What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2026-03-13 compared with 2025-03-17 · 865 added, 1187 removed, 958 unchanged (68% of the section changed)

63 unchanged sentences

As of December 31, 2025, our loan and lease portfolio was comprised of 58.46% fixed rate and 41.54% variable rate loans.

The vast majority of our variable loans

also contain interest rate floors which are designed to mitigate the impact of decreases in interest rates as index rates drop.

An additional component of managing our

interest rate risk is the use of loan floors when structuring our variable loan products.

At loan origination, a loan floor rate, typically equal to or slightly below the initial rate on the loan, is established.

This is particularly beneficial

in a declining interest rate environment.

The following table presents the projected change in the Company’s net interest income over the next twelve months and the economic value of equity at December 31, 2025, that would occur upon an immediate change in

7 unchanged sentences

December 31, 2025

Financial Statements and Supplementary

Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm ( Crowe LLP ,

Sacramento, California , PCAOB ID:

Report of Independent Registered Public Accounting Firm ( Crowe LLP , Sacramento, California , PCAOB ID:

Report of Independent Registered Public Accounting Firm (Eide Bailly LLP, San Ramon, California, PCAOB ID:

10 unchanged sentences

Lodi, California

Opinions on the

Financial Statements and Internal Control over Financial Reporting

We have audited

the accompanying consolidated balance sheet of Farmers & Merchants Bancorp (the “Company”) as of December 31, 2024, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for the

period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in

Internal Control – Integrated Framework:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Farmers & Merchants Bancorp (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income,

changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements").

We also have audited the Company’s internal

control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion,

the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the period ended December 31, 2024 in

conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on

criteria established in Internal Control – Integrated Framework:

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its

cash flows for each of the years in the two-year period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects,

effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by COSO.

Basis for Opinions

The Company’s

management is responsible for these 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

Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audit.

public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules

and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our

audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud,

and whether effective internal control over financial reporting was maintained in all material respects.

the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included

examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the

overall presentation of the financial statements.

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 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 opinions.

Definition and

Limitations of Internal Control Over Financial Reporting

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.

Critical Audit

audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are

material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole,

and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for

Credit Losses on Loans and Leases – Reasonable and Supportable Forecasts - Refer to Notes 1 and 4 to the Financial Statements

T he allowance for credit losses on loans and leases is an accounting estimate of expected credit losses over the estimated life of the Company’s loan and lease portfolio, measured at amortized cost, to be presented at the

net amount expected to be collected.

The Company’s management is responsible for these 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 Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal

control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in

accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of

material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the financial statements.

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.

Definition and Limitations of Internal Control Over Financial Reporting

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.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion

on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses on Loans and Leases –Reasonable and Supportable Forecasts - Refer to Notes 1 and 4 to the Financial Statements

The allowance for credit losses on loans and leases is an accounting estimate of expected credit losses over the estimated life of the Company’s loan and lease portfolio, measured at amortized cost, to be presented

at the net amount expected to be collected.

The allowance for credit losses on loans and leases was $76,375,000 as of December 31, 2025.

The allowance for credit losses on loans and leases under the current expected credit loss methodology required by ASC 326 is based on relevant available information from internal

and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

The economic forecast used in the current expected credit loss methodology includes consideration of national, regional, and local economic

expectations, and is applied as a top of model adjustment through the use of management’s qualitative factors framework, incorporating their maximum loss rate.

We identified the auditing of the reasonable and supportable forecasts used in the allowance for credit losses on loans and leases as a critical audit matter because of the

significant auditor judgment and audit effort needed, including the need to involve more experienced audit personnel to evaluate the significant judgments made by management in determination of the forecasts.

procedures we performed to address this critical audit matter included:

The allowance for credit losses on loans and leases under the current expected credit loss methodology required by ASC 326 is based on relevant available information from internal and external sources, relating to

past events, current conditions, and reasonable and supportable forecasts.

The economic forecast used in the current expected credit loss methodology includes consideration of national, regional, and local economic expectations, and is applied

as a qualitative adjustment through the use of management’s qualitative factors framework, utilizing a linear range of patterns based on historical losses.

We identified the auditing of the reasonable and supportable forecasts used in the allowance for credit losses on loans and leases as a critical audit matter because of the significant auditor judgment and audit

effort needed, including the need to involve more experienced audit personnel to evaluate the significant judgments made by management in determination of the forecasts.

The primary procedures we performed to address this critical audit matter included:

Testing the effectiveness of controls over the determination of reasonable and supportable forecasts, including controls addressing:

9 unchanged sentences

/s/ Crowe LLP

We have served as the Company’s auditor

We have served as the Company's auditor since 2024.

Sacramento, California

March 13, 2026

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders Farmers &

Merchants Bancorp

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

To the Board of Directors and Shareholders

Farmers & Merchants Bancorp

Lodi, California

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Farmers & Merchants Bancorp and subsidiaries (the “Company”) as of December 31, 2023, and the related consolidated statements of income, comprehensive

income, changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the

consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023, and the consolidated results of its operations and its cash flows for each of the years in the

two- year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for the year ended December 31, 2023 of Farmers & Merchants Bancorp and subsidiaries (the “Company”),

and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated results of its operations and its cash

flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public

accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are

free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management,

as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with

the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities

and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material

misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included

examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as

evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Eide Bailly LLP

3 unchanged sentences

FARMERS & MERCHANTS BANCORP

CONSOLIDATED BALANCE SHEETS

BALANCE SHEETS

(Dollars in thousands, except share and per share amounts)

28 unchanged sentences

SHAREHOLDERS' EQUITY

Preferred shares, no par value, 1,000,000 shares authorized and, no ne issued or outstanding

Common shares, $ 0.01 par value, 7,500,000 authorized, 699,798 and 747,971 issued and outstanding at

December 31, 2024 and 2023, respectively

Preferred shares, no par value, 1,000,000 shares authorized and, none issued or outstanding

Common shares, $ 0.01 par value, 7,500,000 authorized, 728,560 and 699,798 issued and 697,904 and 699,798 outstanding at December 31, 2025 and 2024, respectively

Additional paid-in capital

1 unchanged sentence

Accumulated other comprehensive loss, net of taxes

Treasury stock, at cost;

30,656 shares at December 31, 2025 and 0 shares at December 31, 2024

TOTAL SHAREHOLDERS' EQUITY

2 unchanged sentences

FARMERS & MERCHANTS BANCORP

Consolidated Statements of Income

STATEMENTS OF INCOME

Year Ended December 31,

17 unchanged sentences

Gain on BOLI death benefit

Net gain/(loss) on sale of securities available-for-sale

Net gain/(loss) on sale of securities

Net gain on deferred compensation benefits

2 unchanged sentences

Salaries and employee benefits

Net gain on deferred compensation benefits

Data processing

1 unchanged sentence

Professional services

Net gain on deferred compensation benefits

Total non-interest expense

5 unchanged sentences

FARMERS & MERCHANTS BANCORP

Consolidated Statements of Comprehensive Income

STATEMENTS OF COMPREHENSIVE INCOME

Year Ended December 31,

1 unchanged sentence

Other comprehensive income

Unrealized (losses)/gains on available-for-sale securities

Unrealized gains/(losses) on available-for-sale securities

Reclassification adjustment for (gains)/losses on available-for-sale securities

Amortization of unrecognized loss on securities transferred to held-to-maturity

Net unrealized (losses)/gains on securities

Income tax benefit/(expense)

Other comprehensive (loss)/income, net of tax

Net unrealized gains/(losses) on securities

Income tax (expense)/benefit

Other comprehensive income/(loss), net of tax

Total comprehensive income

1 unchanged sentence

FARMERS & MERCHANTS BANCORP

Consolidated Statements of Changes in Shareholders’ Equity

CONSOLIDATED STATEMENTS OF

CHANGES IN SHAREHOLDERS’ EQUITY

(Dollars in thousands, except share and per share amounts)

2 unchanged sentences

Balance as of January 1, 2023

Other comprehensive loss, net of tax

Cash dividends declared ($ 16.15

Repurchase of common stock

Balance as of December 31, 2022

Other comprehensive income, net of tax

Cash dividends declared ($ 17.10

Cash dividends declared ($ 17.10 per share)

Repurchase of common stock

2 unchanged sentences

Other comprehensive loss, net of tax

Cash dividends declared ($ 18.10

Cash dividends declared ($ 18.10 per share)

Repurchase of common stock

Balance as of December 31, 2024

Other comprehensive income, net of tax

Issuance of restricted stock awards

Forfeiture of restricted stock awards

Stock based compensation expense

Cash dividends declared ($ 19.35 per share)

Repurchase of common stock

Purchase of treasury stock

Balance as of December 31, 2025

See accompanying notes to the consolidated financial statements.

FARMERS & MERCHANTS BANCORP

Consolidated Statements of Cash Flows

STATEMENTS OF

Year Ended December 31,

4 unchanged sentences

Depreciation and amortization

Net (accretion) amortization of securities premiums and discounts

Net accretion of securities premiums and discounts

Stock based compensation expenses

Increase in cash surrender value of BOLI

Gain on BOLI death benefit

Decrease (Increase) in deferred income taxes, net

(Increase)/Decrease in deferred income taxes, net

Net realized (gain)/loss on sale of securities available-for-sale

3 unchanged sentences

Cash flows from investing activities:

Net increase in loans and leases held for investment

Net decrease/(increase) in loans and leases held for investment

Purchase of available-for-sale securities

12 unchanged sentences

Cash dividends paid

Net cash used in share repurchase of common stock

Net cash (used in) provided by financing activities

Net cash used in share repurchase program

Purchase of treasury stock

Net cash provided by/(used in) financing activities

Net change in cash and cash equivalents

5 unchanged sentences

Supplemental disclosures of non-cash transactions:

Net change in unrealized gains/(losses) on securities available-for-sale

Net change in unrealized (losses)/gains on securities available-for-sale

See accompanying notes to the consolidated financial statements.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Summary of

Significant Accounting Policies

Nature of Operations and basis of consolidation — Farmers & Merchants Bancorp (the “Company” or “FMCB”) is a Delaware corporation headquartered in Lodi, California and is the bank holding company for Farmers & Merchants Bank of Central California

(the “Bank” or “F&M Bank”).

The Company operates all business activities through the Bank, which was organized in 1916.

Note 1—Summary of Significant Accounting Policies

The Company operates all business activities through the Bank, which was organized in August 1916.

F&M Bank is a California state-chartered bank.

F&M Bank operates under the supervision of the California

Department of Financial Protection and Innovation (“DFPI”), and its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”).

F&M Bank operates under the supervision of the California Department of Financial Protection and Innovation (“DFPI”), and its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”).

F&M Bank is not a member of the Federal Reserve System;

however, FMCB operates as a bank holding

company under the Federal Bank Holding Company Act of 1956, subject to and under the supervision of and examination by the Federal Reserve and is the sole shareholder of F&M Bank.

Both FMCB and F&M Bank are subject to periodic examination

by these applicable federal and state regulatory agencies and file periodic reports and other information with the agencies.

however, FMCB operates as a bank holding company under the Federal Bank Holding Company Act of 1956, subject to and under the supervision of and examination by the Federal Reserve and is the sole shareholder of F&M Bank.

Both FMCB and F&M Bank are subject to periodic examination by these applicable federal and state regulatory agencies and file periodic reports and other information with the agencies.

The Company considers F&M Bank to be its sole operating segment.

2 unchanged sentences

F&M Bancorp, Inc.

was created in March 2002 to protect the name F

During 2002, the Company completed a fictitious name filing in California to begin using the streamlined name “F & M Bank” as part of a larger effort to enhance the Company’s image and build brand name recognition.

2003, the Company formed a wholly owned subsidiary, FMCB Statutory Trust I, for the sole purpose of issuing Trust Preferred Securities and related subordinated debentures.

In accordance with generally accepted accounting principles in the United

States (“GAAP”), FMCB Statutory Trust I is a non-consolidated subsidiary.

Through its network of 30 banking offices and 3 free-standing ATMs, F&M Bank emphasizes personalized service along with a broad range of banking services to businesses and individuals located in

the service areas of its offices.

was created in March 2002 to protect the name F&M Bank.

During 2002, the Company

completed a fictitious business name filing in California to begin using the streamlined name “F&M Bank” as part of a larger effort to enhance the Company’s image and build brand name recognition.

In December 2003, the Company formed a wholly

owned subsidiary, FMCB Statutory Trust I, for the sole purpose of issuing Trust Preferred Securities and related subordinated debentures.

In accordance with generally accepted accounting principles in the United States (“GAAP”), FMCB Statutory

Trust I is a non-consolidated subsidiary.

Through its network of 30 banking offices and 3 free-standing ATMs, F&M Bank emphasizes personalized service along with a broad range of banking services to businesses and individuals located in the service areas of its offices.

Although the Company focuses on marketing its services to small and medium-sized businesses, a broad range of retail banking services are also made available to the local consumer market.

F&M Bank branches are

located through the mid Central Valley of California, including Sacramento, San Joaquin, Solano, Stanislaus and Merced counties and the east region of the San Francisco Bay Area including Napa, Alameda and Contra Costa counties.

F&M Bank provides a broad complement of lending products, including commercial, commercial real estate, real estate construction, agribusiness, consumer, credit card,

residential real estate loans, and equipment leases.

F&M Bank branches are located through the mid Central Valley of California, including Sacramento, San Joaquin, Solano, Stanislaus and Merced counties and the east region of the San Francisco Bay Area including Napa, Alameda and Contra Costa counties.

F&M Bank provides a broad complement of lending products, including commercial, commercial real estate, real estate construction, agribusiness, consumer, credit card, residential real estate loans, and

equipment leases.

Commercial products include term loans, leases, lines of credit and other working capital financing and letters of credit.

Financing products for individuals include automobile financing, lines

of credit, residential real estate, home improvement and home equity lines of credit.

Financing products for individuals include automobile financing, lines of credit, residential real

estate, home improvement and home equity lines of credit.

F&M Bank also offers a wide range of deposit products.

These include checking, savings, money market, time certificates of deposit, individual retirement accounts and online

banking services for both business and personal accounts.

These include checking, savings, money market, time certificates of deposit, individual retirement accounts and online banking services for both business

and personal accounts.

F&M Bank offers a wide range of specialized services designed for the needs of its commercial accounts.

These services include a credit card program for merchants, lockbox and

other collection services, account reconciliation, investment sweep, on-line account access, and electronic funds transfers by way of domestic and international wire and automated clearinghouse.

These services include a credit card program for merchants, lockbox and other collection services, account

reconciliation, investment sweep, on-line account access, and electronic funds transfers by way of domestic and international wire and automated clearinghouse.

F&M Bank makes investment products available to customers, including mutual funds and annuities.

These investment products are offered through a third-party, which employs

investment advisors to meet with and provide investment advice to the Company’s customers.

These investment products are offered through a third-party, which employs investment advisors to meet with and

provide investment advice to the Company’s customers.

FARMERS & MERCHANTS BANCORP

1 unchanged sentence

Note 1—Summary of Significant Accounting Policies—Continued

The consolidated financial statements of the Company include the accounts of Farmers & Merchants Bancorp, a bank holding company incorporated in the State of Delaware and its wholly owned subsidiary, Farmers

& Merchants Bank of Central California .

All intercompany transactions and balances have been eliminated.

Use of estimates — The preparation of consolidated

financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions.

These estimates and assumptions 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 reported period.

The consolidated financial statements of the Company include the accounts of Farmers & Merchants Bancorp and its wholly owned subsidiary, Farmers & Merchants Bank of Central California.

All intercompany

transactions and balances have been eliminated.

Use of estimates — The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions.

These estimates and assumptions 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 reported period.

Actual results could differ from those estimates.

Reclassifications — Certain amounts in the prior

years’ financial statements have been reclassified to conform to the current year’s presentation.

Reclassifications — Certain amounts in the prior years’ financial statements have been reclassified to conform to the current year’s presentation.

There was no impact on net income or retained earnings as a result of any reclassification.

Cash and cash equivalents — Cash and cash

equivalents consist of cash on hand, amounts due from banks, interest bearing deposits, and federal funds sold, all of which have original maturities of three months or less.

Cash and cash equivalents — Cash and cash equivalents consist of cash on hand, amounts due from banks, interest-bearing deposits, and federal funds sold, all of which have original maturities of three months or less.

The Company places its cash with high credit quality institutions.

amounts on deposit fluctuate and, at times, exceed the insured limit by the FDIC, which potentially subjects the Company to credit risk.

The amounts on deposit fluctuate and, at times, exceed the insured limit by the FDIC, which potentially subjects the Company to credit risk.

For these instruments, the carrying amount is a reasonable estimate of fair value.

Statement of cash flows — For purposes of presentation on the

consolidated statements of cash flows, “cash and cash equivalents” are defined as those amounts included in “Cash and cash equivalents” on the consolidated balance sheets .

Investment securities — Investment securities are classified as held-to-maturity (“HTM”)

when the Company has the positive intent and ability to hold the securities to maturity.

Investment securities are classified as available-for-sale (“AFS”) when the Company has the intent of holding the security for an indefinite period of time,

but not necessarily to maturity.

Statement of cash flows — For purposes of presentation on the consolidated statements of cash flows, "cash and cash equivalents" are defined as those amounts included in

"Cash and cash equivalents" on the consolidated balance sheets.

Investment securities — Investment securities are classified as held-to-maturity (“HTM”) when the Company has the positive intent and ability to hold the securities to maturity.

Investment securities are classified as available-for-sale (“AFS”) when the Company has the intent of holding the security for an indefinite period of time, but not necessarily to maturity.

The Company determines the appropriate classification at the time of purchase, and periodically thereafter.

Investment securities classified as HTM are carried at amortized cost.

Investment securities

classified as AFS are reported at fair value.

Investment securities classified as AFS are reported at fair value.

Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities.

Debt securities classified as HTM are carried at cost, net of the

allowance for credit losses – securities, adjusted for amortization of premiums and discounts to the earliest callable date.

Debt securities classified as HTM are carried at cost, net of the allowance for credit losses – securities, adjusted for amortization of premiums and discounts to the earliest callable date.

Debt securities classified as AFS are measured at fair value.

Unrealized holding gains and losses on debt securities

classified as AFS are excluded from earnings and are reported net of tax as accumulated other comprehensive income (or loss) (“AOCI”), a component of shareholders’ equity, until realized.

When AFS securities, specifically identified, are sold,

the unrealized gain or loss is reclassified from AOCI to non-interest income.

Unrealized holding gains and losses on debt securities classified as AFS are excluded from earnings and are reported net of tax as accumulated other comprehensive income (or loss) (“AOCI”), a component of shareholders’ equity, until realized.

When AFS securities, specifically identified, are sold, the unrealized gain or loss is reclassified from AOCI to non-interest income.

Allowance for credit losses — Securities — Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type.

The Company’s HTM portfolio

contains securities issued by U.S.

The Company’s HTM portfolio contains securities issued by U.S.

government entities and agencies and municipalities.

The Company uses industry historical credit loss information adjusted for current conditions to establish the allowance for credit losses on its HTM municipal

bond portfolio.

The Company uses industry historical credit loss information adjusted for current conditions to establish the allowance for credit losses on its HTM municipal bond portfolio.

Further information regarding our policies and methodology used to estimate the allowance for credit losses on HTM securities is presented in Note 2 – Investment Securities.

For AFS investment securities in an unrealized loss position, the Company first assesses whether it intends to sell, or is more likely than not that it will be required to sell the security before recovery of its

FARMERS & MERCHANTS BANCORP

1 unchanged sentence

Note 1—Summary of Significant Accounting Policies—Continued

For AFS investment securities in an unrealized loss position, the Company first assesses whether it intends to sell, or is more likely than not that it will be required to sell

the security before recovery of its amortized cost basis.

If the Company intends to sell the security or it is more likely than not that the Company will be required to sell the security before recovering its cost basis, the entire impairment loss

would be recognized in earnings.

If the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security, the Company evaluates whether the decline in fair value has resulted

from credit losses or other factors.

In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically

related to the security, among other factors.

If the Company intends to sell the security or it is more likely than not that the Company will be required to sell the security before recovering its cost basis, the entire impairment loss would be

recognized in earnings.

credit losses or other factors.

to the security, among other factors.

If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security.

cash flows are discounted by the current effective interest rate.

Projected cash

flows are discounted by the current effective interest rate.

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit

3 unchanged sentences

Changes in the allowance for credit losses-securities are recorded as provision for (or reversal of) credit losses.

Losses are charged against the allowance when management

believes the non-collectability of a security is confirmed or when either criteria regarding intent of requirement to sell is met.

The Company has elected the practical expedient not to measure an allowance for credit losses for accrued interest

The Company has also made the election that all interest accrued but ultimately not received is reversed against interest income.

Non-marketable equity securities — Non-marketable

equity securities primarily consist of Federal Home Loan Bank (“FHLB”) stock.

Losses are charged against the allowance when management believes the non-collectability of a

security is confirmed or when either criteria regarding intent of requirement to sell is met.

The Company has elected the practical expedient not to measure an allowance for credit losses for accrued interest receivables.

The Company has also

made the election that all interest accrued but ultimately not received is reversed against interest income.

Non-marketable equity securities — Non-marketable equity securities primarily consist of Federal Home Loan Bank (“FHLB”) stock.

FHLB stock is restricted because such stock may only be sold to the FHLB at its par value.

Due to the restrictive terms, and the lack of a readily determinable market

value, FHLB stock is carried at cost.

Due to the restrictive terms, and the lack of a readily determinable market value, FHLB stock is carried at cost.

The investments in FHLB stock are required investments related to the Bank’s borrowings from FHLB.

1 unchanged sentence

government does not guarantee these obligations, and each of the regional FHLBs are jointly and severally liable for repayment of each other’s debt.

Loans and leases held for investment — Loans that

management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balance adjusted for any charge-offs, the allowance for credit losses on loan and leases, any

deferred fees or costs on originated loans and unamortized premiums or discounts on acquired loans.

Loans and leases held for investment — Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balance adjusted for any charge-offs, the allowance for credit losses on loan and leases, any deferred fees or costs on originated loans and unamortized premiums or discounts on acquired loans.

Interest income is accrued on the unpaid principal balance.

Loan origination fees, net of certain direct origination costs, are deferred and

recognized as an adjustment of the related loan yield using the effective interest method.

Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the effective interest method.

Interest on loans is accrued based upon the principal amount outstanding.

Company has elected the practical expedient to exclude all accrued interest receivable from all required disclosures of amortized cost.

Additionally, an election was made not to measure an allowance for credit losses for accrued interest

The Company has elected the practical expedient to exclude all accrued interest receivable from all required disclosures of amortized cost.

Additionally, an election was made not to measure an allowance for credit losses for accrued interest receivables.

The Company has also made the election that all interest accrued but ultimately not received is reversed against interest income.

Non-Accrual Loans and Leases — Accrual of interest on loans and leases is generally discontinued when a loan or lease becomes contractually past due by 90 days or more with respect to interest or principal.

When loans and leases are 90

days past due, but in management’s judgment are well secured and in the process of collection, they may not be classified as non-accrual.

When a loan or lease is placed on non-accrual status, all interest previously accrued but not collected is

Income on such loans and leases is then recognized only to the extent that cash is received and where the future collection of principal is probable.

When loans and leases are 90 days past due, but in management's judgment are well secured and in the process of collection, they may not be classified as non-accrual.

When a loan or lease is placed on non-accrual status, all interest previously accrued but not collected is reversed.

Income on such loans and

FARMERS & MERCHANTS BANCORP

1 unchanged sentence

Note 1—Summary of Significant Accounting Policies—Continued

Modifications for Borrowers Experiencing Financial Difficulty — The Company may renegotiate the terms of existing loans for a variety of reasons.

When refinancing or restructuring a loan, the Company evaluates where the

borrower is experiencing financial difficulty.

In making this determination, the Company considers whether the borrower is currently in default on any of its debt.

In addition, the Company evaluates whether it is probable that the borrower

would be in payment default on any of its debt in the foreseeable future without the modification and if the borrower (without the current modification) could obtain equivalent financing from another creditor at a market rate for similar

leases is then recognized only to the extent that cash is received and where the future collection of principal is probable.

Modifications for Borrowers Experiencing Financial Difficulty — The Company may renegotiate the terms of existing loans

for a variety of reasons.

When refinancing or restructuring a loan, the Company evaluates where the borrower is experiencing financial difficulty.

In making this determination, the Company considers whether the borrower is currently in default

on any of its debt.

In addition, the Company evaluates whether it is probable that the borrower would be in payment default on any of its debt in the foreseeable future without the modification and if the borrower (without the current

modification) could obtain equivalent financing from another creditor at a market rate for similar debt.

Modifications of loans to borrowers in these situations may indicate that the borrower is facing financial difficulty.

Modifications of loans to borrowers experiencing financial difficulty that are in the form of principal forgiveness,

interest rate reductions, other-than-insignificant payment delays, or a term extension (or a combination thereof) require disclosure.

The Company’s disclosures are included in Note 4 “Loans and Leases.”

Credit Quality Indicators — The Company assigns a risk rating to all loans and leases and periodically performs detailed reviews of all such

loans and leases over a certain threshold to identify credit risks and assess overall collectability.

For smaller balance loans and leases, such as consumer and residential real estate, a credit grade is established at inception, and then

updated only when the loan or lease becomes contractually delinquent or when the borrower requests a modification.

For larger balance loans, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the

industries in which borrowers operate and the fair values of collateral securing these loans and leases.

These credit quality indicators are used to assign a risk rating to each individual loan or lease.

These risk ratings are also subject to

examination by independent specialists engaged by the Company.

The risk ratings can be grouped into five major categories, defined as follows:

Pass — A pass loan or lease is a strong

credit with no existing or known potential weaknesses deserving of management’s close attention.

This category also includes “Watch” loans, which is a loan with an emerging weakness in either the individual credit or industry that requires

additional attention.

A credit may also be classified Watch if cash flows have not yet stabilized, such as in the case of a development project.

Modifications of

loans to borrowers experiencing financial difficulty that are in the form of principal forgiveness, interest rate reductions, other-than-insignificant payment delays, or a term extension (or a combination thereof) require disclosure.

Company’s disclosures are included in Note 4 “Loans and Leases.”

Credit Quality Indicators — The Company assigns a risk rating to all loans and leases and periodically performs detailed reviews of all such loans and leases over a certain threshold to identify credit risks and assess overall collectability.

For smaller balance

loans and leases, such as consumer and residential real estate, a credit grade is established at inception, and then updated only when the loan or lease becomes contractually delinquent or when the borrower requests a modification.

balance loans and leases, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which borrowers operate and the fair values of collateral securing these loans and leases.

quality indicators are used to assign a risk rating to each individual loan or lease.

These risk ratings are also subject to examination by independent specialists engaged by the Company.

The risk ratings can be grouped into five major

categories, defined as follows:

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

This category also

includes “Watch” loans, which is a loan with an emerging weakness in either the individual credit or industry that requires additional attention.

A credit may also be classified Watch if cash flows have not yet stabilized, such as in the case of

a development project.

Special mention — A special mention loan or lease has potential weaknesses that deserve management's close attention.

If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the

loan or lease or in the Company’s credit position at some future date.

Special mention loans and leases are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Substandard — A substandard loan or lease is not adequately protected by the current financial condition and paying capacity of the borrower or the value of the collateral pledged, if any.

Loans or leases classified as

substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.

Well-defined weaknesses include a project’s lack of marketability, inadequate cash flow or collateral support,

failure to complete construction on time or the project’s failure to fulfill economic expectations.

They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful — Loans or leases classified doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the

weaknesses make collection or liquidation in full, based on currently known facts, conditions and values, highly questionable or improbable.

uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or lease or in the Company's credit position at some future date.

Special mention loans and leases are not adversely classified and do not

expose the Company to sufficient risk to warrant adverse classification.

Substandard — A substandard loan or lease is not adequately protected by the current financial condition and paying capacity of the

borrower or the value of the collateral pledged, if any.

Loans or leases classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.

Well-defined weaknesses include a project's lack of

marketability, inadequate cash flow or collateral support, failure to complete construction on time or the project's failure to fulfill economic expectations.

They are characterized by the distinct possibility that the Company will sustain some

loss if the deficiencies are not corrected.

Doubtful — Loans or leases classified doubtful have all the weaknesses inherent in those classified as substandard

with the added characteristic that the weaknesses make collection or liquidation in full, based on currently known facts, conditions and values, highly questionable or improbable.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1—Summary of Significant Accounting

Policies—Continued

Note 1—Summary of Significant Accounting Policies—Continued

Loss — Loans or leases classified as loss are considered uncollectible.

Once a loan or lease becomes delinquent and repayment becomes

questionable, the Company will address collateral shortfalls with the borrower and attempt to obtain additional collateral.

If this is not forthcoming and payment in full is unlikely, the Company will estimate its probable loss and immediately charge-off

some or all of the balance.

Allowance for Credit Losses — Loans and Leases — On January 1, 2022, the Company adopted

ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments , as amended, which replaced the incurred loss methodology that delayed recognition

until it was probable a loss had been incurred with the current expected credit losses methodology that is referred to as CECL.

Once a loan or lease becomes delinquent and

repayment becomes questionable, the Company will address collateral shortfalls with the borrower and attempt to obtain additional collateral.

If this is not forthcoming and payment in full is unlikely, the Company will estimate its probable loss

and immediately charge-off some or all of the balance.

Allowance for credit losses — Loans and Leases — On January 1, 2022, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments , as amended, which replaced the incurred loss methodology that delayed recognition until it was probable a loss had been incurred with the current expected credit losses methodology that is referred to as CECL.

Both the FASB Staff Q&A Topic 326, No.

1 and the federal financial institution regulatory agencies (“Financial

Institution Letter FIL-17-2019”), along with the Securities and Exchange Commission, have confirmed that smaller, less complex organizations are not required to implement complex models, developed by outside vendors to calculate current

expected credit losses.

1 and the federal financial institution regulatory agencies (“Financial Institution Letter FIL-17-2019”), along with the Securities and Exchange Commission, have confirmed that smaller, less complex organizations are not required to implement complex models, developed by outside vendors to calculate current expected credit losses.

Accordingly, in adopting ASU 2016-13 (Topic 326) Management determined that the Weighted Average Remaining Maturity (“WARM”) methodology was most appropriate given the Company’s size and complexity.

Under the WARM methodology, lifetime losses are calculated by determining the

remaining life of the loan pool, and then applying a loss rate over the remaining life of the loan pool.

Under the WARM methodology, lifetime losses are calculated by determining the remaining life of the loan pool, and then applying a loss rate over the remaining life of the loan pool.

The methodology considers historical loss experience to estimate credit losses for the remaining balance of the loan pool.

The calculated

loss rate is applied to the contractual term, (adjusted for prepayments), to determine the loan pools current expected credit losses.

The Company’s methodology is set forth in a formal policy and takes into consideration the need for a valuation allowance for loans evaluated on a collective (pool) basis, which have similar risk

characteristics as well as allowances to individual loans that do not share similar risk characteristics.

The methodology for determining the allowance for credit losses (“ACL”) on loans and leases is considered a critical accounting policy by

management because of the high degree of judgment involved.

The calculated loss rate is applied to the contractual term, (adjusted for prepayments), to determine the loan pools current expected credit losses.

The Company’s methodology is set forth in a formal policy and takes into consideration the need for a valuation allowance for loans evaluated on a collective (pool) basis, which have similar risk characteristics as

well as allowances to individual loans that do not share similar risk characteristics.

The methodology for determining the allowance for credit losses (“ACL”) on loans and leases is considered a critical accounting policy by management because of

the high degree of judgment involved.

The subjectivity of the assumptions used and the potential for changes in the economic environment could result in changes to the amount of the recorded ACL.

Among the significant

estimates required to establish the ACL are:

Among the significant estimates required to

establish the ACL are:

(i) a weighted average loss estimate categorized by loan segmentation;

(ii) average duration calculations in order to assess the loss factors over the life of the loan segment;

(iii) application of a

reasonable and supportable forecast based on macro- and micro-economic factors expected to influence losses;

(iii) application of a reasonable and

supportable forecast based on macro- and micro-economic factors expected to influence losses;

(iv) value of collateral and strength of borrowers;

and (v) the determination of the qualitative loss factors.

All of these estimates are

susceptible to significant change.

All of these estimates are susceptible to

significant change.

The Company extends loans and leases to commercial and consumer customers primarily in Central California.

13 unchanged sentences

Significant risk characteristics related to the residential real estate segment include the borrowers’ financial wherewithal to service the mortgages and the value of the

property collateralizing the loans.

Significant risk characteristics related to the consumer loan segment include the financial condition of the borrowers and the value of collateral securing the loans.

FARMERS & MERCHANTS BANCORP

1 unchanged sentence

Note 1—Summary of Significant Accounting Policies—Continued

collateralizing the loans.

Significant risk characteristics related to the consumer loan segment include the financial condition of the borrowers and the value of collateral securing the loans.

The ACL is a valuation account that is deducted from the amortized cost basis of loans and leases to present the net amount expected to be collected on the loans.

The provision

for credit losses reflects the amount required to maintain the ACL at an appropriate level based upon management’s evaluation of the adequacy of the current expected credit losses.

The Company increases its ACL by charging provisions for credit

losses on its consolidated statement of income.

The provision for credit losses reflects the amount

required to maintain the ACL at an appropriate level based upon management’s evaluation of the adequacy of the current expected credit losses.

The Company increases its ACL by charging provisions for credit losses on its consolidated statement of

Losses related to specific assets are applied as a reduction of the carrying value of the assets and charged against the ACL when management believes a loan balance is uncollectable.

Recoveries on

previously charged off loans are credited to the ACL.

Recoveries on previously charged off loans are credited

Management estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions, and economic forecasts.

Management evaluates the reasonable and supportable

forecasts over the expected duration of the loan portfolio segments which ranges from approximately 6 months to 3.5 years.

Historical credit loss experience, which is based on peer information, provides the basis for the estimation of expected credit

Adjustments to historical loss information are made, using qualitative factors, when management expects current conditions and economic forecasts to differ from the conditions that existed for the period over which historical information

was evaluated.

The ACL is maintained at a level sufficient to provide for expected credit losses over the life of the loan based on evaluating historical credit loss experience and making adjustments to historical loss information for differences

in the specific risk characteristics in the current loan portfolio.

These factors include, among others, changes in the size and composition of the loan portfolio, differences in underwriting standards, delinquency rates, and current economic

Management evaluates the reasonable and supportable forecasts over the expected duration of the loan portfolio segments which ranges from approximately 6 months to 3.5 years.

Historical credit loss experience, which is based on peer information, provides the basis for the estimation of expected credit losses.

These factors include, among others, changes in the size and composition of the loan portfolio, differences in underwriting standards, delinquency rates, and current economic conditions.

Management incorporates reasonable and supportable information in order to calculate the ACL.

This includes the ability to reliably forecast and document exogenous events that

may affect the credit performance of the Company’s loan portfolio.

Management utilizes the seventeen loan segments used in

preparing regulatory Call Reports to segment its portfolio and to extract the relevant information needed to calculate its ACL.

This includes the ability to reliably forecast and document exogenous events that may affect the credit performance of

the Company’s loan portfolio.

Management utilizes the seventeen loan segments used in preparing regulatory Call Reports to segment its portfolio and to extract the relevant information needed to calculate its ACL.

This allows management the ability to obtain historical loss information for itself as well as its peer groups.

Additionally, management’s third party ALM application also utilizes a similar loan segmentation in calculating weighted average remaining life and duration which includes estimated prepayments.

Management uses the duration of each loan segment to estimate the remaining life

of loans to ensure that the model covers credit losses over the expected life of such loans .

Management uses the duration of each loan segment to estimate the remaining life of loans to ensure that the model covers credit losses over the expected life of such loans.

The foundation of CECL modeling is the ability to estimate expected credit losses over the lifetime of a loan.

Management must use relevant available information about past events (e.g.

historical losses)

current conditions, and economic forecasts about future conditions.

historical losses) current

conditions, and economic forecasts about future conditions.

Historical annual loss rates serve as the starting point to estimate expected credit losses.

Management uses a “through-the-cycle” historical credit loss experience as its

baseline for historical credit losses.

third quarter of 2024 the representative period used for the full economic credit cycle was the period from 2009 to 2023 for all loan segments.

In the third quarter of 2024, the representative period was updated to be from the first quarter of

2008 to the fourth quarter of 2017 for all segments except farmland and agriculture for which the first quarter of 1985 to the fourth quarter of 1994 was used.

These updated periods were deemed to be more comparable to a typical economic cycle as

recent years were impacted by significant federal government stimulus in response to the effects of the COVID-19 pandemic.

Additionally, due to the nature of the 1985 economic downturn and the specific impact that had on the farmland and

agricultural lenders, we believe this is more comparable for the farmland and agricultural loan segments.

Management uses a “through-the-cycle” historical credit loss experience as its baseline for

historical credit losses.

The representative period used for the full economic cycle is the first quarter of 2008 to the fourth quarter of 2017 for all segments except farmland and agriculture for which the first quarter of 1985 to the fourth

quarter of 1994 was used.

Additionally, due to the nature of the 1985 economic downturn and the specific impact that had on the farmland and agricultural lenders, management believes this is more comparable for the farmland and agricultural loan

FARMERS & MERCHANTS BANCORP

1 unchanged sentence

Note 1—Summary of Significant Accounting Policies—Continued

Management has collected historical loss information on its own loan and lease portfolio as well as peer group information by the seventeen loan segments over this time horizon using information available from the Federal regulators using FFIEC call report data for all segments except for farmland and

agricultural loan segments, which utilize Federal Reserve Economic Data (FRED).

Federal regulators have placed the Company into a peer group of banks with assets between $ 3 billion to $ 10 billion.

This peer group segmentation includes

approximately 200 banks nationally.

This peer group segmentation includes approximately 200 banks nationally.

This peer group is similar in asset size and concentration with the exception of the agricultural portfolio as the Company is the 19 th largest agricultural lender in the country.

As a result, none of the banks in the above national

peer group have an agricultural concentration similar to the Company.

Therefore, for purposes of historical losses, the Company uses the asset size peer group loss information for all loan segments except farmland and agricultural loans which

uses a national peer group regardless of asset size.

As a result, none of the banks in the above national peer group have an agricultural concentration similar to the Company.

Therefore, for purposes of historical losses, the Company uses the asset size peer group loss information for all loan segments except farmland and agricultural loans which uses a national peer group regardless of asset size.

Using these peer groups, the model calculates the mean historical loss rate over the respective economic credit cycles described above for both the Company and its peer groups.

third quarter of 2024, the Company did use its own historical loss information for the farmland and agricultural loan segments, however this was changed to accommodate the new historical loss period discussed in the previous paragraph.

Additionally, prior to the third quarter of 2024, the mean historical loss rates derived in the above process were then adjusted by a standard deviation calculation based on management’s reasonable and supportable forecasts.

However, in the

third quarter of 2024 the standard deviation calculation was removed and replaced with economic forecasts which include consideration of national, regional, and local economic expectations, and are applied as a top of model adjustment through

the use of management’s qualitative factors framework, incorporating their maximum loss rate which management believes reduces the extent of management judgments in determination of the forecast.

In addition to the quantitative calculations described above, management employs the use of qualitative factors as defined by the Interagency Policy Statement on Allowance for Credit Losses (“SR 20-12”).

considers qualitative or environmental factors that are likely to cause estimated credit losses associated with our existing portfolio to differ from historical loss experience, as defined in the Interagency guidance, including but not limited to:

Changes in international, national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments.

in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses.

Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses.

Changes in the nature and volume of the portfolio and in the terms of loans.

5 unchanged sentences

The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the institution’s existing portfolio.

The Company uses a risk setting scorecard approach which is applied to each loan portfolio segment to capture all risks across the various qualitative factors above utilizing a linear range of potential loss

patterns to ensure potential losses are appropriately supported through historical losses.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1—Summary of Significant Accounting

Policies—Continued

Prior to the third quarter of 2024, the additional expected credit losses from qualitative factors associated with specific

idiosyncratic risks relied upon specific data intensive inputs and calculations and generally relied upon more subjective inputs as part of the calculations resulting in a cumbersome and complex process.

In the third quarter of 2024, in an effort

to improve the process, while reducing the extent of management judgments, management implemented a risk setting scorecard approach which was applied to each loan portfolio segment to capture all risks across the various qualitative factors above

utilizing a linear range of potential loss patterns to ensure potential losses are appropriately supported through historical losses.

As highlighted above, the Company made updates to certain assumptions and processes in the calculation of the ACL during the third

quarter of 2024 including the forecast, economic credit cycle, the peer groups and the qualitative factor calculations process.

The Company applied these updates to the current period and all prior periods presented on the consolidated balance

sheets and noted that the updates had no material impact to the Company’s consolidated financial statements.

Note 1—Summary of Significant Accounting Policies—Continued

Other real estate owned — Other real estate owned, is expected to be sold and is comprised of properties no longer utilized for business operations and property acquired through foreclosure in satisfaction of indebtedness.

These properties are recorded at

fair value less estimated selling costs upon acquisition.

Revised estimates to the fair value less cost to sell are reported as adjustments to the carrying amount of the asset, provided that such adjusted value is not in excess of the carrying

amount at acquisition.

These properties are recorded at fair value less estimated selling costs upon acquisition.

Revised estimates to the fair value less cost to sell are reported as adjustments to the carrying amount of the asset, provided that such adjusted value is not in excess of the carrying amount at acquisition.

Initial losses on properties acquired through full or partial satisfaction of debt are treated as credit losses and charged to the allowance for credit losses at the time of acquisition.

Subsequent declines in value from

the recorded amounts, routine holding costs, and gains or losses upon disposition, if any, are included in non-interest expense as incurred.

Fair value estimates — We measure some of our assets and liabilities on a fair value basis.

Fair value is the price that would be

received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

To increase consistency and comparability in fair value measurements, we prioritize valuation inputs in accordance with a three-level hierarchy.

We prioritize quoted prices in active markets and minimize reliance on unobservable inputs when possible.

When observable market prices are not available, fair value is estimated using

modeling techniques requiring professional judgment to estimate the appropriate fair value.

We believe we use assumptions that market participants would consider in pricing the asset or the liability.

Changes in market conditions may reduce the

availability of quoted prices or observable data.

See Note 11 “Fair Value” for further information regarding the use of fair value estimates.

Subsequent declines in value from the recorded amounts, routine holding costs, and gains or losses upon disposition, if any, are included in non-interest expense as incurred.

Fair value estimates — The Company measures some of our assets and liabilities on a fair value basis.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

To increase consistency and comparability in fair value measurements, management prioritizes valuation inputs in accordance with a three-level hierarchy.

The Company prioritizes quoted prices in active markets and minimizes reliance on unobservable inputs when possible.

When observable market prices are not available, fair value is estimated using modeling techniques requiring professional judgment to estimate the appropriate fair value.

The Company uses assumptions that market participants would consider in pricing the asset or the liability.

Changes in market conditions may reduce the availability of quoted prices or observable data.

See Note 10 “Fair Value” for further information regarding the use of fair value estimate s.

Premises and equipment — Land is carried at cost.

12 unchanged sentences

Bank-owned life insurance (“BOLI”) — The Bank has purchased life insurance policies.

These policies provide protection against the adverse financial effects that could result from

the death of a key employee and provide tax-exempt income to offset expenses associated with certain employee benefit plans.

These policies provide protection against the adverse financial effects that could result from the death of a key employee and provide tax-exempt income to offset expenses associated with certain employee benefit plans.

It is the Bank’s intent to hold these policies as a long-term investment;

however, there may be an income tax impact if

the Bank chooses to surrender certain policies.

however, there may be an income tax impact if the Bank chooses to surrender certain policies.

Although the lives of individual current or former management-level employees are insured, the Bank is the owner and sole or partial beneficiary.

BOLI is carried at the cash surrender value (“CSV”)

of the underlying insurance contract.

BOLI is carried at the cash surrender value (“CSV”) of the underlying insurance contract.

Changes in the CSV and any death benefits received in excess of the CSV are recognized as non-interest income.

Goodwill — Goodwill represents the excess of the

purchase considerations paid over the fair value of the assets acquired, net of the fair values of liabilities assumed in a business combination and is not amortized but is reviewed annually as of December 31, or more frequently as current

circumstances and conditions warrant, for impairment.

Goodwill — Goodwill represents the excess of the purchase considerations paid over the fair value of the assets acquired, net of the fair values of liabilities assumed in a business combination and is not amortized but is reviewed annually as of December 31, or more frequently as current circumstances and conditions warrant, for impairment.

An assessment of qualitative factors is completed to determine if it is more likely than not that, the fair value of a reporting unit is less than its carrying amount.

If the qualitative

analysis concludes that further analysis is required, then a quantitative impairment test would be completed.

If the qualitative analysis concludes that further analysis is required, then a quantitative impairment test would be completed.

The quantitative goodwill impairment compares the reporting unit's estimated fair values, including goodwill, to its carrying amount.

the carrying amount exceeds its reporting unit’s fair value, then an impairment loss would be recognized as a charge to earnings but is limited by the amount of goodwill allocated to that reporting unit.

Other intangible assets — Other intangible assets

consist primarily of core deposit intangibles (“CDI”), which are amounts recorded in business combinations or deposit purchase transactions related to the value of transaction-related deposits and the value of the client relationships associated

with the deposits.

If the carrying amount exceeds its reporting unit’s fair value, then an impairment loss would be recognized as a charge to earnings but is limited by the amount of goodwill allocated to that reporting unit.

Other intangible assets — Other intangible assets consist primarily of core deposit intangibles (“CDI”), which are amounts recorded in business combinations or deposit purchase transactions related to the value of transaction-related deposits and the value of the client relationships associated with the deposits.

Core deposit intangibles are amortized over the estimated useful lives of such deposits.

These assets are reviewed at least annually for events or circumstances that could affect their recoverability.

These events could include

loss of the underlying core deposits, increased competition or adverse changes in the economy.

These events could include loss of the underlying core deposits, increased competition or adverse changes in the economy.

The amortization of our CDI is recorded in other non-interest expense.

1 unchanged sentence

impairment losses are recorded in other non-interest expense to reduce the carrying amount of the assets.

Right of use lease asset & lease liability — Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”), establishes a right of use model that requires a lessee to record a right

of use asset and a lease liability for all leases with terms longer than 12 months.

We record an operating lease right of use (“ROU”) asset and an operating lease liability (lease liability) for operating leases with a lease term greater than

Right of use lease asset & lease liability — Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”), establishes a right of use model that requires a lessee to record a right of use asset and a lease liability for all leases with terms longer than 12 months.

The Company records an operating lease right of use (“ROU”) asset and an operating lease liability (lease liability) for operating leases with a lease term greater than 12 months.

The ROU asset and lease liability are recorded in other assets and other liabilities, respectively, in the consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease

liabilities represent our obligation to make lease payments arising from the lease.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

Accordingly, ROU assets

are reduced by tenant improvement allowances from property owners plus any prepaid rent.

We do not separate lease and non-lease components of contracts.

As most of our leases do not provide an implicit rate, we generally use our incremental

borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date.

Accordingly, ROU assets are reduced by tenant improvement allowances from property owners plus any prepaid rent.

The Company does not separate lease and non-lease components of contracts.

As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date.

The Company leases retail space and office space under operating leases.

Most leases require the Company to pay real estate taxes, maintenance, insurance and other similar

costs in addition to the base rent.

Most leases require the Company to pay real estate taxes, maintenance, insurance and other similar costs in addition to the base rent.

Certain leases also contain lease incentives, such as tenant improvement allowances and rent abatement.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1—Summary of Significant Accounting

Policies—Continued

Many of our leases contain various provisions for increases in rental rates, based either on changes in the published Consumer Price Index or a predetermined escalation schedule,

which are factored into our determination of lease payments when determinable.

Note 1—Summary of Significant Accounting Policies—Continued

Many of our leases contain various provisions for increases in rental rates, based either on changes in the published Consumer Price Index or a predetermined escalation schedule, which are factored into our

determination of lease payments when determinable.

A majority of the leases provide the Company with the option to extend the lease term one or more times following expiration of the initial term.

The ROU asset and lease

liability terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

The ROU asset and lease liability terms may

include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Off-balance sheet credit related financial instruments — In the ordinary course of business, the Company 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.

Allowance for credit losses - unfunded loan commitments — An allowance for credit losses - unfunded loan commitments is maintained at a level that, in the opinion of management, is adequate to absorb current expected credit losses associated with the life of the Company’s commitments to lend

funds under existing agreements such as letters or lines of credit.

The Company uses a

methodology for determining the allowance for credit losses - unfunded loan commitments that applies the same loan segmentation and loss rate to each pool as the funded exposure adjusted for probability of funding.

The Company also analyzes the estimated utilization rates based upon an average from the trailing 4 quarters and then applies the same historical loss rates used for the outstanding amounts to determine the

appropriate reserve.

However, given that a utilization rate represents a difference between the funded portion quarter to quarter, management analyzes the utilized balances of the

commitments for a trailing 4 quarters in order to assess the maximum advance rate variance over the year.

Such financial instruments are recorded when they are funded.

The Company uses a methodology for determining the allowance for credit losses - unfunded loan commitments that applies the same loan segmentation and loss rate to each pool as the funded exposure adjusted for probability of funding.

However, given that a utilization rate represents a difference between the funded portion quarter to quarter, management analyzes the utilized balances of the commitments for a trailing 4 quarters in order to assess the maximum advance rate variance over the year.

The utilization rates represent the max variance for each loan category within the last 4 quarters.

In order to get an accurate

depiction of the utilization rate.

In order to get an accurate depiction of the utilization rate.

Draws on unfunded loan commitments that are considered uncollectible are charged to the allowance for credit losses on off-balance sheet exposures.

Provisions for credit losses - unfunded loan

commitments are recognized in the provision for credit losses, and added to the allowance for credit losses - unfunded loan commitments, which is included in other liabilities in the consolidated balance sheets.

Prior to the first quarter of 2023 , the provision for credit-losses – unfunded loan commitments was recognized in non-interest expense.

Revenue from contracts with customers — The Company records revenue from contracts with customers in accordance with ASC Topic 606, “Revenue

from Contracts with Customers” (“Topic 606”) .

Under Topic 606, the Company must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price

to the performance obligations in the contract, and recognize revenue when (or as) the Company satisfies a performance obligation.

Significant revenue has not been recognized in the current reporting period that results from performance

obligations satisfied in previous periods.

The Company’s primary sources of revenue are derived from interest and dividends earned on loans, investment securities, and other financial instruments that

are not within the scope of Topic 606.

The Company has evaluated the nature of its contracts with customers and determined that further disaggregation of revenue from contracts with customers into more granular categories beyond what is presented

in the Consolidated Statements of Income is not necessary.

Provisions for credit losses - unfunded loan commitments are recognized in the provision for credit losses, and added to the allowance for credit losses - unfunded loan commitments, which is included in other liabilities in the consolidated balance sheets.

Revenue from contracts with customers — The Company records revenue from contracts with customers in accordance with ASC Topic 606, “Revenue from Contracts with Customers” (“Topic 606”) .

Under Topic 606, the Company must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) the Company satisfies a performance obligation.

Significant revenue has not been recognized in the current reporting period that results from performance obligations satisfied in previous periods.

The Company’s primary sources of revenue are derived from interest and dividends earned on loans, investment securities, and other financial instruments that are not within the scope of Topic 606.

Income is not necessary.

The Company generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed;

charged either on

a periodic basis or based on activity.

Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is limited judgment involved in applying Topic 606 that significantly affects the

determination of the amount and timing of revenue from contracts with customers.

charged either on a periodic basis or based on

Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is limited judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing

of revenue from contracts with customers.

FARMERS & MERCHANTS BANCORP

1 unchanged sentence

Note 1—Summary of Significant Accounting Policies—Continued

Income taxes — Deferred income tax assets and deferred income tax

liabilities represent the tax effect of temporary differences between financial reporting and tax reporting measured at enacted tax rates in effect for the year in which the differences are expected to reverse.

The Company recognizes only the

impact of tax positions that, based on their technical merits, are more likely than not to be sustained upon an audit by the taxing authority.

Developing the provision for income taxes, including the effective tax rate and analysis of potential tax exposure items, if any, requires significant judgment and expertise in

federal and state income tax laws, regulations and strategies, including the determination of deferred income tax assets and liabilities and any estimated valuation allowances deemed necessary to value deferred income tax assets.

Judgments and tax

strategies are subject to audit by various taxing authorities.

While the Company believes it has no significant uncertain income tax positions in the consolidated financial statements, adverse determinations by these taxing authorities could have a

Income taxes — Deferred income tax assets and deferred income tax liabilities represent the tax effect of temporary differences between financial reporting and tax reporting measured at enacted tax rates in effect for the year in which the differences are expected to reverse.

The Company recognizes only the impact of tax positions that, based on their technical merits, are more likely than not to be sustained upon an audit by the taxing authority.

Developing the provision for income taxes, including the effective tax rate and analysis of potential tax exposure items, if any, requires significant judgment and expertise in federal and state income tax laws,

regulations and strategies, including the determination of deferred income tax assets and liabilities and any estimated valuation allowances deemed necessary to value deferred income tax assets.

Judgments and tax strategies are subject to audit

by various taxing authorities.

While the Company believes it has no material uncertain income tax positions in the consolidated financial statements as of December 31, 2025 and 2024, adverse determinations by these taxing authorities could have a

material adverse effect on the consolidated balance sheets, statements of income, or cash flows.

Basic and diluted earnings per common share — Basic earnings per common share amounts are computed by dividing net income by the weighted average number of common shares outstanding for the

There are no common stock equivalent shares.

Therefore, there is no difference between presentation of diluted and basic

earnings per common share.

Comprehensive income — Comprehensive income includes net income and changes in fair value of its available-for-sale investment securities and amortization of net unrealized gains or losses on

securities transferred from available-for-sale to held-to-maturity, net of related taxes.

Basic and diluted earnings per common share — Basic earnings per common share amounts are computed by dividing net income by the weighted average number of common shares outstanding for the period.

Diluted earnings per common share is computed using the weighted average number of shares determined for the basic earnings per common share computation plus the dilutive effects of outstanding restricted stock awards using the treasury stock method.

Shares are excluded from the computations of diluted earnings per share when their inclusion has an anti-dilutive effect.

Comprehensive income — Comprehensive income includes net income and changes in fair value of its available-for-sale investment securities and amortization of net unrealized gains or losses on securities transferred from available-for-sale to held-to-maturity, net of related taxes.

Stock based compensation — The Company recognizes compensation cost based on the fair value of the equity instruments issued.

The expense measures the cost of employee services received in exchange for stock based on the grant-date fair value of the award and recognizes the cost over the vesting period for all awards which is based on a service condition ranging from one to four years .

The grant date fair value of restricted stock awards is calculated using a volume weighted average price over a 30 -day period as of the grant date.

The impact of forfeitures on stock-based compensation expense is recognized as forfeitures occur.

Derivatives — The Company offers interest rate swap products to certain loan customers to allow them to hedge the risk of rising interest rates on their variable-rate loans.

When such products are issued, the Company also enters into an offsetting swap with institutional counterparties to eliminate the interest rate risk to the Company.

These back-to-back swap agreements, which generate fee income for the Company, are intended to offset each other.

The Company retains the credit risk of the original loan.

The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the client plus a fee.

These swaps are not designated as accounting hedges and are recorded at fair value in "Other assets" and "Accrued interest payable and other liabilities" in the consolidated balance sheets.

The changes in fair value are recorded in "Noninterest income - Other income" in the consolidated statements of income.

Segment reporting — The Company is a holding company for the Bank, which offers a wide array of products and services to its customers.

Pursuant to its banking strategy, emphasis is placed on

building relationships with its customers, as opposed to building specific lines of business.

The Company is not organized around discernible lines of business, but rather operates as an integrated unit to customize solutions for its customers

with business line emphasis and product offerings changing over time as customer needs and demands change.

Operations are managed, and financial performance is evaluated on a Company-wide basis by the Chief Executive Officer (“CEO”) who is the chief operating decision maker

Pursuant to its banking strategy, emphasis is placed on building relationships with its customers, as opposed to building specific lines of business.

The Company is not organized around discernible lines of business, but rather operates as an integrated unit to customize solutions for its customers with business line emphasis and product offerings changing over time as

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1—Summary of Significant Accounting Policies—Continued

customer needs and demands change.

Operations are managed, and financial performance is evaluated on a Company-wide basis by the Chief Executive Officer (“CEO”) who is the chief operating decision maker (“CODM”).

The CODM evaluates the financial performance of the Company by evaluating revenues, significant expenses, and budget to actual results in setting the Company’s strategic plan and initiatives.

The CODM uses revenues to evaluate product

pricing and significant expenses to assess performance and evaluate return on assets and return on equity.

The CODM uses revenues to evaluate product pricing and significant expenses to assess performance and evaluate return on assets and return on equity.

The CODM uses consolidated net income to benchmark the Company against its competitors.

The benchmarking analysis coupled with monitoring

of budget to actual results are used in determining discretionary compensation.

The benchmarking analysis coupled with monitoring of budget to actual results are used in determining discretionary compensation.

Loans, leases, and investments provide the revenues in the banking operation.

Interest expense, provisions for credit losses, and salaries and employee benefits

provide the significant expenses in the banking operation.

Interest expense, provisions for credit losses, and salaries and employee benefits provide the significant expenses in the banking operation.

Discrete financial information is not available other than on a Company-wide basis.

Accordingly, all of the operations of the Company are considered by management to be aggregated in

one reportable operating segment.

Loss contingencies — Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an

amount or range of loss can be reasonably estimated.

Accordingly, all of the operations of the Company are considered by management to be aggregated in one reportable operating segment.

Loss contingencies — Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.

Management does not believe there are any such loss contingencies that will have a material and adverse effect on the consolidated financial statements.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1—Summary of Significant Accounting Policies—Continued

Adoption of New Accounting Standards — The

Accounting Standards Codification (“ASC”) is the FASB officially recognized source of authoritative GAAP applicable to all public and non-public non-governmental entities.

Periodically, the FASB will issue Accounting Standard Updates (“ASU”) to

Adoption of New Accounting Standards — The Accounting Standards Codification (“ASC”) is the FASB officially recognized source of authoritative GAAP applicable to all public and non-public non-governmental entities.

Periodically, the FASB will issue Accounting Standard Updates (“ASU”) to its ASC.

Rules and interpretive releases of the SEC under the authority of the federal securities laws are also sources of authoritative GAAP for the Company as an SEC registrant.

All other accounting literature is non-authoritative.

On January 1, 2024, the Company adopted ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions .

The amendments in this ASU affect

all entities that have investments in equity securities measured at fair value that are subject to a contractual sale restriction.

These amendments clarify that a contractual restriction on the sale of an equity security is not considered part of

the unit of account of the equity security and, therefore, is not considered in measuring fair value.

The Company adopted this standard, with no material impact on the Company’s consolidated financial statements.

On January 1, 2024, the Company adopted ASU 2023-02, Investments – Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in

Tax Credit Structures Using the Proportional Amortization Method .

ASU 2023-02 allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving

rise to the related income tax credits.

The amendments in ASU 2023-02 apply to all reporting entities that hold (1) tax equity investments that meet the conditions for and elect to account for them using the proportional amortization method or (2)

an investment in a low income housing tax credit investments (“LIHTC”) structure through a limited liability entity that is not accounted for using the proportional amortization method and to which certain LIHTC-specific guidance removed from FASB

ASC 323-740, Investments – Equity Method and Joint Ventures:

Income Taxes, has been applied.

The amendments in ASU 2023-02 must be applied on either a modified

retrospective or a retrospective basis (except as discussed in the ASU for LIHTC investments not accounted for using the proportional amortization method).

The Company adopted this standard to use the proportional amortization method on January 1,

2024, with a $ 40,000 cumulative-effect adjustment to retained earnings under the modified retrospective method.

Under the proportional amortization method the

amortization of the LIHTC investments, income tax credits and other income tax benefits are now recognized in the

income statement as a component of income tax expense (benefit) rather than other non-interest expense.

On December 31, 2024, the Company adopted ASU 2023-07, “Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures” .

ASU 2023-07 requires public entities to disclose significant segment expenses, an amount and description for other

segment items, the title and position of the entity’s chief operating decision maker (“CODM”) and an explanation of how the CODM uses the reported measures of profit or loss to assess segment performance, and, on an interim basis, certain

segment related disclosures that previously were required only on an annual basis.

ASU 2023-07 also clarifies that entities with a single reportable segment are subject to both new and existing segment reporting requirements and that an entity

is permitted to disclose multiple measures of segment profit or loss, provided that certain criteria are met.

The Company adopted this standard with no material impact on the Company’s consolidated financial statements, however additional

required disclosures have been added to the Segment Reporting accounting policy within this footnote.

Accounting Standards Pending Adoption — The following paragraphs provide descriptions of newly issued but not yet effective accounting standards that could have a material effect on the Company’s financial position or results of operations.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1—Summary of Significant Accounting

Policies—Continued

In July 2023, the FASB issued ASU 2023-03, Presentation of Financial Statements (Topic 205), Income Statement—Reporting

Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718) .

This ASU amends the FASB Accounting Standards Codification for SEC paragraphs

pursuant to SEC Staff Accounting Bulletin No.

120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X:

Income or Loss Applicable to

Common Stock.

ASU 2023-03 is effective upon addition to the FASB Codification.

The Company is currently evaluating the impact this ASU will have on its disclosures.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements:

Codification Amendments in Response to the SEC’s

Disclosure Updated and Simplification Initiative.

ASU 2023-06 amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification (the “Codification”).

The ASU was issued in

response to the SEC’s August 2018 final rule that updated and simplified disclosure requirements that the SEC believed were “redundant, duplicative, overlapping, outdated, or superseded.” The new guidance is intended to align U.S.

requirements with those of the SEC and to facilitate the application of U.S.

GAAP for all entities.

For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to

the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC removes that related disclosure

from its rules.

For all other entities, the amendments will be effective two years later.

However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and

not become effective for any entity.

The Company is currently evaluating the impact this ASU will have on its disclosures.

December 2023, the FASB issued ASU No.

On January 1, 2025, the Company adopted ASU No.

2023-09 , “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” ASU 2023-09 requires public business entities to disclose in their rate reconciliation

table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold.

ASU 2023-09 also requires all entities

to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things.

ASU 2023-09 is

effective for us on January 1, 2025 and the income tax disclosures will be updated upon adoption.

In March 2024, the FASB issued ASU 2024-01, “Compensation - Stock Compensation (Topic 718):

Application of Profits Interest and Similar Awards” .

This ASU provides an illustrative example intended to demonstrate how entities that account for profits interest and similar awards would determine whether a profits interest award

should be accounted for in accordance with Topic 718.

This ASU is effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods.

Early adoption is permitted.

If an entity adopts the amendments

in an interim period, it must adopt them as of the beginning of the annual period that includes that interim period.

Transition can be done either retrospectively or prospectively.

The Company does not expect the adoption of ASU 2024-01 to have

a material impact on its consolidated financial statements.

March 2024, the FASB issued ASU 2024-02, “Codification Improvements - Amendments to Remove References to the Concept Statements” (“ASU 2024-02”) .

ASU 2024-02 contains amendments to the Codification that

remove references to various FASB Concepts Statements.

In most instances, the references are extraneous and not required to understand or apply the guidance.

In other instances, the references were used in prior Statements to provide guidance

in certain topical areas.

ASU 2024-02 is effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company is evaluating the impact of adopting this new standard but does not expect it to have a material impact on its consolidated financial statements.

Improvements to Income Tax Disclosures” retrospectively.

ASU 2023-09 requires public business entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details

about the reconciling items in some categories if items meet a quantitative threshold.

ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and

to disaggregate the information by jurisdiction based on a quantitative threshold, among other things.

The Company adopted this standard with no material impact on the Company’s consolidated financial statements.

FARMERS & MERCHANTS BANCORP

1 unchanged sentence

Note 1—Summary of Significant Accounting Policies—Continued

In November 2024, the FASB issued Accounting Standards Update No.

2024-03, “ Income Statement

– Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) :

Disaggregation of Income Statement Expenses” (“ASU 2024-03”), and in January 2025, the FASB issued Accounting Standards Update No.

2025-01, “ Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures

(Subtopic 220-40):

Accounting Standards Pending Adoption — The following paragraphs provide descriptions of newly issued but not yet effective accounting standards that could have a material

effect on the Company’s financial position or results of operations.

In November 2024, the FASB issued ASU No.

2024-03, “ Income Statement – Reporting Comprehensive Income - Expense Disaggregation

Disclosures (Subtopic 220-40) :

Disaggregation of Income Statement Expenses” ("ASU 2024-03"), and in January

2025, the FASB issued ASU No.

2025-01, “ Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Clarifying the Effective Date” ("ASU 2025-01").

ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement.

2024-03, as clarified by ASU 2025-01, is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

Both early adoption and

retrospective application are permitted.

The Company is currently evaluating the impact that the adoption of these standards will have on its consolidated financial statements and disclosures.

2 — Investment Securities

The amortized cost, fair values, and

unrealized gains and losses of the securities available-for-sale are as follows:

in the income statement.

ASU 2024-03, as clarified by ASU 2025-01, is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

early adoption and retrospective application are permitted.

The Company is currently evaluating the impact that the adoption of these standards will have on its consolidated financial statements and disclosures, but does not expect the impact

to be material .

In July 2025, the FASB issued ASU No.

2025-05, “ Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets ”

(“ASU 2025-05”).

ASU 2025-05 provides amendments that provide all entities with a practical expedient when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under

The amendments are effective in fiscal years beginning after December 15, 2025, and interim reporting periods within those fiscal years.

The Company is evaluating adoption timing and the impact ASU 2025-05 will have on its financial

statements but does not anticipate it will have a material impact on its consolidated financial statements.

In December 2025, the FASB issued ASU No.

2025-11, “Interim Reporting (Topic 270):

Narrow-Scope Improvements” (“ASU 2025-11”).

ASU 2025-11 clarifies and improves the

guidance for interim financial reporting by providing a list of required interim disclosures, clarifying the applicability of interim reporting requirements, and introducing a disclosure principle requiring entities to disclose events since the

end of the last annual reporting period that have a material impact on the entity.

The new guidance is effective for the Company starting January 1, 2029, with early adoption permitted.

The Company is currently evaluating the impact that the

adoption of this new guidance will have on its financial presentation.

In December 2025, the FASB issued ASU No.

2025-12, “Codification Improvements” (“ASU 2025-12”).

ASU 2025-12 is part of the FASB's standing "evergreen" project and makes a

broad set of technical corrections, clarifications, and other minor improvements across many Topics to make the Codification easier to understand and apply.

The amendments will be effective for the Company beginning with the fiscal year ending

December 31, 2027, and interim periods within that fiscal year.

The Company is currently evaluating the impact of such amendments to the consolidated financial statements and related disclosures.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2—Investment Securities

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

Gross Unrealized

5 unchanged sentences

Collateralized mortgage obligations (1)

Municipal securities

Corporate securities

Total available-for-sale securities

(1) All mortgage-backed securities and collateralized mortgage

obligations were issued by an agency or government sponsored entity of the U.S.

(1) All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S.

Gross Unrealized

8 unchanged sentences

(1) All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2—Investment Securities—Continued

book values, estimated fair values, and unrecognized gains and losses of investments classified as held-to-maturity are as follows:

The book values, estimated fair values, and unrecognized gains and losses of investments classified as held-to-maturity are as follows:

Gross Unrecognized

5 unchanged sentences

Total held-to-maturity securities

mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S.

(1) All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2—Investment Securities—Continued

Gross Unrecognized

5 unchanged sentences

Total held-to-maturity securities

(1) All mortgage-backed securities and collateralized mortgage obligations were issued

by an agency or government sponsored entity of the U.S.

The allowance for

credit losses on held-to-maturity securities is a contra-asset valuation account that is deducted from the amortized cost basis of held-to-maturity securities to present the net amount expected to be collected.

Management measures expected

credit losses on held-to-maturity securities on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and

reasonable and supportable forecasts.

(1) All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S.

The allowance for credit losses on held-to-maturity securities is a contra-asset valuation account that is deducted from the amortized cost basis of held-to-maturity securities to present the net amount expected to be collected.

Management measures expected credit losses on held-to-maturity securities on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

With regard to residential mortgage-backed securities issued by the U.S.

government, or agencies thereof, it is expected that the securities will not be settled at prices less than the amortized cost basis

of the securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S.

Accordingly, no

allowance for credit losses has been recorded for these securities.

With regard to securities issued by States and political subdivisions and other held-to-maturity securities, management considers (i) issuer bond ratings, (ii) historical loss

rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) internal forecasts and (v) whether or not such securities are guaranteed or

pre-refunded by the issuers.

government, or agencies thereof, it is expected that the securities will not be settled at prices less than the amortized cost basis of the securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S.

Accordingly, no allowance for credit losses has been recorded for these securities.

With regard to securities issued by States and political subdivisions and other held-to-maturity securities, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) internal forecasts and (v) whether or not such securities are guaranteed or pre-refunded by the issuers.

Fair values are based on quoted market prices or dealer quotes.

If a quoted market price or dealer quote is not available, fair value is estimated using quoted market prices for similar securities.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2—Investment Securities—Continued

The following tables show the gross unrealized losses for available-for-sale securities, for which an allowance for credit losses has not been recorded, that have been in an unrealized loss position for

less than 12 months or 12 months or more:

December 31, 2025

5 unchanged sentences

Mortgage-backed securities (1)

Commerical mortgage-backed securities (1)

Collateralized mortgage obligations (1)

Total available-for-sale securities

(1) All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored

entity of the U.S.

(1) All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2—Investment Securities—Continued

December 31, 2024

7 unchanged sentences

Collateralized mortgage obligations (1)

Corporate securities

Total available-for-sale securities

(1) All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored

entity of the U.S.

As of December 31,

2024, the Company held 186 available-for-sale securities of which 47 securities were in an unrealized loss position for less than twelve months and 114

securities were in an unrealized loss position for twelve months or more without an allowance for credit losses.

Because the decline in fair value is attributable to changes in interest rates and not credit quality and because the Company does

not have the intent to sell and it is likely that the Company will not be required to sell the securities prior to their anticipated recovery at maturity, it has been determined that there is no expected credit loss on these securities.

Management evaluates the

available-for-sale securities in an unrealized loss position, relying primarily on industry analyst reports and observations of market conditions and interest rate fluctuations.

The following table presents the activity in the allowance for credit

losses for held-to-maturity securities by major type:

(1) All mortgage-backed securities and collateralized mortgage obligations were issued by an agency or government sponsored entity of the U.S.

As of December 31, 2025, the Company held 324 available-for-sale securities of which 14 securities were in an unrealized loss position for less than twelve months and 104 securities were in an unrealized loss position for twelve months or more without an allowance for credit losses.

Because the decline in fair value is attributable to changes in interest rates and not credit quality and because the Company does not have the intent to sell and it is likely that the Company will not be required to sell the securities prior to their anticipated recovery at maturity, it has been determined that there is no expected credit loss on these securities.

Management evaluates the available-for-sale securities in an unrealized loss position, relying primarily on industry analyst reports and observations of market conditions and interest rate fluctuations.

The following tables present the activity in the allowance for credit losses for held-to-maturity securities by major type:

December 31, 2025

6 unchanged sentences

Ending balance

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2—Investment Securities—Continued

December 31, 2024

(Dollars in thousands)

Mortgage-backed

Municipal securities

Mortgage-backed securities

Collateralized

3 unchanged sentences

Ending balance

The amortized cost and estimated fair values of investment

securities at December 31, 2024 by contractual final maturity are shown in the following table:

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2—Investment Securities—Continued

The amortized cost and estimated fair values of investment securities at December 31, 2025 by contractual final maturity are shown in the following table:

Available-for-Sale

3 unchanged sentences

Amortized Cost

Securities maturing in:

One year or less

After one year through

After five years through

After one year through five years

After five years through ten years

After ten years

Maturities are based

on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur.

Expected maturities of mortgage-backed and CMO securities may differ from contractual maturities because borrowers have the

right to call or prepay obligations with or without call or prepayment penalties.

The Company monitors the credit quality of those

held-to-maturity securities not issued by the U.S.

Maturities are based on the final contractual payment dates, and do not reflect the impact of contractual monthly principal payments, prepayments or early redemptions that may occur.

Expected maturities of

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

The Company monitors the credit quality of those held-to-maturity securities not issued by the U.S.

government or one of its agencies or government sponsored entities, through the use of credit ratings.

Credit ratings are reviewed and updated quarterly.

Nonrated municipal investments consist primarily of bonds

issued by political subdivisions such as housing authorities and reclamation districts.

Nonrated municipal investments consist primarily of bonds issued by political subdivisions such as housing authorities and reclamation districts.

Nonrated municipal investments are monitored through financial covenants and review of repayment history.

8 unchanged sentences

Municipal securities

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2—Investment Securities—Continued

Held-to-Maturity

3 unchanged sentences

Municipal securities

Proceeds from sales and calls of investment securities were

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2—Investment Securities—Continued

During 2025, the Company sold securities with a book value of $ 24.8 million for a net gain of $ 44,287 .

Included in the sales were $ 3.2 million of securities that were in the held-to-maturity portfolio and were sold for a loss of $ 145,367 for the year ended December 31, 2025.

All held-to-maturity securities sold were mortgage-backed securities with a remaining book value of less than 15 % of the original principal balance at the time of purchase and, as allowed under ASC 320-10-25-14 , the sales were considered maturities for purposes of security classification.

Proceeds from sales and calls of investment securities were as follows:

For the Year Ended December 31,

(Dollars in thousands)

1 unchanged sentence

Pledged Securities

As of December 31, 2024, investment securities carried at $ 712.5 million were pledged to secure public deposits, Federal Home Loan Bank (“FHLB”) borrowings, and other government agency deposits as required by

As of December 31, 2025, investment securities carried at $ 673.8 million were pledged to secure public deposits, Federal Home Loan Bank (“FHLB”) borrowings, and other government agency deposits as required by law.

This amount was $ 712.5 million at December 31, 2024.

1 unchanged sentence

The Bank is a member of the FHLB system.

Members are required to own a certain amount of stock based on the level of borrowings and

other factors, and may invest in additional amounts.

Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts.

FHLB stock and other equity securities are carried at cost, classified as restricted securities, and periodically evaluated for impairment based on ultimate recovery of par value.

Both cash and

stock dividends are reported as income.

Both cash and stock dividends are reported as income.

FHLB stock and other equity securities are reported in Non-Marketable Securities on the Company’s consolidated balance sheets and totaled $ 15.5 million at both December 31, 2025 and 2024.

15 unchanged sentences

Total loans and leases held for investment, net

At December 31, 2024, the portion of loans that were approved for

pledging as collateral on borrowing lines with the FHLB and the Federal Reserve Bank (“FRB”) were $ 1.2 billion and $ 1.4 billion, respectively.

At December 31, 2025, the portion of loans that were approved for pledging as collateral on borrowing lines with the FHLB and the Federal Reserve Bank (“FRB”) were $ 1.4 billion and $ 1.4 billion, respectively.

The borrowing capacity on these loans was $ 889.2 million from FHLB and $ 1.1 billion from the FRB at December 31, 2025.

21 unchanged sentences

Total loans and leases, net

When borrowers are experiencing financial

difficulty, the Company may agree to modify the contractual terms of a loan to a borrower in order to assist the borrower in repaying principal and interest owed to the Company.

The Company’s modifications of loans to borrowers experiencing

financial difficulty are generally in the form of term extensions, repayment plans, payment deferrals, forbearance agreements, interest rate reductions, forgiveness of interest and/or fees, or any combination thereof.

Commercial loans modified

to borrowers experiencing financial difficulty are primarily loans that are substandard or non-accrual, where the maturity date was extended and/or the modified interest rate and payment terms are not commensurate with the current market.

Modifications on personal real estate loans are primarily those placed on forbearance plans, repayment plans, or deferral plans where monthly payments are suspended for a period of time or past due amounts are paid off over a certain period of

time in the future or set up as a balloon payment at maturity.

Modifications to certain credit card and other small consumer loans are often modified under debt counseling programs that can reduce the contractual rate or, in certain instances,

forgive certain fees and interest charges.

Other consumer loans modified to borrowers experiencing financial difficulty consist of various other workout arrangements with consumer customers.

When borrowers are experiencing financial difficulty, the Company may agree to modify the contractual terms of a loan to a borrower in order to assist the borrower in repaying principal and interest owed to the

The Company's modifications of loans to borrowers experiencing financial difficulty are generally in the form of term extensions, repayment plans, payment deferrals, forbearance agreements, interest rate reductions, forgiveness of

interest and/or fees, or any combination thereof.

Commercial loans modified to borrowers experiencing financial difficulty are primarily loans that are substandard or non-accrual, where the maturity date was extended and/or the modified

interest rate and payment terms are not commensurate with the current market.

Modifications on personal real estate loans are primarily those placed on forbearance plans, repayment plans, or deferral plans where monthly payments are suspended

for a period of time or past due amounts are paid off over a certain period of time in the future or set up as a balloon payment at maturity.

Modifications to certain credit card and other small consumer loans are often modified under debt

counseling programs that can reduce the contractual rate or, in certain instances, forgive certain fees and interest charges.

Other consumer loans modified to borrowers experiencing financial difficulty consist of various other workout

arrangements with customers.

FARMERS & MERCHANTS BANCORP

1 unchanged sentence

Note 4—Loans and Leases—Continued

The following tables present the amortized cost of loans that were

both experiencing financial difficulty and modified, by portfolio segment and type of modification, during the periods presented.

The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as

compared to the amortized cost basis of each portfolio segment of financing receivable is also presented below:

The following tables present the amortized cost of loans that were both experiencing financial difficulty and modified, by portfolio segment and type of modification, during the periods presented.

The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each portfolio segment of financing receivable is also presented below:

December 31, 2025

1 unchanged sentence

(Dollars in thousands)

Maturity or term

modification types 1

of total loan

5 unchanged sentences

Consumer and other

1 Includes modifications that resulted from a combination of interest

rate reduction, maturity or term extension, principal forgiveness, and payment deferral modifications.

1 Includes modifications that resulted from a combination of interest rate reduction, maturity or term extension, principal forgiveness, and payment deferral modifications.

2 Unfunded lending commitments related to loans modified to borrowers experiencing financial difficulty totaled $ 0 million at December 31, 2025.

During the twelve months ended December 31, 2025, the Company had one agricultural real estate borrower with five loans that had principal and interest deferrals ranging from twelve to eighteen months .

Three of the loans had the contractual term extended by eighteen months .

In addition, during the twelve months ended December 31, 2025, the Company had two commercial & industrial loans where the contractual terms were extended by six and thirteen months , respectively, and two residential and home equity loans where the contractual terms were extended by ten years .

FARMERS & MERCHANTS BANCORP

1 unchanged sentence

Note 4—Loans and Leases—Continued

During the twelve

months ended December 31, 2024, the Company had one agricultural real estate borrower with five loans that had principal and interest deferrals ranging from two to four months .

One of the agricultural real estate loans had the contractual term extended by four months .

In addition, the Company had one commercial &

industrial loan where the contractual term was extended by two months .

December 31, 2024

1 unchanged sentence

(Dollars in thousands)

of total loan

Maturity or term extension

Payment deferral

Multiple modification types 1

Percentage of total loan segment

Loans and leases held for investment, net

4 unchanged sentences

Consumer and other

Includes modifications that resulted from a combination of interest

rate reduction, maturity or term extension, principal forgiveness, and payment deferral modifications.

1 Includes modifications that resulted from a combination of interest rate reduction, maturity or term extension, principal forgiveness, and payment deferral modifications.

2 Unfunded lending commitments related to loans modified to borrowers experiencing financial difficulty totaled $0 million at December 31, 2024.

twelve months ended December 31, 2023, we had one residential real estate loan that had the contractual interest rate decreased

by 1.00 % and the contractual term was extended by 120 months .

In addition, we had an additional borrower with one

commercial real estate loan that had the contractual term extended by 119 months , and two commercial & industrial loans that had the contractual term extended by eleven months .

The Company closely monitors the performance of the loans that are modified to

borrowers experiencing financial difficulty to understand the effectiveness of the modification efforts.

During the twelve months ended December 31, 2024, the Company had one agricultural real estate borrower with five loans that had principal and interest deferrals ranging from two to four months .

One of the agricultural real estate loans had the contractual term extended by four months .

In addition, during the twelve months ended December 31 2024, the Company had one commercial & industrial loan where the contractual term was extended by two months .

The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of the modification efforts.

A payment default is defined as a loan having a payment past due 90 days or more after a modification took place.

The modified loans presented in the tables above were current as of December 31, 2025 and 2024.

The effect of modifications made to borrowers

experiencing financial difficulty is already included in the ACL because of the measurement methodologies used to estimate the ACL;

therefore, a change to the ACL is generally not recorded upon modification.

If principal forgiveness is

provided, that portion of the loan will be charged-off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the ACL.

An assessment of whether the borrower is experiencing financial difficulty is made on the

date of a modification.

The effect of modifications made to borrowers experiencing financial difficulty is already included in the ACL because of the measurement methodologies used to estimate the ACL;

therefore, a change to the ACL

is generally not recorded upon modification.

If principal forgiveness is provided, that portion of the loan will be charged-off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the ACL.

An assessment

of whether the borrower is experiencing financial difficulty is made on the date of a modification.

FARMERS & MERCHANTS BANCORP

1 unchanged sentence

Note 4—Loans and Leases—Continued

The following table presents outstanding loan and lease balances held for

investment net of unearned income by segment, credit risk rating categories, vintage year by segment of financing receivable, and current period gross charge-offs by year of origination as follows:

The following tables present outstanding loan and lease balances held for investment net of unearned income by segment, credit risk rating categories, vintage year by segment of financing receivable, and current period gross charge-offs by year of origination as follows:

December 31, 2025

97 unchanged sentences

Total current-period gross charge-offs

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4—Loans and Leases—Continued

The Company, in the ordinary course of business,

grants loans to the Company’s executive officers and directors, including their families and firms in which they are principal owners.

The Company, in the ordinary course of business, grants loans to the Company’s executive officers and directors, including their families and firms in which they are principal owners.

Activity in such loans is summarized as follows:

2 unchanged sentences

New loans or advances during year

Effect of changes in composition of related parties

Balance at end of period

A loan or lease

is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

When management determines that foreclosure is

probable, expected credit losses for collateral dependent loans or leases are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

The collateral on the loans and leases is a

significant portion of what secures the collateral dependent loans or leases and significant changes to the fair value of the collateral can impact the allowance for credit losses.

During 2024, there were no significant changes to the

collateral that secures the collateral dependent loans, whether due to general deterioration or with credit quality indicators like appraisal value.

The following tables present the amortized cost basis for collateral dependent

loans and leases by type as of the dates indicated:

A loan or lease is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the

When management determines that foreclosure is probable, expected credit losses for collateral dependent loans or leases are based on the fair value of the collateral at the reporting date, adjusted for selling costs as

The collateral on the loans and leases is a significant portion of what secures the collateral dependent loans or leases and significant changes to the fair value of the collateral can impact the allowance for credit losses.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4—Loans and Leases—Continued

The following table presents the amortized cost basis for collateral dependent loans and leases by type as of the dates indicated:

December 31, 2025

(Dollars in thousands)

Vehicles and Equipment

Collateral dependent loans and leases

5 unchanged sentences

Total gross loans and leases

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

and Leases —Continued

December 31, 2024

(Dollars in thousands)

Vehicles and Equipment

Collateral dependent loans and leases

5 unchanged sentences

Total gross loans and leases

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4—Loans and Leases—Continued

Allowance for Credit Losses

The allowance for credit losses (“ACL”) is the combination of the allowance for credit losses for loan and lease losses and the

allowance for credit losses for unfunded loan commitments.

The ACL for unfunded loan commitments is included within “Interest payable and other liabilities” on the consolidated balance sheets.

The following tables present a summary of the activity in the ACL for loan and lease losses and ACL for unfunded loan commitments for

the periods indicated:

The allowance for credit losses (“ACL”) is the combination of the allowance for credit losses for loan and lease losses and the allowance for credit losses for unfunded loan commitments.

The ACL for unfunded

loan commitments is included within “Interest payable and other liabilities” on the consolidated balance sheets.

The following table presents a summary of the activity in the ACL for loan and lease losses and ACL for unfunded loan commitments for the periods indicated:

Year Ended December 31,

6 unchanged sentences

Balance at end of period

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4—Loans and Leases—Continued

Changes in the allowance for credit losses on loans and leases are as follows:

10 unchanged sentences

Total allowance for credit losses

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4—Loans and Leases—Continued

Year Ended December 31, 2024

9 unchanged sentences

Total allowance for credit losses

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 5—Premises and Equipment

8 unchanged sentences

Depreciation and amortization on premises and equipment included in occupancy expense amounted to $ 3.1 million, $ 2.9 million, and $ 2.5 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Rental income was $ 726,000 , $ 749,000 , and $ 640,000 for the years ended December 31, 2024, 2023, and 2022, respectively, and was recorded in other income.

Rental income was $ 757,000 , $ 726,000 , and $ 749,000 for the years ended December 31, 2025, 2024, and 2023, respectively, and was recorded in other non-interest income.

Note 6—Other Real Estate Owned

The Company reported $ 873,000 in other real estate owned at

December 31, 2024 and 2023, which includes property no longer utilized for business operations and property acquired through foreclosure proceedings.

These properties are carried at fair value less selling costs determined at the date acquired.

Losses, if any, arising from properties acquired through foreclosure are charged against the allowance for loan losses at the time of foreclosure.

Subsequent declines in value, periodic holding costs, and net gains or losses on disposition are

included in other operating expense as incurred.

The Company reported no foreclosed other real estate owned at December 31, 2025 compared to $ 873,000 at December 31, 2024 as the Company wrote off its only OREO property during 2025 after nine years .

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7—Deposits

9 unchanged sentences

Overdrawn deposit balances of $ 187,000 and $ 156,000 were classified as consumer loans at December 31, 2025 and 2024, respectively.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 8—Short-term borrowings

As of December 31, 2024 and 2023, committed lines of credit arrangements totaling $ 2.1 billion and $ 2.2 billion, respectively, were available to the Company

from the FHLB, FRB, and unaffiliated banks.

The Company is a member of the FHLB of San Francisco and has a committed credit line of $ 803.2 million, which is secured by $ 1.0 billion in various real estate loans

and investment securities pledged as collateral.

As of December 31, 2025 and 2024, committed lines of credit arrangements totaling $ 2.1 billion and $ 2.1 billion, respectively, were available to the Company from the FHLB, FRB, and unaffiliated banks.

The Company is a member of the FHLB of San Francisco and has a borrowing capacity and a committed credit line of $ 890.4 million, which is secured by $ 1.1 billion in various real estate loans and investment securities pledged as collateral.

Borrowings generally provide for interest at the then current published rate based on the borrowing term.

The overnight borrowing rate was 3.89 % as of December 31, 2025.

T he Company has $ 1.4 billion in pledged loans with the FRB.

The Company has $ 1.4 billion in pledged loans with the FRB.

As of December 31, 2025, the Company’s overnight borrowing capacity using the primary credit facilities from the Fed account was $ 1.1 billion.

The borrowing rate was 4.50 %

as of December 31, 2024.

The borrowing rate was 3.75 % as of December 31, 2025.

The Company has an unsecured borrowing capacity from unaffiliated banks of $ 133.0 million as of December 31, 2025.

There were no outstanding advances on the above borrowing facilities or from unaffiliated banks as of December 31, 2025 and 2024.

1 unchanged sentence

In 2003, the Company formed a wholly-owned Connecticut statutory business trust, FMCB Statutory Trust I (“Statutory Trust I”), which issued $ 10.0 million of guaranteed preferred beneficial interests in the Company’s junior subordinated deferrable interest debentures (the “Trust Preferred Securities”).

The Company is

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

These debentures qualify

as Tier 1 capital under current regulatory guidelines.

All of the common securities of Statutory Trust I are owned by the Company.

The proceeds from the issuance of the common securities and the Trust Preferred Securities were used by FMCB Statutory

Trust to purchase $ 10.3 million of junior subordinated debentures of the Company, which carry a variable rate based on 3-month SOFR plus 2.85 %.

As of December

31, 2024, the interest rate on the junior subordinated debentures was 7.35 % and the next reset date is March 17, 2025 .

The Company is not considered the primary beneficiary of the trust (variable interest entity);

therefore, the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability.

These debentures qualify as Tier 1 capital under current regulatory guidelines.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9—Long-term Subordinated Debentures—Continued

the common securities of Statutory Trust I are owned by the Company.

The proceeds from the issuance of the common securities and the Trust Preferred Securities were used by FMCB Statutory Trust to purchase $ 10.3 million of junior subordinated debentures of the Company, which carry a variable rate based on 3 -month SOFR plus 2.85 %.

As of December 31, 2025, the interest rate on the junior subordinated debentures was 6.82 % and the next reset date is March 17, 2026 .

The debentures represent the sole asset of Statutory Trust I.

The Trust Preferred Securities accrue and pay distributions at a variable

rate based on 3-month SOFR

plus 2.85 % per annum of the stated liquidation value of $ 1,000 per capital security.

The Company has entered into contractual arrangements which, taken collectively, fully and unconditionally guarantee payment to the extent that Statutory Trust I has funds available

The Trust Preferred Securities accrue and pay distributions at a variable rate based on 3 -month SOFR plus 2.85 % per annum of the stated liquidation value of $ 1,000 per capital security.

The Company has entered into contractual arrangements which, taken collectively, fully and unconditionally guarantee payment to the extent that Statutory Trust I has funds available therefor of:

(i) accrued and unpaid distributions required to be paid on the Trust Preferred Securities;

(ii) the redemption price with respect to any Trust Preferred Securities called for redemption by Statutory Trust I;

and (iii) payments due upon

a voluntary or involuntary dissolution, winding up, or liquidation of Statutory Trust I.

and (iii) payments due upon a voluntary or involuntary dissolution, winding up, or liquidation of Statutory Trust I.

The Trust Preferred Securities are mandatorily redeemable upon maturity of the subordinated debentures on December 17, 2033 , or upon earlier redemption as provided in the indenture.

The Company has the right to redeem the subordinated debentures purchased by Statutory Trust I, in

whole or in part, on or after December 17, 2008.

The Company has the right to redeem the subordinated debentures purchased by Statutory Trust I, in whole or in part, on or after December 17, 2008.

As specified in the indenture, if the subordinated debentures are redeemed prior to maturity, the redemption price will be the principal amount and any accrued but unpaid interest.

Additionally, if the

Company decided to defer interest on the subordinated debentures, the Company would be prohibited, by the terms of the debentures, from paying cash dividends on the Company’s common stock.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 10—Employee Benefit Plans

Executive Retirement Plan

The Company, through the Bank, sponsors an Executive Retirement Plan (“ERP”) for certain executive level employees.

The ERP is a non-qualified deferred compensation

plan and was developed to supplement the Company’s Profit Sharing Plan, which, as a qualified retirement plan, has a ceiling on benefits as set by the Internal Revenue Service.

The ERP is comprised of:

(1) a Performance Component which makes

contributions based upon long-term cumulative profitability and increase in market value of the Company;

(2) a Salary Component which makes contributions based upon participant salary levels;

and (3) an Equity Component for which contributions are

discretionary and subject to Board of Directors approval.

The Company maintains a Rabbi Trust to fund, in part, the ERP.

The Rabbi Trust is an irrevocable grantor trust to which the Company may contribute assets for the limited purpose of funding a

nonqualified deferred compensation plan.

The Company may not use the assets of the Rabbi Trust for any purpose other than meeting its obligations under the ERP;

however, the assets of the Rabbi Trust remain subject to the claims of its creditors and

are included in the consolidated financial statements.

The Company contributes cash to the Rabbi Trust from time to time for the sole purpose of funding the ERP.

The Rabbi Trust will use any cash the Company contributes to purchase shares of common

stock of the Company, and other financial instruments, on the open market.

ERP contributions are invested in a mix of financial instruments;

however, the Equity Component contributions are invested primarily in common stock of the Company.

November 29, 2024 each component of the ERP was terminated and frozen and no future contributions are permitted to be made.

For each existing participant, the account balances will be liquidated and paid out to each participant at a time to be

determined, but which will occur sometime between the 12 -month anniversary and the 24 -month anniversary of the termination of the plans pursuant to regulations promulgated by the Department of the Treasury.

The Company incurred a net expense of $ 9.0

million to the ERP during the year ended December 31, 2024, $ 9.1 million during the year ended December 31, 2023 and $ 7.4 million during the year ended December 31, 2022.

The Company’s carrying value of the liability under the ERP was $ 61.4 million as of December 31, 2024 and $ 57.5

million as of December 31, 2023, which is included in interest payable and other liabilities on the balance sheet.

The Company’s shares of common stock held as investments in the Rabbi Trust of the ERP as of December 31, 2024 and 2023 totaled 48,877 and 49,276 with an historical

cost basis of $ 31.8 million and $ 31.6

million, respectively.

All amounts have been fully funded into the Rabbi Trust as of December 31, 2024 and 2023.

The consolidated investments held in the Rabbi Trust are recorded at fair value with changes in unrealized gains or losses recorded

within non-interest income and the equal and offsetting charges in the related liability are recorded in non-interest expense in the consolidated statements of income.

Net gains on ERP plan investments were $ 2.7 million in 2024 compared

to net gains of $ 2.6 million in 2023 and $ 0.1

million in 2022.

Balances in non-qualified deferred compensation plans may be invested in financial instruments whose market value fluctuates based upon trends in interest rates and stock prices.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 10—Employee Benefit Plans —Continued

Senior Management

Retention Plan

The Company, through the Bank, sponsors a Senior Management Retention Plan (“SMRP”) for certain senior level employees.

is a non-qualified deferred compensation plan and was developed to supplement the Company’s Profit Sharing Plan, which, as a qualified retirement plan, has a ceiling on benefits as set by the Internal Revenue Service.

All contributions are

discretionary and subject to the Board of Directors approval.

The Company maintains a Rabbi Trust to fund, in part, the SMRP.

The Rabbi Trust is an irrevocable grantor trust to which the Company may

contribute assets for the limited purpose of funding a non-qualified deferred compensation plan.

The Company may not use the assets of the Rabbi Trust for any purpose other than meeting its obligations under the SMRP;

however, the assets of the

Rabbi Trust remain subject to the claims of its creditors and are included in the consolidated financial statements.

The Company contributes cash to the Rabbi Trust from time to time for the sole purpose of funding the SMRP.

The Rabbi Trust will

use any cash the Company contributes to purchase shares of common stock of the Company, and other financial instruments, on the open market.

Contributions to the SMRP are invested primarily in common stock of the Company.

Effective November 29,

2024 the SMRP was terminated and frozen and no future contributions are permitted to be made.

For each existing participant, the account balances will be liquidated and paid out to each participant at a time to be determined, but which will occur

sometime between the 12 -month anniversary and the 24 -month anniversary of the termination of the plan pursuant to regulations promulgated by the Department of the Treasury.

The Company incurred a net expense of $ 4.0 million to the SMRP

during the year ended December 31, 2024, $ 4.1 million during the year ended December 31, 2023 and $ 3.0 million during the year ended December 31, 2022.

The Company’s carrying value of the liability under the SMRP was $ 21.2 million as of December 31, 2024 and $ 16.9

million as of December 31, 2023, which is included in interest payable and other liabilities on the balance sheet.

The Company’s shares of stock held as investments in the Rabbi Trust of the SMRP as of

December 31, 2024 and December 31, 2023 totaled 19,647 and 17,806 shares with an historical cost basis of $ 14.6 million and

$ 12.8 million, respectively.

All amounts have been fully funded into the Rabbi Trust as of December 31, 2024 and 2023.

The consolidated

investments held in the Rabbi Trust are recorded at fair value with changes in unrealized gains or losses recorded within non-interest income and the equal and offsetting charges in the related liability are recorded in non-interest expense in the

consolidated statements of income.

Net gains on SMRP plan investments were $ 0.5 million in 2024, $ 0.4 million in 2023 and $ 0.4 million in

Balances in non-qualified deferred compensation plans may be invested in financial instruments whose market value fluctuates based upon trends in interest rates and stock prices.

Stock-Based Compensation

At the special meeting of shareholders held on November 25, 2024, the Company’s shareholders approved the Farmers & Merchants Bancorp 2025 Restricted Stock Retirement Plan (the “2025 Plan”).

The 2025 Plan permits stock-based compensation

awards to employees, officers and directors of the Company and its subsidiaries and affiliates.

The 2025 Plan authorized awards up to 80,000

No shares have been issued under the 2025 Plan as of December 31, 2024.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 10—Employee Benefit Plans—Continued

Profit Sharing Plan

The Company, through the Bank, sponsors a Profit Sharing Plan for substantially all full-time employees of the Company with one or more years of service.

Participants receive up to two annual employer contributions, one is

discretionary and the other is mandatory.

The discretionary contributions to the Profit Sharing Plan are determined annually by the Board of Directors.

The discretionary contributions totaled $ 1.8 million, $ 1.9 million, and $ 1.8 million for the years ended December 31, 2024, 2023, and 2022, respectively.

The mandatory contributions to the Profit Sharing Plan are made

according to a predetermined set of criteria.

Mandatory contributions totaled $ 2.0 million, $ 2.0 million, and $ 1.6 million for the years ended December

31, 2024, 2023, and 2022, respectively.

Company employees are permitted, within limitations imposed by tax law, to make pretax contributions and after tax (Roth) contributions to the 401(k) feature of the Profit Sharing Plan.

The Company does

not match employee contributions within the 401(k) feature of the Profit Sharing Plan and the Company can terminate the Profit Sharing Plan at any time.

Benefits pursuant to the Profit Sharing Plan vest 0 % during the first year of participation, 25 % per full year

thereafter and after five years such benefits are fully vested.

Bank-Owned Life Insurance

The Company has purchased single premium life insurance policies on the lives of certain key employees of the Company.

These policies provide:

(1) financial protection to the Company in the event of the death of a key employee;

significant income to the Company to offset the expense associated with the ERP and other employee benefit plans, since the interest earned on the cash surrender value of the policies is tax exempt as long as the policies are used to finance

employee benefits.

As compensation to each employee for agreeing to allow the Company to purchase an insurance policy on his or her life, split dollar agreements have been entered into with those employees.

These agreements provide for a division

of the life insurance death proceeds between the Company and each employee’s designated beneficiary or beneficiaries.

The Company earned tax-exempt interest on the life

insurance policies of $ 2.4 million, $ 2.0

million, and $ 2.2 million for the three years ended December 31, 2024, 2023, and 2022, respectively.

As of December 31, 2024 and 2023,

the total cash surrender value of the insurance policies was $ 74.1 million and $ 74.9 million, respectively.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Additionally, if the Company decided to defer interest on the subordinated debentures, the Company would be prohibited, by the terms of the debentures, from paying cash dividends on the Company’s common stock.

Note 10—Fair Value

The Company uses fair value measurements to record fair value adjustments to certain financial and

non-financial assets and liabilities and to determine fair value disclosures.

Various financial instruments such as available-for-sale securities are recorded at fair value on a recurring basis.

Additionally, from time to time, the Company may be

required to record at fair value other assets and liabilities on a non-recurring basis, such as collateral dependent loans and other real estate owned.

These non-recurring fair value adjustments typically involve lower of cost or fair value

accounting or write-down of individual assets.

The Company uses fair value measurements to record fair value adjustments to certain financial and non-financial assets and liabilities and to determine fair value disclosures.

Various financial instruments

such as available-for-sale securities are recorded at fair value on a recurring basis.

Additionally, from time to time, the Company may be required to record at fair value other assets and liabilities on a non-recurring basis, such as

collateral dependent loans and other real estate owned.

These non-recurring fair value adjustments typically involve lower of cost or fair value accounting or write-down of individual assets.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Depending on the nature of the asset or liability, the Company uses

various valuation techniques and assumptions when estimating fair value.

Depending on the nature of the

asset or liability, the Company uses various valuation techniques and assumptions when estimating fair value.

For accounting disclosure purposes, a three-level valuation hierarchy of fair value measurements has been established.

The valuation hierarchy is based upon the transparency

of inputs to the valuation of an asset or liability as of the measurement date.

valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.

The three levels are defined as follows:

Level 1 – inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in

markets that are not active, and inputs that are observable for the assets or liabilities, either directly or indirectly (such as interest rates, yield curves, and prepayment speeds).

Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that

are not active, and inputs that are observable for the assets or liabilities, either directly or indirectly (such as interest rates, yield curves, and prepayment speeds).

Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value.

These may be internally developed, using the Company’s best information and assumptions

that a market participant would consider.

These may be internally developed, using the Company’s best information and assumptions that a market

participant would consider.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 10—Fair Value—Continued

The carrying amounts and estimated fair values of financial instruments held by the Company are set forth below.

Fair value estimates are made at a specific point in time based on

relevant market information.

Fair value estimates are made at a specific point in time based on relevant market information.

They do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.

Because no market exists for many of the Company’s

financial instruments, fair value estimates are based on judgments regarding future expected loss experience, risk characteristics and economic conditions.

These estimates are subjective, involve uncertainties, and cannot be determined with

Changes in assumptions could significantly affect the estimates.

Because no market exists for many of the Company’s financial instruments,

fair value estimates are based on judgments regarding future expected loss experience, risk characteristics and economic conditions.

These estimates are subjective, involve uncertainties, and cannot be determined with precision.

assumptions could significantly affect the estimates.

Management monitors the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy.

Changes in economic

conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another.

Changes in economic conditions

or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another.

In such instances, the transfer is reported at the beginning of the reporting period.

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

liabilities or total earnings.

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

total earnings.

Securities classified as available-for-sale are reported at fair value on a recurring basis utilizing Level 1, 2 and 3 inputs.

For these securities, the Company obtains fair

value measurements from an independent pricing service.

For these securities, the Company obtains fair value measurements from an

independent pricing service.

The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S.

Treasury yield curve, live trading levels, trade execution data,

market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

Treasury yield curve, live trading levels, trade execution data, market consensus

prepayment speeds, credit information and the bond's terms and conditions, among other things.

The Company does not record all loans and leases at fair value on a recurring basis.

However, from time to time, a loan or lease is considered collateral dependent and an

allowance for credit losses is established.

Once a loan or lease is identified as collateral dependent, management measures specific reserves in accordance FASB ASC Topic 326.

The fair value of collateral dependent loans or leases is

estimated using one of several methods, including collateral value when the loan is collateral dependent, market value of similar debt, enterprise value, and discounted cash flows.

Collateral dependent loans and leases not requiring an

allowance represent loans and leases for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans and leases.

Collateral dependent loans and leases where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy.

In determining the value of real estate collateral, the Company

relies on external and internal appraisals of property values depending on the size and complexity of the real estate collateral.

These appraisals may utilize a single valuation approach or a combination of approaches including sales

comparison, cost and the income approach.

Adjustments are often made in the appraisal process by the appraisers to take into account differences between the comparable sales and income and other available data.

Such adjustments can be

significant and typically result in a Level 3 classification of the inputs for determining fair value.

The valuation technique used for Level 3 non-recurring collateral dependent loans is primarily the sales comparison approach less

estimated selling costs.

The Company maintains a list of qualified property appraisers who review appraisal reports for reasonableness.

In the case of non-real estate collateral, reliance is placed on a variety of sources, including

external estimates of value and judgments based on the experience and expertise of internal specialists.

Values of all loan collateral are regularly reviewed by credit administration.

Unobservable inputs to these measurements, which include

estimates and judgments often used in conjunction with appraisals, are not readily quantifiable.

These measurements are classified as Level 3.

FARMERS & MERCHANTS BANCORP

1 unchanged sentence

Note 10—Fair Value—Continued

The Company does not record all loans and leases at fair value on a recurring basis.

However, from time to time, a loan or

lease is considered collateral dependent and an allowance for credit losses is established.

Once a loan or lease is identified as collaterally dependent, management measures specific reserves in accordance FASB ASC Topic 326 .

These appraisals may utilize a single valuation approach or a combination of approaches including sales comparison, cost and the income approach.

Adjustments are often made in the appraisal process by the appraisers to take

into account differences between the comparable sales and income and other available data.

Such adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value.

The valuation technique used

for Level 3 non-recurring collateral dependent loans is primarily the sales comparison approach less estimated selling costs.

Other Real Estate Owned (“OREO”) is reported at fair value on a non-recurring basis.

Fair values are based on recent real estate appraisals.

These appraisals may use a single valuation approach or a

combination of approaches including sales comparison, cost and the income approach.

Adjustments are often made in the appraisal process by the appraisers to take into account differences between the comparable sales and income and other available

These appraisals may use a single valuation approach or

a combination of approaches including sales comparison, cost and the income approach.

Adjustments are often made in the appraisal process by the appraisers to take into account differences between the comparable sales and income and other

available data.

Such adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value.

The valuation technique used for Level 3 non-recurring OREO is primarily the sales comparison approach less

estimated selling costs.

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring and non-recurring basis and indicate the fair

value hierarchy of the valuation techniques utilized by the Company to determine such fair value for the periods indicated.

The valuation technique used for Level 3 non-recurring OREO is primarily the sales comparison

approach less estimated selling costs.

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

December 31, 2025

1 unchanged sentence

(Dollars in thousands)

Carrying Amount

Fair valued on a recurring basis:

Financial assets

Available-for-sale securities

3 unchanged sentences

Collateralized mortgage obligations

Municipal securities

Corporate securities

Other equity investments

Derivatives not designated as hedging instruments

Financial liabilities

Derivatives not designated as hedging instruments

Fair valued on a non-recurring basis:

Collateral dependent loans

Other real estate owned

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11—Fair Value—Continued

December 31, 2024

1 unchanged sentence

(Dollars in thousands)

Carrying Amount

Fair valued on a recurring basis:

8 unchanged sentences

Other real estate owned

Collateral dependent

While the overall

loan portfolio is not carried at fair value, the Company periodically records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans.

Nonrecurring adjustments also include certain specific reserves for collateral dependent loans when establishing the allowance for credit losses on loans.

Such amounts are generally based on the fair value of the underlying collateral supporting

In determining the value of real estate collateral, the Company relies on external and internal appraisals of property values depending on the size and complexity of the real estate collateral.

The Company maintains a list of qualified

property appraisers who review appraisal reports for reasonableness.

In the case of non-real estate collateral, reliance is placed on a variety of sources, including external estimates of value and judgments based on the experience and expertise

of internal specialists.

Values of all loan collateral are regularly reviewed by credit administration.

Unobservable inputs to these measurements, which include estimates and judgments often used in conjunction with appraisals, are not readily

quantifiable.

These measurements are classified as Level 3.

FARMERS & MERCHANTS BANCORP

1 unchanged sentence

Note 10—Fair Value—Continued

The following tables summarize the carrying amount and estimated fair values of the Company’s financial assets and liabilities not carried at fair value, and indicate the

fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value for the periods indicated.

The following tables summarize the carrying amount and estimated fair values of the Company’s financial assets and liabilities not carried at fair value, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value for the periods indicated.

December 31, 2025

1 unchanged sentence

(Dollars in thousands)

Carrying Amount

Total Fair Value

Financial assets:

9 unchanged sentences

(Dollars in thousands)

Carrying Amount

Total Fair Value

Financial assets:

7 unchanged sentences

Non-marketable securities include FHLB stock, Pacific Coast Bankers’ Bank stock and TIB, National Association stock which are recorded at cost.

Ownership of these stocks is

restricted to member banks.

Ownership of these stocks is restricted to member banks.

Purchases and sales of these securities are at par value with the issuer.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11—Earnings Per Share

Basic earnings per common share is computed by dividing net earnings allocated to common shareholders by the weighted average number of common shares outstanding during the applicable period.

There were no outstanding restricted stock awards prior to 2025.

Shares are excluded from the computations of diluted earnings per share when their inclusion has an anti-dilutive effect.

For the year ended December 31, 2025, there were no potential common shares that were anti-dilutive.

The following table presents the factors used in the earnings per share computation for the periods indicated:

Year Ended December 31,

(Dollars in thousands, except share and per share amounts)

Weighted average common shares outstanding for basic earnings per common share

Dilutive potential common shares

Shares used in computing diluted earnings per common share

Basic earnings per common share

Diluted earnings per commons share

Note 12—Employee Benefit Plans

Executive Retirement Plan

The Company, through the Bank, sponsors an Executive Retirement Plan (“ERP”) for certain executive level employees.

The ERP is a non-qualified deferred compensation plan and was developed to supplement the

Company’s Profit Sharing Plan, which, as a qualified retirement plan, has a ceiling on benefits as set by the Internal Revenue Service.

The ERP is comprised of:

(1) a Performance Component which makes contributions based upon long-term

cumulative profitability and increase in market value of the Company;

(2) a Salary Component which makes contributions based upon participant salary levels;

and (3) an Equity Component for which contributions are discretionary and subject

to Board of Directors approval.

The Company maintains a Rabbi Trust to fund, in part, the ERP.

The Rabbi Trust is an irrevocable grantor trust to which the Company may contribute assets for the limited purpose of funding a non-qualified

deferred compensation plan.

The Company may not use the assets of the Rabbi Trust for any purpose other than meeting its obligations under the ERP;

however, the assets of the Rabbi Trust remain subject to the claims of its creditors and are

included in the consolidated financial statements.

The Company contributes cash to the Rabbi Trust from time to time for the sole purpose of funding the ERP.

The Rabbi Trust will use any cash the Company contributes to purchase shares of

common stock of the Company, and other financial instruments, on the open market.

ERP contributions are invested in a mix of financial instruments;

however, the Equity Component contributions are invested primarily in common stock of the

Effective November 29, 2024, each component of the ERP was terminated and frozen and no future contributions are permitted to be made.

On December 10, 2025, the account balances were liquidated and paid out to eligible

participants.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 12—Employee Benefit Plans—Continued

The Company incurred no expense to the ERP during the year ended December 31, 2025 due to the freezing of the plans, a net expense of $ 9.0 million during the year ended December 31, 2024, and a net expense of $ 9.1 million during the year ended December 31, 2023.

The Company’s carrying value of the liability under the ERP was $ 72 ,000 as of December 31, 2025 and $ 61.4 million as of December 31, 2024, which is included in interest payable and other liabilities on the balance sheet.

There were no shares of common stock held as investments in the Rabbi Trust of the ERP as of December 31, 2025 and 49,173 shares with an historical cost basis of $ 31.8 million at December 31, 2024.

All amounts have been fully funded into the Rabbi Trust as of December 31, 2025 and 2024.

The consolidated investments held in the Rabbi Trust are recorded at fair value with changes in unrealized gains or losses recorded within non-interest income and the equal and offsetting charges in the related liability are recorded in non-interest expense in the consolidated statements of income.

Net gains on ERP plan investments were $ 3.6 million in 2025 compared to net gains of $ 2.7 million in 2024 and $ 2.6 million in 2023.

Balances in non-qualified deferred compensation plans may be invested in financial instruments whose market value fluctuates based upon trends in interest rates and stock prices.

Senior Management Retention Plan

The Company, through the Bank, sponsors a Senior Management Retention Plan (“SMRP”) for certain senior level employees.

The SMRP is a non-qualified deferred compensation plan and was developed to supplement

the Company’s Profit Sharing Plan, which, as a qualified retirement plan, has a ceiling on benefits as set by the Internal Revenue Service.

All contributions are discretionary and subject to the Board of Directors approval.

maintains a Rabbi Trust to fund, in part, the SMRP.

The Rabbi Trust is an irrevocable grantor trust to which the Company may contribute assets for the limited purpose of funding a non-qualified deferred compensation plan.

The Company may

not use the assets of the Rabbi Trust for any purpose other than meeting its obligations under the SMRP;

however, the assets of the Rabbi Trust remain subject to the claims of its creditors and are included in the consolidated financial

The Company contributes cash to the Rabbi Trust from time to time for the sole purpose of funding the SMRP.

The Rabbi Trust will use any cash the Company contributes to purchase shares of common stock of the Company, and other

financial instruments, on the open market.

Contributions to the SMRP are invested primarily in common stock of the Company.

Effective November 29, 2024 the SMRP was terminated and frozen and no future contributions are permitted to be made.

On December 10, 2025, the account balances were liquidated and paid out to eligible participants.

The Company incurred no expense for the SMRP during the year ended December 31, 2025 due to the freezing of the plans, a net expense of $ 4.0 million during the year ended December 31, 2024 and a net expense of $ 4.1 million during the year ended December 31, 2023.

The Company recognized the recapture of expense of $ 79 ,000 due to forfeitures within the plan during the year ended December 31, 2025.

The Company’s carrying value of the liability under the SMRP was $ 2.1 million as of December 31, 2025 and $ 21.2 million as of December 31, 2024, which is included in interest payable and other liabilities on the balance sheet.

The Company’s shares of stock held as investments in the Rabbi Trust of the SMRP as of December 31, 2025 and December 31, 2024 totaled 1,073 and 19,351 shares with an historical cost basis of $ 1.1 million and $ 14.6 million, respectively.

All amounts have been fully funded into the Rabbi Trust as of December 31, 2025 and 2024.

Net gains on SMRP plan investments were $ 1.1 million in 2025, $ 0.5 million in 2024 and $ 0.4 million in 2023.

Balances in non-qualified deferred compensation plans may be invested in financial instruments whose market value fluctuates based upon trends in interest rates and stock prices.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 12—Employee Benefit Plans—Continued

Profit Sharing Plan

The Company, through the Bank, sponsors a Profit Sharing Plan for substantially all full-time employees of the Company with one or more years of service.

Participants receive up to two annual employer contributions, one is mandatory and the other is discretionary.

The mandatory contributions to the Profit Sharing Plan are made according to a predetermined set of criteria.

Mandatory contributions totaled $ 2.1 million, $ 2.0 million, and $ 2.0 million for the years ended December 31, 2025, 2024, and 2023, respectively.

The discretionary contributions to the Profit Sharing Plan are determined annually by the Board of Directors.

The discretionary contributions totaled $ 1.8 million, $ 1.8 million, and $ 1.9 million for the years ended December 31, 2025, 2024, and 2023, respectively.

Company employees are permitted, within limitations imposed by tax law, to make pretax contributions and after tax (Roth) contributions to the 401(k) feature of the Profit Sharing Plan.

The Company does not match employee contributions within the 401(k) feature of the Profit Sharing Plan and the Company can terminate the Profit Sharing Plan at any time.

Benefits pursuant to the Profit Sharing Plan vest 0 % during the first year of participation, 25 % per full year thereafter and after five years such benefits are fully vested.

Bank-Owned Life Insurance

The Company has purchased single premium life insurance policies on the lives of certain key employees of the Company.

These policies provide:

(1) financial protection to the Company in the event of the death

of a key employee;

and (2) significant income to the Company to offset the expense associated with the ERP and other employee benefit plans, since the interest earned on the cash surrender value of the policies is tax exempt as long as the

policies are used to finance employee benefits.

As compensation to each employee for agreeing to allow the Company to purchase an insurance policy on his or her life, split dollar agreements have been entered into with those employees.

These agreements provide for a division of the life insurance death proceeds between the Company and each employee’s designated beneficiary or beneficiaries.

The Company earned tax-exempt interest on the life insurance policies of $ 2.5 million, $ 2.4 million, and $ 2.0 million for the three years ended December 31, 2025, 2024, and 2023, respectively.

As of December 31, 2025 and 2024, the total cash surrender value of the insurance policies was $ 76.6 million and $ 74.1 million, respectively.

Note 13—Stock-Based Compensation

Restricted Stock Award Plan

At the special meeting of shareholders held on November 25, 2024, the Company’s shareholders approved the Farmers & Merchants Bancorp 2025 Restricted Stock Retirement Plan (the “2025 Plan”).

The 2025 Plan provides for the issuance of up to 80,000 shares to directors and employees of the Company and its subsidiaries and affiliates.

Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at issue date.

Due to the illiquidity of the stock, the fair value of the stock is determined using a volume weighted average price over a 30 -day period as of the grant date.

The awards contain a service condition, which requires the employees to provide services during the applicable vesting periods.

The awards were comprised of a one-year award for directors and two-year , three-year and four-year awards for employees depending on their roles and responsibilities.

The awards vest on a pro-rated basis over the life of the award.

Total remaining shares issuable under the 2025 Plan were 48,332 at December 31, 2025, including 1,992 shares forfeited and again available for future awards under the 2025 Plan.

The unvested restricted shares generally have voting rights and dividend rights;

however, the dividends are paid to the holder only when the restricted shares vest.

Dividends on forfeited restricted shares are also forfeited.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 13—Stock-Based Compensation—Continued

During the year ended December 31, 2025, the Company issued the following restricted stock awards under the 2025 Plan:

Date of Grant

Number of Shares

Volume Weighted Average

Price over a 30-day Period as

of the Grant Date

February 3, 2025

October 14, 2025

December 9, 2025

The following table summarizes the change in the Company’s nonvested shares for the year ended December 31, 2025:

Number of Shares

Average of the Volume

Weighted Average Price

over a 30-day Period as of

the Grant Date

Restricted Stock Award

Nonvested shares outstanding, January 1, 2025

Nonvested shares outstanding, December 31, 2025

For the year ended December 31, 2025, the Company recognized $ 11.6 million in compensation cost related to shares granted under the 2025 Plan.

As of December 31, 2025, there was $ 22.3 million of total unrecognized compensation cost related to nonvested shares granted under the 2025 Plan.

The remaining cost is expected to be recognized over a weighted-average period of 1.69 years.

No shares of restricted stock vested during the year ended December 31, 2025.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14—Derivatives

Derivatives Not Designated as Hedging Instruments

As a customer accommodation, the Company may enter into interest rate swaps with its loan customers.

The Company also enters into corresponding offsetting derivatives with third parties.

these derivatives represent economic hedges, they do not qualify as hedges for accounting purposes.

The fair value of these swaps are recorded as components of other assets and other liabilities in the Company’s consolidated balance sheets.

December 31, 2025

December 31, 2024

(Dollars in thousands)

Notional Amount

Derivatives not designated as hedging instruments:

Interest rate swaps related to customer loans

Total included in other assets

Derivatives not designated as hedging instruments:

Interest rate swaps related to customer loans

Total included in other liabilities

(Dollars in thousands)

Location of Gain or (Loss)

Recognized in Income on

Derivatives not designated as hedging instruments:

Interest rate swaps related to loan customers

Other (expense) income

Note 15—Commitments and Contingencies

In the normal course of business, the Company enters into financial instruments with off balance sheet risk in order to meet the financing needs of its customers and to reduce its

own exposure to fluctuations in interest rates.

In the normal course of business, the Company enters into financial instruments with off balance sheet risk in order to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates.

These instruments include commitments to extend credit, letters of credit, and other types of financial guarantees.

1 unchanged sentence

(Dollars in thousands)

Commitments to extend credit, including

unsecured commitments of $ 20,535 and $ 19,858 as of December 31, 2024 and 2023, respectively

Commitments to extend credit, including unsecured commitments of $ 20,995 and $ 20,535 as of December 31, 2025 and 2024, respectively

Stand-by letters of credit, including unsecured commitments of $ 5,248 and $ 4,490 as of December 31, 2025 and 2024, respectively

The Company’s exposure to credit loss in the event of nonperformance by the other party with regard to standby letters of credit, undisbursed loan commitments, and financial guarantees is represented by the contractual notional

amount of those instruments.

The Company's exposure to credit loss in the event of nonperformance by the other party with regard to standby letters of credit, undisbursed loan commitments, and financial guarantees is represented by the contractual notional amount of those instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

The Company uses the same credit policies in making commitments and

conditional obligations as it does for recorded balance sheet items.

The Company uses the same credit policies in making commitments and conditional obligations as it does for recorded balance sheet items.

The Company may or may not require collateral or other security to support financial instruments with credit risk.

Evaluations of each customer’s creditworthiness are performed on

a case-by-case basis.

The estimated exposure to loss from these commitments is included in the allowance for credit losses for unfunded loan commitments, which amounted to $ 2.7 million and $ 3.7 million for the years ended December 31, 2024 and 2023,

respectively.

Evaluations of each customer's creditworthiness are performed on a case-by-case basis.

The estimated exposure to loss from these commitments is included in the allowance for credit losses for unfunded loan commitments, which amounted to $ 3.3 million and $ 2.7 million for the years ended December 31, 2025 and 2024, respectively.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 15—Commitments and Contingencies—Continued

Standby letters of credit are conditional commitments issued by the Company to guarantee performance of or payment for a customer to a third-party.

Outstanding standby letters of

credit have maturity dates ranging from 1 to 48 months with a final expiration in some cases up to October 2028.

Outstanding standby letters of credit have maturity dates ranging from 1 to 51 months with a final expiration in some cases up to April 2030.

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

The Company has commitments to fund investments in LIHTC partnerships and limited liability companies.

The Company invests in LIHTC partnerships and solar tax funds that are designed to generate a return primarily through

the realization of federal tax credits.

The Company accounts for these investments by amortizing the cost of tax credit investments over the life of the investment using a proportional amortization method and tax credit investment amortization

expense is a component of the provision for income taxes.

The Company has commitments to fund investments in low-income housing tax credit investments (“LIHTC”) partnerships and limited liability companies.

The Company invests in LIHTC partnerships and solar tax funds that are designed to generate a return primarily through the realization of federal tax credits.

At December 31, 2025 and 2024, the balance of the investments in LIHTC was $ 45.5 million and $ 43.8 million, respectively.

These balances are reflected in the other assets line on the consolidated balance sheets.

Total unfunded commitments related to the investments in LIHTC totaled

$ 18.9 million and $ 15.5 million at December 31, 2024 and 2023, respectively.

These balances are reflected

in the interest payable and other liabilities line on the consolidated balance sheets.

Total unfunded commitments related to the investments in LIHTC totaled $ 16.8 million and $ 18.9 million at December 31, 2025 and 2024, respectively.

These balances are reflected in the interest payable and other liabilities line on the consolidated balance sheets.

The Company expects to fulfill these commitments through 2042.

Additionally, during the years ended December 31, 2024 and 2023, the Company

recognized tax credits from its investments in LIHTC of $ 4.4 million and $ 3.6 million, respectively .

Additionally, during the years ended December 31, 2025 and 2024, the Company recognized tax credits from its investments in LIHTC of $ 5.1 million and $ 4.4 million, respectively.

In the ordinary course of business, the Company becomes involved in litigation arising out of its normal business activities.

Management, after consultation with legal counsel,

believes that the ultimate liability, if any, resulting from the disposition of such claims would not be material in relation to the financial position of the Company.

Management, after consultation with legal counsel, believes that

the ultimate liability, if any, resulting from the disposition of such claims would not be material in relation to the financial position of the Company.

The Company may be required to maintain average reserves on deposit with the FRB primarily based on deposits outstanding.

Reserve requirements are offset by the Company’s vault cash

and deposit balances maintained with the FRB.

Reserve requirements are offset by the Company’s vault cash and

deposit balances maintained with the FRB.

FARMERS & MERCHANTS BANCORP

2 unchanged sentences

Lessee – Operating Leases

Operating leases in which we are the

lessee are recorded as operating lease right-of-use (“ROU”) assets and operating lease liabilities, included in other assets and other liabilities , respectively, on our consolidated balance sheets.

We do not currently have any significant finance leases in which we are the

Operating lease ROU assets represent

our right to use an underlying asset during the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease.

ROU assets and operating lease liabilities are recognized at lease commencement based

on the present value of the remaining lease payments using a discount rate that represents our incremental borrowing rate at the lease commencement date.

Operating leases in which we are the lessee are recorded as operating lease right-of-use (“ROU”) assets and operating lease liabilities, included in other assets and other liabilities , respectively, on our consolidated balance sheets.

We do not currently have any significant finance leases in which we are the lessee.

Operating lease ROU assets represent our right to use an underlying asset during the lease term and operating lease liabilities represent our obligation to make lease payments arising from the

ROU assets and operating lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using a discount rate that represents our incremental borrowing rate at the

lease commencement date.

ROU assets are further adjusted for lease incentives.

Operating lease expense, which is

comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability, is recognized on a straight-line basis over the lease term, and is recorded net in occupancy expense in the consolidated statements of

Our leases relate primarily to office

space and bank branches with remaining lease terms of generally nine months to 7 years.

Operating lease expense, which is comprised of amortization of the ROU asset and the implicit interest accreted on the operating lease liability,

is recognized on a straight-line basis over the lease term, and is recorded net in occupancy expense in the consolidated statements of income.

Our leases relate primarily to office space and bank branches with remaining lease terms of generally nine months to 7 years.

Certain lease arrangements contain extension options that typically range from 5 to 10 years at the then fair market rental rates.

ASC 842 requires lessees to evaluate whether option

periods, if available, will be exercised in order to determine the full life of the lease.

ASC 842 requires lessees to evaluate whether option periods, if available, will be exercised in order to determine the full life of the lease.

The Company used the first option period, unless it is a relatively new lease that has a long initial lease term or other extenuating circumstances.

As of December 31, 2024, operating

lease ROU assets and liabilities were $ 2.2 million and $ 2.3 million, respectively.

As of December 31, 2025, operating lease ROU assets and liabilities were $ 1.6 million and $ 1.7 million, respectively.

As of December 31, 2024, operating lease ROU assets and liabilities were $ 2.2 million and $ 2.3 million, respectively.

Operating lease expenses totaled $ 798 ,000, $ 758 ,000 and $ 737 ,000 for the years ended December 31, 2025, 2024 and 2023, respectively.

13 unchanged sentences

Net present value of lease liabilities

As of December 31, 2024, we have no additional operating leases for office space that have not yet commenced or that are anticipated to commence during the first quarter of 2025.

As of December 31, 2025, we had no additional operating leases for office space that had not yet commenced or that are anticipated to commence during the first quarter of 2026.

Lessor – Direct Financing Leases

The Company is the lessor in direct

finance lease arrangements.

The Company is the lessor in direct finance lease arrangements.

Leases are recorded at the principal balance outstanding, net of unearned income and charge-offs.

Interest income is recognized using the interest method.

Leases typically have a maturity of three to ten years , and fixed rates that

are most often tied to Treasury indices with an appropriate spread based on the amount of perceived risk.

Leases typically have a maturity of three to ten years , and fixed rates that are most often tied to Treasury indices with an appropriate spread based on the amount of perceived risk.

Credit risks are underwritten using the same credit criteria the Company would use when making an equipment term loan.

Residual value risk is

managed with qualified, independent appraisers that establish the residual values the Company uses in structuring a lease.

Lease payments due to the Company are

typically fixed and paid in equal installments over the lease term.

Variable lease payments that do not depend on an index or a rate (e.g., property taxes) that are paid directly by the Company are minimal.

The majority of property taxes are paid

directly by the client to third-parties and are not considered part of variable payments and therefore are not recorded by the Company.

As a lessor, the Company leases

certain types of agriculture equipment, solar equipment, construction equipment and other equipment to its customers.

The Company’s net investment in direct financing leases, included in the line item “Loans and leases held for investment, net of

unearned income” on the balance sheet, was $ 175.5 million at December 31, 2024 and $ 167.1 million at December 31, 2023.

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

At the conclusion of the lease, the lessee has the option to extend the lease, purchase the leased asset or return the leased asset to the Company.

Lease payments due to the Company are typically fixed and paid in equal installments over the lease term.

Variable lease payments that do not depend on an index or a rate (e.g., property

taxes) that are paid directly by the Company are minimal.

The majority of property taxes are paid directly by the client to third-parties and are not considered part of variable payments and therefore are not recorded by the

As a lessor, the Company leases certain types of agriculture equipment, solar equipment, construction equipment and other equipment to its customers.

The Company's net investment in direct financing leases, included in the line item “Loans and leases held for investment, net of unearned income” on the balance sheet, was $ 181.0 million at December 31, 2025 and $ 179.7 million at December 31, 2024.

The following table provides the components of leases receivable income for the period indicated:

Year Ended December 31,

(Dollars in thousands)

Interest income on net investments in leases

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 16—Leases—Continued

The following table presents the components of lease receivables as of the date indicated:

(Dollars in thousands)

Direct financing leases

Lease receivables

Unguaranteed residual values

Total net investment in direct financing leases

The following table presents maturities of direct financing lease receivables for the years ending December 31:

(Dollars in thousands)

Total lease payments

unearned interest income and guaranteed residual value

Net lease receivables

Note 17—Income Taxes

Pretax income from continuing operations is all from domestic activities.

The Company has no foreign operations or foreign tax expense.

The components of income tax expense (benefit) are as follows:

2 unchanged sentences

Income tax expense (benefit)

Total current income tax

Total current income tax expense

Total deferred income tax expense (benefit)

Total provision

for income tax expense

The combined federal and state income tax expense differs from that computed at the federal statutory corporate tax rate as follows:

Total provision for income tax expense

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 17—Income Taxes—Continued

The combined federal and state income tax expense differs from that computed at the federal statutory corporate tax rate as follows and is presented on a retrospective basis under ASU 2023-09:

Year Ended December 31,

4 unchanged sentences

Low-income housing tax credits

Compensation expense

Nontaxable and nondeductible items

Bank-owned life insurance

Tax-exempt interest income

Tax-exempt interest income, net of TEFRA

Nondeductible items

Compensation expense

Tax effect of low-income housing tax credit losses

Low-income housing tax credit amortization

Total income tax expense and effective tax rate

* State taxes in California made up the majority (greater than 50%) of the tax effect in the category.

The increase in compensation expense deduction above is related to the distribution of deferred compensation (non-qualified retirement plans).

The cash paid for income taxes (net of refunds) during the year was as follows:

Year Ended December 31,

(Dollars in thousands)

State and local:

Total income taxes paid

FARMERS & MERCHANTS BANCORP

8 unchanged sentences

Accrued liabilities

Tax credit carry forward

Loss carryforwards

State income taxes

Lease liabilities

Acquired net operating losses

Low-income housing tax investments

Acquired loans fair valuation

Acquired OREO fair valuation

Tax credit carry forward

Acquired loans fair valuation and other

Total deferred tax assets

7 unchanged sentences

FHLB dividends

Investments (other K-1s)

Prepaid assets

1 unchanged sentence

Net deferred tax assets

The Company believes, based on available information, that more likely than not, the net deferred tax asset will be realized in the normal

course of operations.

Accordingly, no valuation allowance has been recorded at December 31, 2024 and 2023.

The decrease in net

deferred tax assets of $ 7.0 million was primarily due to sale of investment tax credits related to commercial leasing activities of $ 7.4 million.

The impact of a tax position is recognized in the financial statements if that position is more likely than not of being sustained on

audit, based on the technical merits of the position.

As of December 31, 2024 and 2023, the Company did no t have any significant

uncertain tax positions.

The Company includes any interest and penalties associated with unrecognized tax benefits within the provision for income taxes.

The Company does not expect a material change to the total amount of unrecognized tax benefits

in the next twelve months.

The Company files U.S.

and state income tax returns in jurisdictions with various statutes of limitations.

The 2020 through 2024 tax years remain subject to selection for examination as of December 31, 2024.

As of December 31, 2024 and 2023, the Company had net

operating loss carryovers of $ 1.6 million and $ 1.7

million, respectively .

The Company had $ 2.4 million

and $ 2.9 million in tax credit carry-forwards as of December 31, 2024 and December 31, 2023 , respectively.

The Company believes, based on available information, that more likely than not, the net deferred tax asset will be realized in the normal course of operations.

Accordingly, no valuation allowance has been recorded at December 31, 2025 or 2024.

The decrease in net deferred tax assets of $ 11.1 million was primarily due to a decrease in unrealized losses on debt securities and an increase in deferred tax liabilities from commercial leasing activities.

As of December 31, 2025 and 2024, the Company had federal net operating loss carryovers of $ 8.0 million and $ 1.6 million, respectively.

The $ 1.6 million in federal net operating loss carryover expires in 2036, but the rest can be carried forward indefinitely.

As of December 31, 2025 and 2024, the Company also had a state net operating loss carryforward of $ 1.7 million which expires in 2036.

The Company had $ 21.4 million and $ 2.4 million in federal tax credit carry-forwards as of December 31, 2025 and December 31, 2024, respectively.

The tax credit carry-forwards have expiration dates ranging from 2026 to 2042 , for low-income housing tax credits.

The significant increase in carry-forward tax credits results from the reduction in taxable income, resulting in limitations to fully utilize tax credits that were generated in 2025.

The impact of a tax position is recognized in the financial statements if that position is more likely than not of being sustained on audit, based on the technical merits of the position.

Company believes that it has no material uncertain tax positions in the consolidated financial statements as of December 31, 2025 or 2024.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15—Condensed Financial Statements of Parent Company

Note 17—Income Taxes—Continued

The Company files U.S.

and state income tax returns in jurisdictions with various statutes of limitations.

The 2022 through 2025 federal tax years and the 2021 through 2025 state tax years remain subject to selection for examination as of December 31, 2025.

The IRS is in the process of reviewing the Company’s 2023 tax return including inquiries related to certain leasing investment tax credits.

The timing of when the IRS review will be complete and the potential outcome of the IRS review are both uncertain at this time.

Note 18—Condensed Financial Statements of Parent Company

Financial information pertaining only to Farmers and Merchants Bancorp, on a parent-only basis, is as follows:

31 unchanged sentences

Cash flows from investing activities:

Securities sold or matured

Purchase of securities

Net cash used in investing activities

1 unchanged sentence

Common stock repurchases

Purchase of treasury stock

Cash dividends paid

4 unchanged sentences

Note 19—Subsequent Events

In accordance with ASC Topic 855, “ Subsequent Events ”, which establishes general standards of accounting for and

disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after December 31, 2024 up through the date the Company issued the financial

During this period, there were no subsequent events that required recognition or disclosure.

In accordance with ASC Topic 855, “ Subsequent Events ”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but

before financial statements are issued, the Company has evaluated all events or transactions that occurred after December 31, 2025 up through the date the Company issued the financial statements.

During this period, there were no subsequent events

that required recognition or disclosure.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of

the disclosure controls and procedures (as required by Exchange Act Rules 240.13a-15(b) and 15d-14(a)).

Based on that evaluation, the CEO and CFO have concluded that as of the end of the period covered by this Report, the disclosure controls and

procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in reports that are filed or submitted under the Exchange Act are recorded, processed, summarized and timely reported as provided in

the SEC’s rules and forms.

REPORT OF MANAGEMENT

To the Board of Directors and Shareholders of Farmers & Merchants Bancorp

The management of Farmers & Merchants Bancorp (the “Company”) is responsible for the preparation, integrity, and fair presentation of its published financial statements and all other information presented in

this annual report.

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and, as such, include amounts based on informed judgments and estimates made by

In the opinion of management, the financial statements and other information herein present fairly the financial condition and operations of the Company at the dates indicated in conformity with accounting principles generally

accepted in the United States of America.

Management is responsible for establishing and maintaining an effective system of internal control over financial reporting.

The internal control system is augmented by written policies and procedures and by audits

performed by an internal audit staff (assisted in certain instances by outside third party audit resources other than the independent registered public accounting firm), which reports to the Audit & Risk Committee of the Board of Directors.

Internal auditors monitor the operation of the internal and external control system and report findings to management and the Audit & Risk Committee.

When appropriate, corrective actions are taken to address identified control deficiencies

and other opportunities for improving the system.

The Audit & Risk Committee provides oversight to the financial reporting process.

There are inherent limitations in the effectiveness of any system of internal control, including the

possibility of human error and circumvention or overriding of controls.

Accordingly, even an effective internal control system can provide only reasonable assurance with respect to financial statement preparation.

Further, because of changes in

conditions, the effectiveness of an internal control system may vary over time.

The Audit & Risk Committee of the Board of Directors is comprised entirely of outside directors who are independent of the Company’s management.

The Audit & Risk Committee is responsible for the selection

of the independent registered public accounting firm.

It meets periodically with management, the independent auditors and the internal auditors to ensure that they are carrying out their responsibilities.

The Audit & Risk Committee is also responsible for performing an oversight role by reviewing and monitoring the financial, accounting, and auditing procedures of the Company in addition to reviewing the

Company’s financial reports.

The independent auditors and the internal auditors have full and free access to the Audit & Risk Committee, with or without the presence of management, to discuss the adequacy of the internal control structure for

financial reporting and any other matters, which they believe should be brought to the attention of the Committee.

Chairman, President, and Chief Executive Officer

Executive Vice President and Chief Financial Officer

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Farmers & Merchants Bancorp management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities

Exchange Act of 1934, as amended.

The Company’s internal control over financial reporting is designed by, or under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer and effected by management, and other

personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of

America (“GAAP”).

The Company’s internal control over financial reporting includes those policies and procedures that:

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with

authorizations of management and directors of the Company;

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.

There are inherent limitations in any internal control, no matter how well designed and misstatements due to error or fraud may occur and not be detected, including the possibility of circumvention or overriding of

Accordingly, even an effective internal control system can provide only reasonable assurance with respect to financial statement preparation.

Further, because of changes in conditions, the effectiveness of an internal control system may

vary over time.

Management assessed the effectiveness of the internal control structure over financial reporting as of December 31, 2024.

This assessment was based on criteria for effective internal control over financial

reporting set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on this assessment, management believes that the Company’s internal control over financial reporting is effective as of December 31, 2024.

The Company’s independent registered public accounting firm has audited the consolidated financial statements for the year ended December 31, 2024, has issued an audit report on the Company’s internal control over

financial reporting.

Such audit report expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board as of

December 31, 2024 that appears on page 74.

Changes in Internal Controls

There have been no material changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the year ended December 31,

2024, to which this report relates that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

Other Information

During the quarter ended December 31, 2024, no director or officer (as defined in Rule 16a-1(f)

under the Exchange Act) of the Company adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” as each term is defined in Item 408(a) of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not Applicable

Directors, Executive Officers and Corporate Governance

Information regarding “Directors and Executive Officers” is set forth under the headings “Annual Meeting Business Matters – Proposal No.

1 – Election of Directors” and “Executive Compensation – Compensation

Discussion and Analysis – Executive Officers Who Are Not Directors” of the Company’s 2025 Annual Meeting Proxy Statement (“Proxy Statement”) and is incorporated herein by reference.

Information regarding “Delinquent Section 16(a) Reports” is set forth under the section “Other Matters – Delinquent Section 16(a) Reports” of the Company’s Proxy Statement and is incorporated herein by reference.

The information required by Item 10 regarding our insider trading policies is incorporated by reference from the information under the caption “Corporate Governance – Code of Ethics and Insider Trading Policy” in

our Proxy Statement.

A copy of our insider trading policy is filed as Exhibit 19 to this Form 10-K.

Information regarding the Company’s corporate governance and board committees is set forth under the heading “Corporate Governance – Board of Directors Meetings” and “– Committees of the Board” in the Company’s

Proxy Statement and is incorporated herein by reference.

Consistent with the requirements of the Sarbanes-Oxley Act, the Company has a Code of Conduct applicable to senior financial officers including the principal executive officer, principal financial officer and

principal accounting officer.

The Company will provide, without charge, a copy of the Code of Conduct to any stockholder by mail.

Requests should be sent to the Company’s address, Attention:

Shareholders Relations.

The Company intends to satisfy

the disclosure requirements under Item 5.05 of Form 8-K regarding amendments to and waivers of the Code of Conduct by posting such information on its website, at www.fmbonline.com .

Executive Compensation

Information regarding “Executive Compensation” is set forth under the headings “Director Compensation” and “Executive Compensation” of the Company’s Proxy Statement and is incorporated herein by reference.

Information regarding “Compensation Committee Interlocks and Insider Participation” is set forth under such heading under “Executive Compensation” in the Company’s Proxy Statement and is incorporated herein by

Information regarding the “Compensation Committee Report” is set forth under the heading “Report of the Personnel Committee of the Board of Directors on Executive Compensation” under “Executive Compensation” in the

Company’s Proxy Statement and is incorporated herein by reference.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information regarding “Security Ownership of Certain Beneficial Owners and Management” is set forth under such heading of the Company’s Proxy Statement and is incorporated herein by reference.

Information regarding “Equity Compensation Plan Information” is set forth under the heading “Executive Compensation – Compensation Discussion and Analysis – Qualified and Non-Qualified Retirement Programs” of the

Company’s Proxy Statement and is incorporated herein by reference.

Certain Relationships and Related Transactions, and Director Independence

Information regarding “Certain Relationships and Related Transactions, and Director Independence” is set forth under the heading “Corporate Governance – Certain Relationships and Related Person Transactions” and “

– Director Independence” of the Company’s Proxy Statement and is incorporated herein by reference.

Principal Accountant Fees and Services

Information regarding “Principal Accountant Fees and Services” is set forth under the heading “Fees and Services of Independent Registered Public Accounting Firm” of the Company’s Proxy Statement and is incorporated herein by reference.

Exhibits and Financial Statement Schedules

List of Financial Statements and Financial Statement Schedules

The following documents are filed as a part of this Form 10-K:

Financial Statements and

Financial Statement schedules required to be filed by Item 8 of this Form 10-K.

The following exhibits are required by Item 601 of Regulation S-K and are included as part of this Form 10-K:

Amended and Restated Certificate of Incorporation filed on Registrant’s Form 10-K for the year

ended December 31, 2022, and incorporated herein by reference.

Amended By-Laws , as amended February 11, 2025, filed as Exhibit 3.1 to the Registrant’s Form 8-K

filed on February 13, 2025, and incorporated herein by reference.

Certificate of Designation for the Series A Junior Participating Preferred Stock (included as Exhibit A to the

Rights Agreement between Farmers & Merchants Bancorp and Registrar and Transfer Company, dated as of August 5, 2008, filed as Exhibit 4.1 below), filed on the Registrant’s Form 10-Q for the quarter ended June 30, 2008, is

incorporated herein by reference.

Amended and Restated Rights Agreement , dated as of April 5, 2024, between the Company and

Computershare Trust, N.A., a federally chartered, limited purpose trust company (as successor to Registrar and Transfer Company), as Rights Agent, incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed on April 5,

Description of F&M Bancorp Capital Stock , filed on Registrant’s Form 10-K for the year

ended December 31, 2019.

Amended and Restated Employment Agreement effective April 1, 2024, between Farmers & Merchants Bank

of Central California and Kent A.

Steinwert , filed on Registrant’s Form 10-Q for the quarter ended March 31, 2024, is incorporated herein by reference.**

Amended and Restated Employment Agreement effective April 1, 2024, between Farmers & Merchants Bank

of Central California and Bart R.

Olson , filed on Registrant’s Form 10-Q for the quarter ended March 31, 2024, is incorporated herein by reference.

Amended and Restated Employment Agreement effective April 1, 2024, between Farmers & Merchants Bank

of Central California and Ryan J.

Misasi , filed on Registrant’s Form 10-Q for the quarter ended March 31, 2024, is incorporated herein by reference.

Amended and Restated Employment Agreement effective April 1, 2024, between Farmers & Merchants Bank

of Central California and David M.

Zitterow , filed on Registrant’s Form 10-Q for the quarter ended March 31, 2024, is incorporated herein by reference.

Amended and Restated Employment Agreement effective April 1, 2024, between Farmers & Merchants Bank

of Central California and John W.

Weubbe , filed on Registrant’s Form 10-Q for the quarter ended March 31, 2024, is incorporated herein by reference.

Employment Agreement effective April 22, 2024, between Farmers & Merchants Bank of Central California and Thomas Bennett ,

filed on Registrant’s Form 10-Q for the quarter ended March 31, 2024, is incorporated herein by reference.

Employment Agreement effective December 9, 2024, between Farmers & Merchants Bank of Central California and Troy D.

Executive Retirement Plan – Performance Component as amended on November 5, 2010, filed on Registrant’s Form

10-Q for the period ended September 30, 2010, is incorporated herein by reference.

Executive Retirement Plan – Retention Component as amended on November 5, 2010, filed on Registrant’s Form

10-Q for the period ended September 30, 2010, is incorporated herein by reference.

Executive Retirement Plan – Salary Component , amended and restated on November 29, 2014, filed on

Registrant’s Form 10-K for the year ended December 31, 2014, is incorporated herein by reference.

Executive Retirement Plan – Equity Component , amended and restated on November 29, 2014, filed on

Registrant’s Form 10-K for the year ended December 31, 2014, is incorporated herein by reference.

Senior Management Retention Plan , amended and restated on November 29, 2014, filed on Registrant’s Form 10-K

for the year ended December 31, 2014, is incorporated herein by reference.

Farmers & Merchants Bancorp 2025 Restricted Stock Retirement Plan , filed on Registrant’s Form

8-K filed on December 2, 2024, is incorporated herein by reference.

Farmers & Merchants Bancorp 2025 Restricted Stock Award Agreement , filed on Registrant’s Form

8-K filed on January 16, 2025, is incorporated herein by reference.

Insider Trading Policy*

Subsidiaries of the Registrant , filed on Registrant’s Form 10-K for the year ended December 31,

2003, is incorporated herein by reference.

Consent of Independent Registered Public Accounting Firm (Crowe LLP)*

Consent of Independent Registered Public Accounting Firm (Eide Bailly LLP)*

Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

Inline XBRL Taxonomy Extension Schema Document.

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

Inline XBRL Taxonomy Extension Definition Linkbase Document.

Inline XBRL Taxonomy Extension Label Linkbase Document.

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*Filed herewith

** Management contract or compensatory plan or arrangement

Form 10-K Summary

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, thereunto duly authorized on

March 14, 2025.

FARMERS & MERCHANTS BANCORP

Director, Chairman, President and Chief Executive Officer

(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 14, 2025, by the following persons on behalf of the registrant and in the capacities indicated.

Director, Chairman, President and Chief Executive Officer

(Principal Executive Officer)

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

/s/ Edward Corum, Jr.

Edward Corum, Jr.

/s/ Stephenson K.

Stephenson K.

/s/ Craig James

/s/ Gary Long

/s/ Kevin Sanguinetti

Kevin Sanguinetti

/s/ Deborah E.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk