148
Interest Income Recognized	28	43
Interest Income Recognized Cash Basis	26	3
Commercial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	326	377
Unpaid Principal Balance	326	377
Related Allowance	204	134
Average Recorded Investment	825	1,752
Interest Income Recognized	45	2
Interest Income Recognized Cash Basis	18	1
Consumer [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	11
Unpaid Principal Balance	11
Related Allowance	11
Average Recorded Investment	1
With No Related Allowance Recorded [Member] | Residential [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	204	18
Unpaid Principal Balance	229	18
Average Recorded Investment	52	138
Interest Income Recognized	1	10
Interest Income Recognized Cash Basis	1	10
With No Related Allowance Recorded [Member] | Agricultural Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	93
Interest Income Recognized	7
With No Related Allowance Recorded [Member] | Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	471	906
Unpaid Principal Balance	471	906
Average Recorded Investment	740	630
Interest Income Recognized	7	21
Interest Income Recognized Cash Basis	5	3
With No Related Allowance Recorded [Member] | Commercial [Member]
Financing Receivable, Impaired [Line Items]
Average Recorded Investment	319	203
Interest Income Recognized	45
Interest Income Recognized Cash Basis	18
With a Specific Allowance Recorded [Member] | Residential [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	97	282
Unpaid Principal Balance	97	282
Related Allowance	36	78
Average Recorded Investment	118	204
Interest Income Recognized	6	5
Interest Income Recognized Cash Basis	6	3
With a Specific Allowance Recorded [Member] | Agricultural Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment		88
Unpaid Principal Balance		88
Related Allowance		9
Average Recorded Investment	15	72
With a Specific Allowance Recorded [Member] | Agricultural [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	25
Unpaid Principal Balance	25
Related Allowance	25
Average Recorded Investment	2
With a Specific Allowance Recorded [Member] | Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	709	769
Unpaid Principal Balance	709	1,116
Related Allowance	111	295
Average Recorded Investment	83	518
Interest Income Recognized	21	22
Interest Income Recognized Cash Basis	21
With a Specific Allowance Recorded [Member] | Commercial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	326	377
Unpaid Principal Balance	326	377
Related Allowance	204	134
Average Recorded Investment	506	1,549
Interest Income Recognized		2
Interest Income Recognized Cash Basis		1
With a Specific Allowance Recorded [Member] | Consumer [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	11
Unpaid Principal Balance	11
Related Allowance	11
Average Recorded Investment	$ 1

XML

Off Balance Sheet Activities - Outstanding Financial Instruments Whose Contract Amounts Represent Credit Risk (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Commitments to extend credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Concentration of Risk	$ 212,258	$ 201,891
Credit card arrangements [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Concentration of Risk	15,064	14,818
Standby letters of credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Concentration of Risk	$ 694	$ 1,567

XML

Loans - Analysis of Allowance for Credit Losses (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$ 5,357	$ 5,386
Charge Offs	(778)	(1,262)	(891)
Recoveries	298	374	286
Provision	1,191	858
Other Non-interest expense related to unfunded	44	1
Ending Balance	6,112	5,357	5,386
Ending balance: individually evaluated for impairment	387	516
Ending balance: collectively evaluated for impairment	5,725	4,841
Ending balance: loans acquired with deteriorated credit quality	2	1
FINANCING RECEIVABLES:
Ending balance, net of deferred fees	621,926	576,113
Ending balance: individually evaluated for impairment	1,843	2,440
Ending balance: collectively evaluated for impairment	620,083	573,673
Ending balance: loans acquired with deteriorated credit quality	526	540
Consumer Real Estate [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	257	368
Charge Offs	(168)	(147)
Recoveries	34	20
Provision	414	16
Ending Balance	537	257
Ending balance: individually evaluated for impairment	36	78
Ending balance: collectively evaluated for impairment	501	179
Ending balance: loans acquired with deteriorated credit quality	2	1
FINANCING RECEIVABLES:
Ending balance, net of deferred fees	97,550	92,438
Ending balance: individually evaluated for impairment	301	300
Ending balance: collectively evaluated for impairment	97,249	92,138
Ending balance: loans acquired with deteriorated credit quality	526	540
Agricultural Real Estate [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	131	113
Provision	53	18
Ending Balance	184	131
Ending balance: individually evaluated for impairment		9
Ending balance: collectively evaluated for impairment	184	122
FINANCING RECEIVABLES:
Ending balance, net of deferred fees	50,895	44,301
Ending balance: individually evaluated for impairment		88
Ending balance: collectively evaluated for impairment	50,895	44,213
Agricultural [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	326	290
Recoveries	44	5
Provision	177	31
Ending Balance	547	326
Ending balance: individually evaluated for impairment	25
Ending balance: collectively evaluated for impairment	522	326
FINANCING RECEIVABLES:
Ending balance, net of deferred fees	74,611	65,449
Ending balance: individually evaluated for impairment	25
Ending balance: collectively evaluated for impairment	74,586	65,449
Commercial Real Estate [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	2,107	1,749
Charge Offs	(229)	(164)
Recoveries	4	23
Provision	485	499
Ending Balance	2,367	2,107
Ending balance: individually evaluated for impairment	111	295
Ending balance: collectively evaluated for impairment	2,256	1,812
FINANCING RECEIVABLES:
Ending balance, net of deferred fees	270,188	248,893
Ending balance: individually evaluated for impairment	1,179	1,675
Ending balance: collectively evaluated for impairment	269,009	247,218
Commercial and Industrial [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	1,359	2,183
Charge Offs		(513)
Recoveries	20	141
Provision	42	(452)
Ending Balance	1,421	1,359
Ending balance: individually evaluated for impairment	204	134
Ending balance: collectively evaluated for impairment	1,217	1,225
FINANCING RECEIVABLES:
Ending balance, net of deferred fees	104,824	103,856
Ending balance: individually evaluated for impairment	327	377
Ending balance: collectively evaluated for impairment	104,497	103,479
Consumer [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	292	268
Charge Offs	(381)	(438)
Recoveries	196	185
Provision	216	277
Ending Balance	323	292
Ending balance: individually evaluated for impairment	11
Ending balance: collectively evaluated for impairment	312	292
FINANCING RECEIVABLES:
Ending balance, net of deferred fees	23,858	21,176
Ending balance: individually evaluated for impairment	11
Ending balance: collectively evaluated for impairment	23,847	21,176
Unfunded Loan Commitment & Letters of Credit [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	163	162
Other Non-interest expense related to unfunded	44	1
Ending Balance	207	163
Ending balance: collectively evaluated for impairment	207	163
Unallocated [Member]
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	722	253
Provision	(196)	469
Ending Balance	526	722
Ending balance: collectively evaluated for impairment	$ 526	$ 722

XML

Loans - Impaired Loans Classified as Troubled Debt Restructured (Detail) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014 Contract	Dec. 31, 2013 Contract
Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts Modified, Troubled Debt Restructurings	0	0
Pre- Modification Outstanding Recorded Investment	$ 0	$ 0
Post- Modification Outstanding Recorded Investment	0	0
Number of Contracts Modified, Troubled Debt Restructurings That Subsequently Defaulted	0	0
Recorded Investment	0	0
Agricultural Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts Modified, Troubled Debt Restructurings	0	0
Pre- Modification Outstanding Recorded Investment	0	0
Post- Modification Outstanding Recorded Investment	0	0
Number of Contracts Modified, Troubled Debt Restructurings That Subsequently Defaulted	0	0
Recorded Investment	0	0
Commercial and Industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts Modified, Troubled Debt Restructurings	0	0
Pre- Modification Outstanding Recorded Investment	0	0
Post- Modification Outstanding Recorded Investment	0	0
Number of Contracts Modified, Troubled Debt Restructurings That Subsequently Defaulted	0	0
Recorded Investment	$ 0	$ 0

XML

Fair Value of Financial Instruments - Impaired Loans and Other Real Estate (Detail) (Fair Value on Nonrecurring Basis [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Change in fair value of assets	$ (208)	$ (589)
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total	1,456	1,924
Change in fair value of assets	(168)	(525)
Residential [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total	21	964
Change in fair value of assets	(8)
Other real estate owned - commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total	23	1,127
Change in fair value of assets	(32)	(64)
Level 1 [Member] | Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total
Level 1 [Member] | Residential [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total
Level 1 [Member] | Other real estate owned - commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total
Level 2 [Member] | Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total
Level 2 [Member] | Residential [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total
Level 2 [Member] | Other real estate owned - commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total
Level 3 [Member] | Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total	1,456	1,924
Level 3 [Member] | Residential [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total	21	964
Level 3 [Member] | Other real estate owned - commercial [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on a nonrecurring basis, Total	$ 23	$ 1,127

XML

Deposits (Tables)

12 Months Ended

Dec. 31, 2014

Banking and Thrift [Abstract]

Time Deposits

Time deposits at December 31 consist of the following:

	(In Thousands)
	2014		2013
Time deposits under $100,000	$	113,903	$	135,998
Time deposits of $100,000 or more		81,597		100,362
	$	195,500	$	236,360

Scheduled Maturities for Time Deposits

At December 31, 2014 the scheduled maturities for time deposits are as follows:

	(In Thousands)
2015	$	97,439
2016		49,634
2017		19,586
2018		24,864
2019		3,053
thereafter		924
	$	195,500

XML

Securities - Gross Unrealized Losses, Aggregated by Investment Category and Length of Time (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Gross Unrealized Losses, Less Than Twelve Months	$ (32)	$ (4,611)
Fair Value, Less Than Twelve Months	8,900	164,278
Gross Unrealized Losses, Twelve Months and Over	(1,914)	(403)
Fair Value, Twelve Months and Over	123,852	4,598
U.S. Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Unrealized Losses, Less Than Twelve Months		(795)
Fair Value, Less Than Twelve Months		25,272
Gross Unrealized Losses, Twelve Months and Over	(440)
Fair Value, Twelve Months and Over	25,393
U.S. Government Agency [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Unrealized Losses, Less Than Twelve Months	(1)	(2,783)
Fair Value, Less Than Twelve Months	5,458	96,241
Gross Unrealized Losses, Twelve Months and Over	(1,310)	(403)
Fair Value, Twelve Months and Over	82,803	4,598
Mortgage-backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Unrealized Losses, Less Than Twelve Months		(574)
Fair Value, Less Than Twelve Months		23,171
Gross Unrealized Losses, Twelve Months and Over	(62)
Fair Value, Twelve Months and Over	7,900
State and Local Governments [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Unrealized Losses, Less Than Twelve Months	(31)	(459)
Fair Value, Less Than Twelve Months	3,442	19,594
Gross Unrealized Losses, Twelve Months and Over	(102)
Fair Value, Twelve Months and Over	$ 7,756

XML

Off Balance Sheet Activities

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Off Balance Sheet Activities

Note 14 – Off Balance Sheet Activities

Credit Related Financial Instruments

The Bank is a party to credit related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing need of its customers. These financial instruments include commitments to extend credit, Standby Letters of Credit, and Commercial Letters of Credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The Bank’s exposure to credit loss is represented by the contractual amount of these commitments. The Bank follows the same credit policies in making commitments as it does for on-balance-sheet instruments. The allowance for credit losses as it relates to unfunded loan commitments (AULC) is included under other liabilities. The AULC as of December 31, 2014 and 2013 was $207 thousand and $163 thousand, respectively.

At December 31, 2014 and 2013, the following financial instruments were outstanding whose contract amounts represent credit risk:

	(In Thousands)
	2014		2013
Commitments to extend credit	$	212,258	$	201,891
Credit card arrangements		15,064		14,818
Standby letters of credit		694		1,567

Commitments to extend credit, credit card arrangements and Standby Letters of Credit all include exposure to some credit loss in the event of nonperformance of the customer. The Bank’s credit policies and procedures for credit commitments and financial guarantees are the same as those for extensions of credit that are recorded in the financial statements. Due to the fact that these instruments have fixed maturity dates, and because many of them expire without being drawn upon, they generally do not present any significant liquidity risk to the Bank.

Collateral Requirements

To reduce credit risk related to the use of credit-related financial instruments, the Bank might deem it necessary to obtain collateral. The amount and nature of the collateral obtained is based on the Bank’s credit evaluation of the customer. Collateral held varies but may include cash, securities, accounts receivable, inventory, property, plant, and real estate.

Legal Contingencies

Various legal claims also arise from time to time in the normal course of business, which, in the opinion of management, will have no material effect on the Company’s consolidated financial statements.

XML

Quarterly Financial Data

12 Months Ended

Dec. 31, 2014

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Data

Note 19 – Quarterly Financial Data

Quarterly Financial Data – UNAUDITED

	(000’s omitted except per share data)
	Quarter Ended in 2014
	Mar 31			June 30			Sep 30			Dec 31
Summary of Income:
Interest income	$	8,159		$	8,304		$	8,471		$	8,519
Interest expense		944			970			895			907
Net Interest Income		7,215			7,334			7,576			7,612
Provision for loan loss		428			444			282			37
Net interest income after provision of loan loss		6,787			6,890			7,294			7,575
Other income (expense)		(3,955	)		(3,456	)		(3,818	)		(3,800	)
Net income before income taxes		2,832			3,434			3,476			3,775
Income taxes		874			881			1,002			1,114
Net income	$	1,958		$	2,553		$	2,474		$	2,661
Earnings per Common Share	$	0.42		$	0.55		$	0.54		$	0.57
Average common shares outstanding		4,637,172			4,626,309			4,621,298			4,627,338
	Quarter Ended in 2013
	Mar 31			June 30			Sep 30			Dec 31
Summary of Income:
Interest income	$	7,702		$	7,765		$	7,844		$	8,117
Interest expense		1,233			1,184			1,129			1,058
Net Interest Income		6,469			6,581			6,715			7,059
Provision for loan loss		167			112			303			276
Net interest income after provision for loan loss		6,302			6,469			6,412			6,783
Other income (expense)		(3,218	)		(2,958	)		(3,555	)		(3,632	)
Net income before income taxes		3,084			3,511			2,857			3,151
Income taxes		932			1,009			791			864
Net income	$	2,152		$	2,502		$	2,066		$	2,287
Earnings per common share	$	0.46		$	0.53		$	0.45		$	0.49
Average common shares outstanding		4,683,659			4,679,971			4,682,655			4,660,096

XML

Condensed Financial Statements of Parent Company - Statement of Income (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Income
Interest									$ 28,070	$ 24,978	$ 26,489
Interest Municipals									2,037	2,080	2,112
Total interest income	8,519	8,471	8,304	8,159	8,117	7,844	7,765	7,702	33,453	31,428	33,273
Income Before Income Taxes and Equity in Undistributed Earnings of Subsidiaries	3,775	3,476	3,434	2,832	3,151	2,857	3,511	3,084	13,517	12,603	13,692
Income Taxes	1,114	1,002	881	874	864	791	1,009	932	3,871	3,596	3,904
Net Income	2,661	2,474	2,553	1,958	2,287	2,066	2,502	2,152	9,646	9,007	9,788
Other Comprehensive Loss:
Unrealized gains (losses) on securities									1,158	(8,448)	417
Comprehensive Income									10,084	2,920	9,500
Farmers & Merchants State Bank [Member]
Income
Dividends from subsidiary									5,725	3,830	3,870
Interest										566	713
Interest Municipals									215	30
Total interest income									5,940	4,426	4,583
Operating Expenses									577	304	305
Income Before Income Taxes and Equity in Undistributed Earnings of Subsidiaries									5,363	4,122	4,278
Income Taxes									(196)	89	139
Income from operation before equity in undistributed earnings of subsidiary									5,559	4,033	4,139
Equity in undistributed earnings of Subsidiaries									4,087	4,974	5,649
Net Income									9,646	9,007	9,788
Other Comprehensive Loss:
Unrealized gains (losses) on securities									438	(6,087)	(288)
Comprehensive Income									$ 10,084	$ 2,920	$ 9,500

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Securities - Amortized Cost and Fair Value of Securities with Gross Unrealized Gains and Losses (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 247,819	$ 324,500
Gross Unrealized Gains	2,619	5,023
Gross Unrealized Losses	(1,946)	(5,014)
Estimated Market Value	248,492	324,509
U.S. Treasury [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	25,833	26,067
Gross Unrealized Losses	(440)	(795)
Estimated Market Value	25,393	25,272
U.S. Government Agency [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	120,154	174,772
Gross Unrealized Gains	391	1,386
Gross Unrealized Losses	(1,311)	(3,186)
Estimated Market Value	119,234	172,972
Mortgage-backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	29,067	44,638
Gross Unrealized Gains	557	728
Gross Unrealized Losses	(62)	(574)
Estimated Market Value	29,562	44,792
State and Local Governments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	72,765	79,023
Gross Unrealized Gains	1,671	2,909
Gross Unrealized Losses	(133)	(459)
Estimated Market Value	$ 74,303	$ 81,473

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Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2014

Fair Value Disclosures [Abstract]

Estimated Fair Values and Related Carrying or Notional Amounts

The estimated fair values, and related carrying or notional amounts, for on and off-balance sheet financial instruments as of December 31, 2014 and 2013, are reflected below.  

	(In Thousands)
	December 2014										December 2013
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3		Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and Cash Equivalents	$	24,295	$	24,295	$	24,295	$	—	$	—	$	19,263	$	19,263	$	19,263	$	—	$	—
Securities - available for sale		248,492		248,492		25,393		215,168		7,931		324,509		324,509		25,272		288,891		10,346
Other Securities		3,717		3,717		—		—		3,717		4,216		4,216		—		—		4,216
Loans, net		616,021		625,377		—		—		625,377		570,919		579,992		—		—		579,992
Interest receivable		3,578		3,578		—		—		3,578		3,694		3,694		—		—		3,694
Total Assets	$	896,103	$	905,459	$	49,688	$	215,168	$	640,603	$	922,601	$	931,674	$	44,535	$	288,891	$	598,248
Financial Liabilities:
Interest bearing Deposits	$	403,051	$	403,801	$	—	$	—	$	403,801	$	429,652	$	429,750	$	—	$	—	$	429,750
Non-interest bearing Deposits		164,009		164,009		—		164,009		—		110,452		110,452		—		110,452		—
Time Deposits		195,500		196,545		—		—		196,545		236,360		236,027		—		—		236,027
Total Deposits	$	762,560	$	764,355	$	—	$	164,009	$	600,346	$	776,464	$	776,229	$	—	$	110,452	$	665,777
Federal Funds purchased and Securities sold under agreement to repurchase		55,962		55,962		—		—		55,962		69,756		69,756		—		—		69,756
Federal Home Loan Bank advances		—		—		—		—		—		4,500		4,570		—		—		4,570
Interest payable		207		207		—		—		207		223		223		—		—		223
Dividends payable		965		965		—		965		—		967		967		—		967		—
Total Liabilities	$	819,694	$	821,489	$	—	$	164,974	$	656,515	$	851,910	$	851,745	$	—	$	111,419	$	740,326

Financial Assets Measured at Fair Value on Recurring Basis

The following summarizes financial assets measured at fair value on a recurring basis as of December 31, 2014 and December 31, 2013 segregated by level or the valuation inputs within the fair value hierarchy utilized to measure fair value:

($ in Thousands)	Quoted Prices in Active		Significant		Significant
December 31, 2014	Active Markets for Identical Assets (Level 1)		Observable Inputs (Level 2)		Observable Inputs (Level 3)
Assets-(Securities Available for Sale)
U.S. Treasury	$	25,393	$	—	$	—
U.S. Government agency		—		119,234		—
Mortgage-backed securities		—		29,562		—
State and local governments		—		66,372		7,931
Total Securities Available for Sale	$	25,393	$	215,168	$	7,931
($ in Thousands)	Quoted Prices in Active		Significant		Significant
December 31, 2013	Active Markets for Identical Assets (Level 1)		Observable Inputs (Level 2)		Observable Inputs (Level 3)
Assets-(Securities Available for Sale)
U.S. Treasury	$	25,272	$	—	$	—
U.S. Government agency		—		172,972		—
Mortgage-backed securities		—		44,792		—
State and local governments		—		71,127		10,346
Total Securities Available for Sale	$	25,272	$	288,891	$	10,346

Changes in the Level 3 Fair-Value Category of Which Unobservable Inputs

	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local Governments Tax-Exempt			State and Local Governments Taxable			State and Local Governments Total
Balance at January 1, 2014	$	8,802		$	1,544		$	10,346
Change in Market Value		(1,104	)		(251	)		(1,355	)
Purchases		—			—			—
Sales		—			—			—
Payments & Maturities		(1,060	)		—			(1,060	)
Balance at December 31, 2014	$	6,638		$	1,293		$	7,931

	(In Thousands)
	Fair Value Measurements Using Significant
	Unobservable Inputs (Level 3)
	State and Local Governments Tax-Exempt			State and Local Governments Taxable			State and Local Governments Total
Balance at January 1, 2013	$	14,863		$	1,545		$	16,408
Change in Market Value		(1,852	)		(1	)		(1,853	)
Purchases		519			—			519
Sales		—			—			—
Payments & Maturities		(4,728	)		—			(4,728	)
Balance at December 31, 2013	$	8,802		$	1,544		$	10,346

Impaired Loans and Other Real Estate

The following table presents impaired loans and other real estate owned as recorded at fair value:

	Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2014
($ in Thousands)	Balance at December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Change in fair value for twelve-month period ended Dec. 31,  2014
Impaired loans	$	1,456	$	—	$	—	$	1,456	$	(168	)
Other real estate owned - residential mortgages		21		—		—		21		(8	)
Other real estate owned - commercial		23		—		—		23		(32	)
Total change in fair value									$	(208	)
	Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2013
($ in Thousands)	Balance at December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Change in fair value for twelve-month period ended Dec. 31, 2013
Impaired loans	$	1,924	$	—	$	—	$	1,924	$	(525	)
Other real estate owned - residential mortgages		964		—		—		964		—
Other real estate owned - commercial		1,127		—		—		1,127		(64	)
Total change in fair value									$	(589	)

Quantitative Information about Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements

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

	Fair Value at December 31, 2014		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
State and political subdivision securities	$	7,931	Discounted Cash Flow	Credit strength of underlying project or entity / Discount rate	0-5%
Impaired Loans		1,456	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0-50%
Other real estate owned - residential		21	Appraisals	Discount to reflect current market	0-20%
Other real estate owned - commercial		23	Appraisals	Discount to reflect current market	0-20%
	Fair Value at December 31, 2013		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
State and political subdivision securities	$	10,346	Discounted Cash Flow	Credit strength of underlying project or entity / Discount rate	0-5%
Impaired Loans		1,924	Collateral based measurements	Discount to reflect current market conditions and ultimate collectability	0-50%
Other real estate owned - residential		964	Appraisals	Discount to reflect current market	0-20%
Other real estate owned - commercial		1,127	Appraisals	Discount to reflect current market	0-20%

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Consolidated Statement of Changes to Shareholders Equity (USD $) In Thousands, except Share data	Total	Common Stock [Member]	Treasury Stock [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income [Member]
Beginning balance at Dec. 31, 2011	$ 105,339	$ 12,361	$ (9,898)	$ 96,495	$ 6,381
Beginning balance, shares at Dec. 31, 2011		4,716,337
Net income	9,788			9,788
Other comprehensive income (loss)	(288)				(288)
Purchase of Treasury Stock	(894)		(894)
Purchase of Treasury Stock, shares		(42,144)
Issuance of 11,000, 11,000 and 13,250 shares of restricted stock (Net of Forfeitures - 1,135, 620 and 780) for the period ended 2012, 2013 and 2014 respectively, Amount	(37)	(235)	204	(6)
Issuance of 11,000, 11,000 and 13,250 shares of restricted stock (Net of Forfeitures - 1,135, 620 and 780) for the period ended 2012, 2013 and 2014 respectively, Shares		9,865
Stock-based compensation expense	217	217
Cash dividends declared - 0.78, 0.81 and 0.84 per share for the period ended 2012, 2013 and 2014 respectively	(3,636)			(3,636)
Ending balance at Dec. 31, 2012	110,489	12,343	(10,588)	102,641	6,093
Ending balance, shares at Dec. 31, 2012		4,684,058
Net income	9,007			9,007
Other comprehensive income (loss)	(6,087)				(6,087)
Purchase of Treasury Stock	(1,236)		(1,236)
Purchase of Treasury Stock, shares		(56,000)
Issuance of 11,000, 11,000 and 13,250 shares of restricted stock (Net of Forfeitures - 1,135, 620 and 780) for the period ended 2012, 2013 and 2014 respectively, Amount	(54)	(284)	213	17
Issuance of 11,000, 11,000 and 13,250 shares of restricted stock (Net of Forfeitures - 1,135, 620 and 780) for the period ended 2012, 2013 and 2014 respectively, Shares		10,380
Stock-based compensation expense	253	253
Cash dividends declared - 0.78, 0.81 and 0.84 per share for the period ended 2012, 2013 and 2014 respectively	(3,755)			(3,755)
Ending balance at Dec. 31, 2013	108,617	12,312	(11,611)	107,910	6
Ending balance, shares at Dec. 31, 2013		4,638,438
Net income	9,646			9,646
Other comprehensive income (loss)	438				438
Purchase of Treasury Stock	(576)		(576)
Purchase of Treasury Stock, shares		(23,570)
Issuance of 11,000, 11,000 and 13,250 shares of restricted stock (Net of Forfeitures - 1,135, 620 and 780) for the period ended 2012, 2013 and 2014 respectively, Amount	(2)	(322)	259	61
Issuance of 11,000, 11,000 and 13,250 shares of restricted stock (Net of Forfeitures - 1,135, 620 and 780) for the period ended 2012, 2013 and 2014 respectively, Shares		12,470
Stock-based compensation expense	232	232
Cash dividends declared - 0.78, 0.81 and 0.84 per share for the period ended 2012, 2013 and 2014 respectively	(3,862)			(3,862)
Ending balance at Dec. 31, 2014	$ 114,493	$ 12,222	$ (11,928)	$ 113,755	$ 444
Ending balance, shares at Dec. 31, 2014		4,627,338

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Fair Value of FInancial Instruments - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest-bearing deposits maturing date	90 days
Business Combination, cost incurred	$ 231,400
Business Combination, Borrowings outstanding	0
Carrying amounts of dividends payable, number of days	Forty days
Impaired loans categorized as Level 3	1,843,000	2,440,000
Specific allocation for impaired loans	387,000	516,000
Asset impairment charges	0
Federal Home Loan Bank of Indianapolis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Redemption period imposed on stock	5 years
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans categorized as Level 3	1,500,000	1,900,000
Fair Value on a Recurring Basis [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Specific allocation for impaired loans	$ 386,900	$ 516,100

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Securities

12 Months Ended

Dec. 31, 2014

Investments, Debt and Equity Securities [Abstract]

Securities

Note 3 – Securities

The amortized cost and fair value of securities, with gross unrealized gains and losses, follows:

	(In Thousands)
	2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
Available-for-Sale:
U.S. Treasury	$	25,833	$	—	$	(440	)	$	25,393
U.S. Government agency		120,154		391		(1,311	)		119,234
Mortgage-backed securities		29,067		557		(62	)		29,562
State and local governments		72,765		1,671		(133	)		74,303
Total available-for-sale securities	$	247,819	$	2,619	$	(1,946	)	$	248,492

	(In Thousands)
	2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
Available-for-Sale:
U.S. Treasury	$	26,067	$	—	$	(795	)	$	25,272
U.S. Government agency		174,772		1,386		(3,186	)		172,972
Mortgage-backed securities		44,638		728		(574	)		44,792
State and local governments		79,023		2,909		(459	)		81,473
Total available-for-sale securities	$	324,500	$	5,023	$	(5,014	)	$	324,509

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

1. The fair value of the security has significantly declined from book value.

2. A downgrade has occurred that lowered the credit rating to below investment grade (below Baa3 by Moody and BBB – by Standard and Poors.)

3. Dividends have been reduced or eliminated or scheduled interest payments have not been made.

4. The underwater security has longer than 10 years to maturity and the loss position had existed for more than 3 years.

5. Management does not possess both the intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value.

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

Information pertaining to securities with gross unrealized losses at December 31, 2014 and 2013, aggregated by investment category and length of time that individual securities have been in a continuous loss position follows:

	2014
	(In Thousands) Less Than Twelve Months					(In Thousands) Twelve Months & Over
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	—		$	—	$	(440	)	$	25,393
U.S. Government agency		(1	)		5,458		(1,310	)		82,803
Mortgage-backed securities		—			—		(62	)		7,900
State and local governments		(31	)		3,442		(102	)		7,756
Total available-for-sales securities	$	(32	)	$	8,900	$	(1,914	)	$	123,852

	2013
	(In Thousands) Less Than Twelve Months					(In Thousands) Twelve Months & Over
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	(795	)	$	25,272	$	—		$	—
U.S. Government agency		(2,783	)		96,241		(403	)		4,598
Mortgage-backed securities		(574	)		23,171		—			—
State and local governments		(459	)		19,594		—			—
Total available-for-sales securities	$	(4,611	)	$	164,278	$	(403	)	$	4,598

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

Sales of $57.9, $91.0, and $60.5 million for 2014, 2013, and 2012 respectively, generated gross realized gains and losses for the years ended December 31, as presented below:

	(In Thousands)
	2014			2013			2012
Gross realized gains	$	638		$	839		$	852
Gross realized losses		(144	)		(64	)		—
Net realized gains	$	494		$	775		$	852
Tax expense related to net realized gains	$	168		$	264		$	290

The net realized gain on sales and related tax expense is a reclassification out of accumulated other comprehensive income. The net realized gain is included in net gain on sale of securities available-for-sale and the related tax expense is included in income tax expense in the condensed consolidated statements of income and comprehensive income.

The amortized cost and fair value of debt securities at December 31, 2014, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	(In Thousands)
	Amortized Cost		Fair Value
One year or less	$	23,288	$	23,505
After one year through five years		157,000		156,781
After five years through ten years		31,333		31,470
After ten years		7,131		7,174
Total	$	218,752	$	218,930
Mortgage-backed securities		29,067		29,562
Total	$	247,819	$	248,492

Investments with a carrying value and fair value of $176.9 million at December 31, 2014 and $205.2 million at December 31, 2013 were pledged to secure public deposits and securities sold under repurchase agreements.

Other securities include Federal Home Loan Bank of Cincinnati and Farmer Mac stock as of December 31, 2014. Federal Home Loan Bank of Indianapolis stock which was acquired in the Knisely acquisition was completely redeemed in early 2013. The stock acquired had a five-year redemption period.

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Loans - Contractual Aging of Recorded Investment in Past Due Loans by Portfolio Classification of Loans (Detail) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	$ 841	$ 806
60-89 Days Past Due	270	2
Greater Than 90 Days	1,174	633
Total Past Due	2,285	1,441
Current	619,641	574,672
Total Financing Receivables	621,926	576,113
Recorded Investment > 90 Days and Accruing	0	0	0
Consumer Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	713	778
60-89 Days Past Due	50	0
Greater Than 90 Days	436	234
Total Past Due	1,199	1,012
Current	96,351	91,426
Total Financing Receivables	97,550	92,438
Recorded Investment > 90 Days and Accruing	0	0
Agricultural Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current	50,895	44,301
Total Financing Receivables	50,895	44,301
Recorded Investment > 90 Days and Accruing	0	0
Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	25
Total Past Due	25
Current	74,586	65,449
Total Financing Receivables	74,611	65,449
Recorded Investment > 90 Days and Accruing	0	0
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	78
60-89 Days Past Due	204
Greater Than 90 Days	709	373
Total Past Due	991	373
Current	269,197	248,520
Total Financing Receivables	270,188	248,893
Recorded Investment > 90 Days and Accruing	0	0
Commercial and Industrial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
60-89 Days Past Due	8
Greater Than 90 Days		26
Total Past Due	8	26
Current	104,816	103,830
Total Financing Receivables	104,824	103,856
Recorded Investment > 90 Days and Accruing	0	0
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	25	28
60-89 Days Past Due	8	2
Greater Than 90 Days	29
Total Past Due	62	30
Current	23,796	21,146
Total Financing Receivables	23,858	21,176
Recorded Investment > 90 Days and Accruing	$ 0	$ 0

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Earnings Per Share - Calculation of Basic Earnings Per Share (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Earnings Per Share [Abstract]
Net income	$ 2,661	$ 2,474	$ 2,553	$ 1,958	$ 2,287	$ 2,066	$ 2,502	$ 2,152	$ 9,646	$ 9,007	$ 9,788
Less: distributed earnings allocated to participating securities									(27)	(25)	(23)
Net earnings available to common shareholders									$ 9,619	$ 8,982	$ 9,765
Weighted average common shares outstanding including participating securities									4,628,178	4,676,547	4,695,876
Less: average unvested restricted shares									(32,211)	(30,618)	(29,888)
Weighted average common shares outstanding	4,627,338	4,621,298	4,626,309	4,637,172	4,660,096	4,682,655	4,679,971	4,683,659	4,595,967	4,645,929	4,665,988
Basic earnings per share	$ 0.57	$ 0.54	$ 0.55	$ 0.42	$ 0.49	$ 0.45	$ 0.53	$ 0.46	$ 2.08	$ 1.93	$ 2.08

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Premises and Equipment - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Property, Plant and Equipment [Abstract]
Depreciation Expenses	$ 1.3	$ 1.2	$ 1.2

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Nature of Operations

Nature of Operations

The Farmers & Merchants Bancorp, Inc. (the Company) through its bank subsidiary, The Farmers & Merchants State Bank (the Bank) provides a variety of financial services to individuals and small businesses through its offices in Northwest Ohio and Northeast Indiana.

Consolidation Policy

Consolidation Policy

The consolidated financial statements include the accounts of Farmers & Merchants Bancorp, Inc. and its wholly-owned subsidiaries, The Farmers & Merchants State Bank (the Bank), a commercial banking institution and Farmers & Merchants Risk Management, Inc. (the Captive), a Captive insurance company. All significant inter-company balances and transactions have been eliminated.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and the valuation of mortgage servicing rights, goodwill, available for sale investment securities, other real estate owned and impaired loans. Actual results could differ from those estimates.

The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. In connection with the determination of the estimated losses on loans, management obtains independent appraisals for significant collateral.

The Bank’s loans are generally secured by specific items of collateral including real property, consumer assets, and business assets. Although the Bank has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent on local economic conditions in the agricultural industry.

While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based on changes in local economic conditions. In addition regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the Bank to recognize additional losses based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans may change materially in the near term. However, the amount of the change that is reasonably possible cannot be estimated.

Cash and Cash Equivalents

Cash and Cash Equivalents

For purposes of the consolidated statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. This includes cash on hand, amounts due from banks, and federal funds sold. Generally, federal funds are purchased for one day periods.

Restrictions on Cash and Amounts Due from Banks

Restrictions on Cash and Amounts Due from Banks

The Bank is required to maintain average balances on hand with the Federal Reserve Bank. The aggregate reserve was $7.1 million for December 31, 2014 and it was $6.5 million for December 31, 2013. The Company and its subsidiaries maintain cash balances with high quality credit institutions. At times such balances may be in excess of the federally insured limits.

Securities

Securities

Debt securities are classified as available-for-sale. Securities available-for-sale are carried at fair value with unrealized gains and losses reported in other comprehensive income. Realized gains and losses on securities available for sale are included in other income (expense) and, when applicable, are reported as a reclassification adjustment, net of tax, in other comprehensive income (loss). Gains and losses on sales of securities are determined on the specific-identification method.

Declines in the fair value of securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. The related write-downs are included in earnings as realized losses.

Other Securities

Other Securities

Other Securities consists of Federal Home Loan Bank of Cincinnati and Indianapolis stock and Farmer Mac stock. The Federal Home Loan Bank of Indianapolis stock was completely redeemed during 2013. These stocks are carried at cost and are held to enable the Bank to conduct business with the entities. The Federal Home Loan Banks sell and purchase their stock at par. The Federal Home Loan Bank of Cincinnati stock is held as collateral security for all indebtedness of the Bank to the Federal Home Loan Bank. The Federal Home Loan Bank of Cincinnati is evaluated for impairment as conditions warrant.

Loans

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at the amount of unpaid principal, reduced by unearned discounts and deferred loan fees and costs, as well as, by the allowance for loan losses. Interest income is accrued on a daily basis based on the principal outstanding.

Generally, a loan is classified as nonaccrual and the accrual of interest income is generally discontinued when a loan becomes ninety days past due as to principal or interest and these loans are placed on a “cash basis” for purposes of income recognition. Management may elect to continue the accrual of interest when the estimated net realizable value of collateral is sufficient to cover the principal and accrued interest, and the loan is in the process of collection. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest receivable is charged against income.

Loan origination and commitment fees and certain direct loan origination costs are deferred and amortized as a net adjustment to the related loan’s yield. The Bank is generally amortizing these costs over the contractual life of such loans.

Allowance for Loan Losses

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses charged to income. Loans deemed to be uncollectable and changes in the allowance relating to loans are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based on management’s periodic review of the collectability of the loans in light of historical experiences, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective, as it requires estimates that are subject to revision as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. The unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial and agricultural loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

At 120 days delinquent, secured consumer loans are charged down to the value of the collateral, if repossession of the collateral is assured and/or in the process of repossession. Consumer mortgage loan deficiencies are charged down upon the sale of the collateral or sooner upon the recognition of collateral deficiency.

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

Large groups of homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank does not separately identify individual consumer loans for impairment, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

For more information regarding the actual composition and classification of loans involved in the establishment of the allowance for loan loss, please see Note 4 provided here with the notes to consolidated financial statements.

Loans Held for Sale

Loans Held for Sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized in a valuation allowance by charges to income.

Servicing Assets

Servicing Assets

Servicing assets are recognized as separate assets when rights are acquired through purchase or sale of financial assets. Capitalized servicing rights are reported in other assets and are amortized into noninterest expense in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as interest rates and terms. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market based assumptions. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the capitalized amount for the stratum. Fees received for servicing loans owned by investors are based on a percentage of the outstanding monthly principal balance of such loans and are included in operating income as loan payments are received. Costs of servicing loans are charged to expense as incurred.

Goodwill and other Intangible Assets

Goodwill and other Intangible Assets

Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed at least annually. If possible impairment is likely, the Bank will utilize the assistance of an independent third party for impairment and any such impairment is recognized in the period identified. The Bank considered the following qualitative factors to determine if impairment was likely: 1) the Bank continued to perform above peer and remains profitable with capital growth, 2) the Bank had improved asset quality and does not see any change in the trend, 3) the Bank had strong liquidity and capital positions, 4) in quantitative testing done by an independent source in 2014, the excess fair value of capital was $48 million or 50.16% over the carrying value and was nearly 12 times the value of the goodwill being carried and 5) the Bank was unaware of any likely circumstances that would indicate the fair value of the entity would be greatly decreased in the near future. Therefore, the Bank concluded it is unlikely impairment of Goodwill has occurred from the goodwill established from the Bank’s acquisition which occurred on December 31, 2007.

Other intangible assets consist of core deposit intangible assets arising from business acquisitions. They are initially measured at fair value and then are amortized on a straight line method over their estimated useful lives and evaluated for impairment.

Off Balance Sheet Instruments

Off Balance Sheet Instruments

In the ordinary course of business, the Bank has entered into commitments to extend credit, including commitments under credit card arrangements, commercial letters of credit and standby letters of credit. Such financial instruments are recorded when they are funded.

Foreclosed Real Estate

Foreclosed Real Estate

Foreclosed real estate held for sale is carried at the lower of fair value minus estimated costs to sell, or cost. Costs of holding foreclosed real estate are charged to expense in the current period, except for significant property improvements, which are capitalized. Valuations are periodically performed by management and an allowance is established by a charge to non-interest expense if the carrying value exceeds the fair value minus estimated costs to sell. Foreclosed real estate is classified as other real estate owned. The net income from operations of foreclosed real estate held for sale is reported in non-interest income. At December 31, the Bank’s holding of other real estate owned totaled approximately $1.1 and $2.1 million for 2014 and 2013 respectively.

Bank Premises and Equipment

Bank Premises and Equipment

Land is carried at cost. Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is based on the estimated useful lives of the various properties and is computed using straight line and accelerated methods. Costs for maintenance and repairs are charged to operations as incurred. Gains and losses on dispositions are included in current operations.

Federal Income Tax

Federal Income Tax

The Company’s income tax expense consists of the following components: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in tax expense. Based on management’s analysis, the Company did not have any uncertain tax positions as of December 31, 2014 and 2013. With a few exceptions, the Company is no longer subject to U.S. Federal, state or local examinations by tax authorities for years before 2011.

Earnings Per Share

Earnings Per Share

Basic earnings per share represent income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. See Note 12 for additional information.

Stock-Based Compensation

Stock-Based Compensation

The fair value of restricted common stock is their fair market value on the date of grant. The fair value of restricted stock is amortized as compensation expense on a straight-line basis over the vesting period of the grants. Compensation expense recognized is included in personnel expense in the consolidated statement of income

Comprehensive Income

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of comprehensive income.

The components of other comprehensive income and related tax effects are as follows:

	(In Thousands)
	2014			2013			2012
Net unrealized gain (loss) on available-for-sale securities	$	1,158		$	(8,448	)	$	417
Reclassification adjustment for gain on sale of available-for-sale securities		(494	)		(775	)		(852	)
Net unrealized gains (losses)		664			(9,223	)		(435	)
Tax effect		226			(3,136	)		(147	)
Other comprehensive income (loss)	$	438		$	(6,087	)	$	(288	)

Reclassification

Reclassification

Certain amounts in the 2013 and 2012 consolidated financial statements have been reclassified to conform with the 2014 presentation.

Subsequent Events

Subsequent Events

On January 16, 2015, the Company announced the authorization by its Board of Directors for the Company’s repurchase, either on the open market, or in privately negotiated transactions, of up to 200,000 shares of its outstanding common stock commencing January 16, 2015 and ending December 31, 2015.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” The amendments in this ASU provide guidance for the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The amendments in this ASU are expected to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments apply to all public entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this guidance did not have an impact on the Company’s results of operations or financial position.

In January 2014, the FASB issued ASU 2014-04, “Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” The amendments in this ASU reduce diversity in practice by clarifying when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. The amendments in this ASU clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this ASU are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. An entity can elect to adopt the amendments in this ASU using either a modified retrospective transition method or a prospective transition method. The Company does not expect that the adoption of this ASU will have an impact on the Company’s results of operations or financial position.

In August 2014, the FASB issued ASU 2014-14, “Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Classification of Certain Government – Guaranteed Mortgage Loans upon Foreclosure.” The amendments in this ASU require that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if (1) the loan has a government guarantee that is not separable from the loan before foreclosure; (2) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim; and (3) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The adoption of this guidance is not expected to have a material impact on the Company’s results of operations or financial position.

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Securities Sold Under Agreement to Repurchase - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Amortized Cost and Fair Value Debt Securities [Abstract]
Securities to be used as collateral for the underlying repurchase agreements	$ 65.3	$ 74.7

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2014

Earnings Per Share [Abstract]

Calculation of Basic Earnings Per Share

	Year Ended
	December 31, 2014			December 31, 2013			December 31, 2012
Earnings per share
Net income	$	9,646		$	9,007		$	9,788
Less: distributed earnings allocated to participating securities		(27	)		(25	)		(23	)
Net earnings available to common shareholders	$	9,619		$	8,982		$	9,765
Weighted average common shares outstanding including participating securities		4,628,178			4,676,547			4,695,876
Less: average unvested restricted shares		(32,211	)		(30,618	)		(29,888	)
Weighted average common shares outstanding		4,595,967			4,645,929			4,665,988
Basic earnings per share	$	2.08		$	1.93		$	2.08

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Related Party Transactions

12 Months Ended

Dec. 31, 2014

Related Party Transactions [Abstract]

Related Party Transactions

Note 13 – Related Party Transactions

In the ordinary course of business, the Bank has granted loans to senior officers and directors and their affiliated companies amounting to $1.5 and $5.9 million at December 31, 2014 and 2013, respectively. New loans approved during 2014 were $428 thousand. During 2014, subsequent advances totaled $10.1 million and payments of $10.6 million were received. The difference in related borrowings amounted to $502 thousand, net reduction. Deposits of directors, executive officers and companies in which they have a direct or indirect ownership as of December 31, 2014 and 2013, amounted to $26.1 million and $22.3 million, respectively.