What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2026-05-08 compared with 2025-11-07 · 1199 added, 484 removed, 640 unchanged (72% of the section changed)

3 unchanged sentences

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

September 30,

Cash and due from banks

8 unchanged sentences

Allowance for credit losses - loans and leases

Loans and leases held for investment, net

Loans held for investment, net

Bank-owned life insurance

Premises and equipment, net

Deferred income tax assets and income taxes receivable

Deferred income tax assets and income taxes receivevable

Accrued interest receivable

Other intangibles

Other real estate owned

LIABILITIES AND SHAREHOLDERS’ EQUITY

11 unchanged sentences

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, 726,294 and 699,798 issued and 721,411 and 699,798 outstanding at September 30, 2025 and December 31, 2024, respectively

Common shares, $ 0.01 par value, 7,500,000 authorized, 723,880 and 728,560 issued and 693,043 and 697,904 outstanding at March 31, 2026 and December 31, 2025, respectively

Additional paid-in capital

2 unchanged sentences

Treasury stock, at cost;

4,883 shares at September 30, 2025 and 0 shares at December 31, 2024

30,837 shares at March 31, 2026 and 30,656 shares at December 31, 2025

TOTAL SHAREHOLDERS’ EQUITY

4 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

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

5 unchanged sentences

Interest expense

Borrowed funds

Subordinated debentures

7 unchanged sentences

Increase in cash surrender value of BOLI

Net gain on sale of securities available-for-sale

Net gain on deferred compensation benefits

15 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

Other comprehensive income

Unrealized gains on available-for-sale securities

Reclassification adjustment for gains on available-for-sale securities

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

Net unrealized gains on securities

Income tax expense

Other comprehensive income, net of tax

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

Amortization of unrecognized gains/(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

Total comprehensive income

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the three and nine months ended September 30, 2025 and 2024

(Dollars in thousands, except share amounts)

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

Comprehensive

(Loss)/Income

Balance as of June 30, 2025

Balance as of December 31, 2024

Other comprehensive income, net of tax

Forfeiture of restricted stock awards

Issuance of restricted stock awards

Stock based compensation expense

Cash dividends declared ($ 5.00 per share)

Repurchase of common stock

Adjustment common stock excise tax

Purchase of treasury stock

Balance as of September 30, 2025

Balance as of June 30, 2024

Other comprehensive income, net of tax

Repurchase of common stock

Balance as of September 30, 2024

(Dollars in thousands, except share amounts)

Comprehensive

(Loss)/Income

Balance as of March 31, 2025

Balance as of December 31, 2025

Other comprehensive income, net of tax

Other comprehensive loss, net of tax

Issuance of restricted stock awards

Restricted stock surrendered for tax withholdings upon vesting

Forfeiture of restricted stock awards

1 unchanged sentence

Cash dividends declared ($ 5.10 per share)

Repurchase of common stock

Purchase of treasury stock

Balance as of September 30, 2025

Balance as of December 31, 2023

Cumulative change from adoption of ASU 2023-02

Other comprehensive income, net of tax

Cash dividends declared ($ 8.80 per share)

Repurchase of common stock

Balance as of September 30, 2024

Balance as of March 31, 2026

See accompanying notes to the unaudited consolidated financial statements.

FARMERS & MERCHANTS BANCORP

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

CONSOLIDATED STATEMENTS OF C ASH FLOWS

Three Months Ended

(Dollars in thousands)

7 unchanged sentences

Decrease in deferred income taxes, net

Gain on sale of securities available-for-sale

Net changes in:

2 unchanged sentences

Cash flows from investing activities:

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

Net decrease in loans and leases held for investment

Purchase of available-for-sale securities

4 unchanged sentences

Purchase of other investments

Redemption of other investments

Proceeds from bank-owned life insurance

Proceeds from sale of assets

Net cash used in investing activities

Net cash provided by investing activities

Cash flows from financing activities:

1 unchanged sentence

Cash dividends paid

Net cash used in share repurchase program

Restricted stock vesting distribution

Cash used in share repurchase program

Purchase of treasury stock

7 unchanged sentences

Supplemental disclosures of non-cash transactions:

Net change in unrealized losses on securities available-for-sale

Accrued cash dividend on restricted stock

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

See accompanying notes to the unaudited consolidated financial statements.

2 unchanged sentences

Note 1—Basis of Presentation and Significant Accounting Policies

The accompanying unaudited consolidated financial statements include the accounts of Farmers & Merchants Bancorp (“FMCB” or “Bancorp”), a bank holding company incorporated in the State of Delaware, and its wholly

owned subsidiary, Farmers & Merchants Bank of Central California (“F&M Bank” or the “Bank”) (collectively, the “Company”).

These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with

the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”).

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair

presentation of the financial position and results of operations for the periods presented have been included.

Certain information and note disclosures have been condensed or omitted pursuant to the rules and regulations of the SEC and the

accounting standards for interim financial statements.

The accompanying unaudited consolidated financial statements include the accounts of Farmers & Merchants Bancorp (“FMCB” or “Bancorp”), a bank holding company incorporated in the State of

Delaware, and its wholly owned subsidiary, Farmers & Merchants Bank of Central California (“F&M Bank” or the “Bank”) (collectively, the “Company”).

accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”).

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered

necessary for a fair presentation of the financial position and results of operations for the periods presented have been included.

Certain information and note disclosures have been condensed or omitted pursuant to the rules and regulations of the

SEC and the accounting standards for interim financial statements.

All significant intercompany transactions and balances have been eliminated.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements.

Various elements of the Company’s

accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments.

In particular, management has identified several accounting policies that, due to the judgments,

estimates and assumptions inherent in those policies, are significant to an understanding of Bank’s financial statements.

These policies relate to:

(i) the determination of the provision and allowance for credit losses;

(ii) the valuation of

financial assets and liabilities recorded at fair value;

(iii) the valuation of intangibles, such as goodwill and core deposit intangibles (“CDI”);

(iv) the valuation of other real estate owned (“OREO”);

and (v) the valuation or recognition of

deferred tax assets and liabilities.

These policies and judgments, estimates and assumptions are described in greater detail in subsequent notes to the Unaudited Consolidated Financial Statements and Management’s Discussion and Analysis of

Financial Condition and Results of Operations - Critical Accounting Policies and Estimates, in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 14, 2025 (“2024 Form 10-K”) and Item 2 - Management’s

Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates included in this Quarterly Report on Form 10-Q.

Various elements of the

Company’s accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments.

In particular, management has identified one accounting policy that, due to the judgments,

estimates and assumptions inherent in this policy, is significant to an understanding of the Bank’s financial statements.

This policy relates to the determination of the allowance for credit losses on loans and leases held for investment.

policy and the related judgments, estimates and assumptions are described in greater detail in subsequent notes to the Unaudited Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of

Operations - Critical Accounting Policies and Estimates, in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 13, 2026 (“2025 Form 10-K”) and Item 2 - Management’s Discussion and Analysis of Financial

Condition and Results of Operations - Critical Accounting Policies and Estimates included in this Quarterly Report on Form 10-Q.

The information included in this Form 10-Q should be read in conjunction with our 2025 Form 10-K.

Interim results are not necessarily indicative of results for a full year or any other interim period.

Interim results are not necessarily indicative of results for a full year or any other interim

Summary of Significant Accounting Policies

Our accounting policies are described in Note 1 – Summary of Significant Accounting Policies, of our audited consolidated financial statements included in our 2025 Form 10-K.

As of September 30, 2025, there were no

significant changes to accounting policies from those disclosed in our audited consolidated financial statements included in our 2024 Form 10-K.

As of March 31, 2026,

there were no significant changes to accounting policies from those disclosed in our audited consolidated financial statements included in our 2025 Form 10-K.

Use of estimates — The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions.

8 unchanged sentences

All other accounting literature is non-authoritative.

In December 2023, the FASB issued 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

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.

On January 1, 2025, the Company adopted this standard with no material impact on the Company’s consolidated financial statements, and the new income tax disclosures will be required beginning with our 2025 Form 10-K.

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.

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.

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.

In March 2025, the FASB issued ASU No.

2025-02, “ Liabilities (Topic 405)-Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

122 ” (“ASU 2025-02”), which

communicates changes to the FASB codification, including changes to non-authoritative SEC content.

The update affects SEC registrants, makes amendments to the GAAP taxonomy and is effective upon issuance.

Management has evaluated the impact of the

adoption of this standard and determined there would be no material impact to the Company’s consolidated financial position or results of operations.

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”).

This ASU 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

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 Topic 606.

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 and, at this time, does not anticipate it will have a material impact on its consolidated financial statements.

The Company adopted this new guidance on January 1, 2026 and there was no

material impact on its consolidated financial statements.

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.

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.

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, but does not expect the impact to be material .

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

4 unchanged sentences

(Dollars in thousands)

As of September 30, 2025

As of March 31, 2026

Government-sponsored securities

13 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

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

1 unchanged sentence

(Dollars in thousands)

As of September 30, 2025

As of March 31, 2026

Mortgage-backed securities (1)

2 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.

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

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2—Investment Securities—Continued

Gross Unrecognized

6 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

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.

4 unchanged sentences

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.

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:

September 30, 2025

March 31, 2026

Less Than 12 Months

1 unchanged sentence

(Dollars in thousands)

Unrealized Losses

Available-for-Sale Securities

2 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.

December 31, 2025

2 unchanged sentences

(Dollars in thousands)

Unrealized Losses

Available-for-Sale Securities

1 unchanged sentence

Mortgage-backed securities (1)

Commerical mortgage-backed securities (1)

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

(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

1 unchanged sentence

Note 2—Investment Securities—Continued

As of September 30, 2025, the Company held 320 available-for-sale securities of which 24 securities were in an unrealized loss position for less than twelve months and 109 securities were in an unrealized loss position for twelve months or more without an allowance for credit losses.

As of March 31, 2026, the Company held 323 available-for-sale securities of which 55 securities were in an unrealized loss position for less than twelve months and 99 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.

1 unchanged sentence

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

September 30, 2025

March 31, 2026

(Dollars in thousands)

Municipal securities

Mortgage-backed

Collateralized mortgage obligations

Collateralized

Allowance for credit losses - securities

4 unchanged sentences

(Dollars in thousands)

Municipal securities

Mortgage-backed

Collateralized mortgage obligations

Collateralized

Allowance for credit losses - securities

2 unchanged sentences

Ending balance

The amortized cost and estimated fair values of investment securities at September 30, 2025 by contractual final maturity are shown in the following table:

The amortized cost and estimated fair values of investment securities at March 31, 2026 by contractual final maturity are shown in the following table:

Available-for-Sale

8 unchanged sentences

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.

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.

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.

FARMERS & MERCHANTS BANCORP

6 unchanged sentences

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

As of September 30, 2025, there were no past due principal or interest payments associated with held-to-maturity municipal securities.

As of March 31, 2026, there were no past due principal or interest payments associated with held-to-maturity municipal securities.

There were no holdings of securities of any one issuer, other than the U.S.

4 unchanged sentences

(Dollars in thousands)

September 30, 2025

March 31, 2026

Municipal securities

5 unchanged sentences

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

For the Three Months Ended March 31,

(Dollars in thousands)

Gross proceeds

Nine months ended September 30, 2025

Nine months ended September 30, 2024

Pledged Securities

At September 30, 2025, investment securities carried at $ 688.4 million were pledged to secure public deposits, Federal Home Loan Bank (“FHLB”) borrowings, and other government agency deposits as required by law.

At March 31, 2026, investment securities carried at $ 731.0 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 $ 673.8 million at December 31, 2025.

4 unchanged sentences

(Dollars in thousands)

September 30,

Loans and leases held for investment, net

9 unchanged sentences

Total loans and leases held for investment, net

At September 30, 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 $ 1.2 billion and $ 1.4 billion, respectively.

The borrowing capacity on these loans was $ 805.9 million from FHLB and $ 1.1 billion from the FRB at September 30, 2025.

At March 31, 2026, 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 $ 932.4 million from FHLB and $ 1.1 billion from the FRB at March 31, 2026.

The following tables show an aging analysis of the loan and lease portfolio, net of unearned income, by the time past due for the periods indicated:

September 30, 2025

March 31, 2026

(Dollars in thousands)

Non-accrual with no ACL

Loans and leases held for investment, net

17 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 Company.

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 3—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 following table presents 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:

Three Months Ended September 30, 2025

March 31, 2026

Amortized cost associated with the following modification types:

(Dollars in thousands)

Interest rate reduction

Maturity or term extension

Principal forgiveness

Payment deferral

Multiple modification types 1

Percentage of total loan segment

Maturity or term

modification types 1

of total loan

Loans and leases held for investment, net

5 unchanged sentences

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 during the three months ended September 30, 2025.

During the three months ended September 30, 2025, the Company modified one residential first mortgage loan with a 10 -year maturity extension and re-amortization and one commercial loan with a maturity extension of 5 months.

Nine Months Ended September 30, 2025

2 Unfunded lending commitments related to loans modified to borrowers experiencing financial difficulty totaled $ 0 million at March 31, 2026.

During the three months ended March 31, 2026, the Company modified one commercial real estate loan with a monthly payment reduction, two commercial and industrial loans with contractual term extensions of four and three months and one residential loan with an interest rate reduction and a contractual term extension of ten years .

March 31, 2025

Amortized cost associated with the following modification types:

(Dollars in thousands)

Interest rate reduction

Maturity or term extension

Principal forgiveness

Payment deferral

Multiple modification types 1

Percentage of total loan segment

Maturity or term

modification types 1

of total loan

Loans and leases held for investment, net

5 unchanged sentences

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 during the nine months ended September 30, 2025.

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

FARMERS & MERCHANTS BANCORP

1 unchanged sentence

Note 3—Loans and Leases—Continued

During the nine months ended September 30, 2025, the Company modified four agricultural real estate loans and one agricultural production loan, all related to the same agricultural borrower.

During the three months ended March 31, 2025, the Company modified one agricultural borrower with four agricultural real estate loans and one agricultural production loan.

Two of the loans had the contractual term extended by six months and three loans had principal and interest deferrals of six months .

The Company also modified one home equity and one residential first mortgage loan with 10 -year maturity extensions and re-amortizations and one commercial loan with a maturity extension of 5 months.

The Company did not enter into any loan modifications with borrowers experiencing financial difficulty during the three and nine months ended September 30, 2024.

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.

There was one loan modified within the last twelve months for $ 176,000 that had a payment default and was charged off during the nine months ended September 30, 2025 and none during the nine months ended September 30, 2024.

There were no loans modified to borrowers with financial difficulty that had a payment default subsequent to modification during the three and nine months end September 30, 2025 and 2024.

There was one loan modified within the last 12 months that had a payment default and was past due during the three months ended March 31, 2026.

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.

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 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 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.

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

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 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.

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

1 unchanged sentence

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.

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.

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 as 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

1 unchanged sentence

Note 3—Loans and Leases—Continued

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 as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the

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

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

Once a loan or lease becomes delinquent and repayment becomes questionable, the Company

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

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

Once a loan or lease becomes delinquent and repayment becomes

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

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

charge-off some or all of the balance.

The 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:

September 30, 2025

Term Loans and Leases Amortized Cost Basis by Origination Year

March 31, 2026

Term Loans Amortized Cost Basis by Origination Year

(Dollars in thousands)

Revolving Loans Amortized Cost

Revolving Loans Converted to Term

Net loans and leases held for investment

22 unchanged sentences

Note 3—Loans and Leases—Continued

September 30, 2025

Term Loans and Leases Amortized Cost Basis by Origination Year

March 31, 2026

Term Loans Amortized Cost Basis by Origination Year

(Dollars in thousands)

21 unchanged sentences

December 31, 2025

Term Loans and Leases Amortized Cost Basis by Origination Year

Term Loans Amortized Cost Basis by Origination Year

(Dollars in thousands)

Revolving Loans Amortized Cost

Revolving Loans Converted to Term

Net loans and leases held for investment

23 unchanged sentences

December 31, 2025

Term Loans and Leases Amortized Cost Basis by Origination Year

Term Loans Amortized Cost Basis by Origination Year

(Dollars in thousands)

20 unchanged sentences

(Dollars in thousands)

September 30,

Balance at beginning of the period

5 unchanged sentences

Note 3—Loans and Leases—Continued

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.

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.

The following table presents the amortized cost basis for collateral dependent loans and leases by type as of December 31, 2024:

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

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.

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

March 31, 2026

(Dollars in thousands)

Collateral dependent loans and leases

Residential and home equity

Total real estate

Commercial & industrial

Commercial leases

Consumer and other

Total gross loans and leases

December 31, 2025

(Dollars in thousands)

Vehicles and Equipment

Collateral dependent loans and leases

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Total gross loans and leases

There were no collateral dependent loans or leases at September 30, 2025.

FARMERS & MERCHANTS BANCORP

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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:

For the Three Months Ended September 30,

(Dollars in thousands)

Credit Losses

Balance at beginning of period

Provision for/(reversal of) credit losses

Net (charge-offs)/recoveries

Balance at end of period

For the Nine Months Ended September 30,

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

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

For the Three Months Ended March 31,

(Dollars in thousands)

2 unchanged sentences

Balance at beginning of period

Provision for/(reversal of) credit losses

Net (charge-offs)/recoveries

Provision for credit losses

Net recoveries/(charge-offs)

Balance at end of period

Changes in the ACL on loans and leases for the periods indicated are as follows:

For the Three Months Ended September 30, 2025

Three Months Ended March 31, 2026

(Dollars in thousands)

for/(recapture of)

credit losses

for/(recapture

of) credit losses

end of period

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Note 3—Loans and Leases—Continued

For the Three Months Ended September 30, 2024

(Dollars in thousands)

Balance at beginning of period

for/(recapture of)

credit losses

end of period

Allowance for credit losses:

Residential and home equity

Total real estate

Commercial & industrial

Commercial leases

Consumer and other

Total allowance for credit losses

For the Nine Months Ended September 30, 2025

(Dollars in thousands)

Balance at beginning of period

for/(recapture of)

credit losses

end of period

Allowance for credit losses:

Residential and home equity

Total real estate

Commercial & industrial

Commercial leases

Consumer and other

Total allowance for credit losses

For the Nine Months Ended September 30, 2024

Year Ended December 31, 2025

(Dollars in thousands)

Balance at beginning of period

for/(recapture of)

credit losses

end of period

at beginning of

for/(recapture

of) credit losses

Allowance for credit losses:

5 unchanged sentences

Total allowance for credit losses

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4—Other Real Estate Owned

OREO was $ 873,000 at September 30, 2025 and December 31, 2024, respectively, 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.

During the second quarter of 2025, the Company recorded an additional $ 326,000 in other real estate owned, which was sold during the third quarter of 2025 at the carrying value.

Note 4—Deposits

1 unchanged sentence

(Dollars in thousands)

September 30,

December 31, 2025

Certificates of deposit:

Certificates of deposit equal to or less than $250,000

Certificates of deposit less than or equal to $250,000

Certificates of deposit greater than $250,000

3 unchanged sentences

Total certificates of deposit

Overdrawn deposit balances of $ 166,000 and $ 156,000 were classified as consumer loans at September 30, 2025 and December 31, 2024, respectively.

Overdrawn deposit balances of $ 164,000 and $ 187,000 were classified as consumer loans at March 31, 2026 and December 31, 2025, respectively.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 5—Short-term borrowings

As of September 30, 2025 and December 31, 2024, committed lines of credit arrangements totaling $ 2.1 billion, 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 $ 807.3 million, which is secured by $ 1.2 billion in various real estate loans and $ 1.4 million in investment securities pledged as collateral.

As of March 31, 2026 and December 31, 2025, committed lines of credit arrangements totaling $ 2.2 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 $ 933.6 million, which is secured by $ 1.2 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 4.36 % as of September 30, 2025.

The overnight borrowing rate was 3.96 % as of March 31, 2026.

The Company has $ 1.4 billion in pledged loans with the FRB.

As of September 30, 2025, the Company’s overnight borrowing capacity using the primary credit facilities from the Fed account was $ 1.1 billion.

The borrowing rate was 4.25 % as of September 30, 2025.

There were no outstanding advances on the above borrowing facilities as of September 30, 2025 or December 31, 2024.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of March 31, 2026, the Company’s overnight borrowing capacity using the primary credit facilities from the Fed account was $ 1.1 billion.

The borrowing rate was 3.64 % as of March 31, 2026.

The Company has an unsecured borrowing capacity from unaffiliated banks of $ 133.0 million as of March 31, 2026.

There were no outstanding advances on the above borrowing facilities as of March 31, 2026 or December 31, 2025.

Note 6—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.

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.

The 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:

3 unchanged sentences

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.

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.

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 judgements regarding future expected loss experience, risk characteristics and economic conditions.

Fair value estimates are made at a specific point in time based on relevant market

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 judgements regarding future expected loss experience, risk characteristics and economic conditions.

These estimates are subjective, involve uncertainties, and cannot be determined with precision.

Changes in assumptions could

significantly affect the estimates.

Changes in assumptions could significantly affect the estimates.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 6—Fair Value—Continued

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.

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

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.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7—Fair Value—Continued

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.

Securities classified as held-to-maturity are reported at fair value on a non-recurring basis utilizing Level 1, 2

and 3 inputs.

Level 3 - Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market.

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.

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.

The fair value of collateral dependent loans

or leases is estimated using one of several methods, including collateral value, 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.

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

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.

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.

1 unchanged sentence

Fair values are based on recent real estate appraisals.

These appraisals may use a single

valuation approach or a combination of approaches including sales comparison, cost and the income approach.

Adjustments are often made in the appraisal process by the appraisers to take into account differences between the comparable sales and income

and other available data.

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 valuation technique used for Level 3

non-recurring OREO is primarily the sales comparison approach less estimated selling costs.

FARMERS & MERCHANTS BANCORP

2 unchanged sentences

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.

September 30, 2025

March 31, 2026

Fair Value Measurements

(Dollars in thousands)

Carrying Amount

Fair valued on a recurring basis:

11 unchanged sentences

Derivatives not designated as hedging instruments

Fair valued on a non-recurring basis:

Other real estate owned

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

2 unchanged sentences

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.

September 30, 2025

March 31, 2026

Fair Value Measurements

(Dollars in thousands)

Carrying Amount

Financial assets:

9 unchanged sentences

(Dollars in thousands)

Carrying Amount

Financial assets:

6 unchanged sentences

Subordinated debentures

Non-marketable securities include FHLB stock, PCBB stock and TIB, National Association stock, which are recorded at cost.

Ownership of these stocks is restricted to member banks.

Purchases and sales of these securities

are at par value with the issuer.

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

Purchases and sales of these securities are at par value with the issuer.

The fair value of these investments is equal to the carrying amount.

4 unchanged sentences

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.

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 three and nine months ended September 30, 2025, there were no potential common shares that were anti-dilutive.

The following tables present the factors used in the earnings per share computation for the periods indicated:

Three Months Ended

September 30,

(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 common share

Nine Months Ended

September 30,

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

Weighted average common shares outstanding for basic earnings per common share

For the three months ended March 31, 2026, 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:

Three Months Ended March 31,

(Dollars in thousands, except 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 common share

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Basic earnings per share

Diluted earnings per share

Note 8—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 Company.

Effective 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 components of the ERP pursuant to regulations promulgated by the Department of the Treasury.

The Company incurred no expense for the ERP during the nine months ended September 30, 2025 due to the freezing of the plans and a net expense of $ 6.8 million during the nine months ended September 30, 2024.

The Company’s carrying value of the liability under the ERP was $ 58.1 million as of September 30, 2025 and $ 61.4 million as of December 31, 2024, 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 September 30, 2025 and December 31, 2024 totaled 47,806 and 48,877 shares with an historical cost basis of $ 31.4 million and $ 31.8 million, respectively.

All amounts have been fully funded into the Rabbi Trust as of September 30, 2025 and December 31, 2024.

Executive Retirement Plan and Senior Management Retirement Plan

The Company, through the Bank, sponsored an Executive Retirement Plan for certain executive level employees and a Senior Management Retention Plan for other senior level employees, collectively

Effective November 29, 2024, all components of the Plans were terminated and frozen and no subsequent contributions were made to the Plans.

On December 10, 2025, the account balances of the Plans

were liquidated and paid out to eligible participants.

The Company incurred no expense for the Plans during the three months ended March 31, 2026 and March 31, 2025 due to the freezing of the Plans.

The Company’s carrying value of the liability under the Plans for certain participants with different liquidation payout provisions was $ 2.5 million as of March 31, 2026 and $ 2.2 million as of December 31, 2025, 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 Plans as of March 31, 2026 and December 31, 2025 totaled 1,073 shares with a historical cost basis of $ 1.1 million.

All amounts were fully funded into the Rabbi Trust as of March 31, 2026 and December 31, 2025.

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 investments were $ 2.2 million and $ 2.4 million at September 30, 2025 and 2024, respectively.

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.

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.

FARMERS & MERCHANTS BANCORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9—Employee Benefit Plans—Continued

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 no expense for the SMRP during the nine months ended September 30, 2025 due to the freezing of the plans and a net expense of $ 3.4 million for the nine months ended September 30, 2024.

The plan recognized $ 0.1 million in forfeitures for the nine months ended September 30, 2025.

The Company’s carrying value of the liability under the SMRP was $ 20.6 million as of September 30, 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 September 30, 2025 and December 31, 2024 totaled 17,946 and 19,647 shares with an historical cost basis of $ 13.9 million and $ 14.6 million, respectively.

All amounts have been fully funded into the Rabbi Trust as of September 30, 2025 and December 31, 2024.

The consolidated investments held in the Rabbi Trust are recorded at fair value with changes 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 $ 0.6 million and $ 0.5 million at September 30, 2025 and 2024, respectively.

Net gains on the Plans’ investments were $ 0.8 million at March 31, 2025.

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.

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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.

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, and an annual increase on the first day of each fiscal year beginning with January 1, 2026 and ending with the last January 1 during the initial ten-year term of the plan, equal to (a) two and one-half percent ( 2.5 %) of all outstanding shares on the last day of the immediately preceding fiscal year or (b) any lesser amount that the Personnel Committee sets for the purpose of that fiscal year.

Pursuant to the 2.5 % evergreen provision described above, the total number of shares available to be issued under the 2025 Plan increased by 17,448 shares to 97,448 as of January 1, 2026.

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 was determined using a volume weighted average price over a 30 -day period as of the grant date, which equaled $ 1,033.03 per share.

The first awards were granted on February 3, 2025 and totaled 30,818 shares.

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.

1 unchanged sentence

The awards vest on a pro-rated basis over the life of the award.

Total remaining shares issuable under the 2025 Plan were 50,598 at September 30, 2025.

Total remaining shares issuable under the 2025 Plan were 70,460 at March 31, 2026, including 2,370 shares forfeited and 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 if, when and to the extent such unvested restricted shares vest.

Dividends on forfeited restricted stock are also forfeited.

The following tables summarize the change in the Company’s nonvested shares for the three and nine months ended September 30, 2025:

however, the dividends are paid to the holder only when the restricted shares vest.

Dividends on forfeited restricted shares are also forfeited.

During the three months ended March 31, 2026, the Company issued the following restricted stock awards under the 2025 Plan:

Date of Grant

Number of Shares

Weighted Average Fair

Value at Grant-Date

Restricted Stock Award

Nonvested shares outstanding, June 30, 2025

Nonvested shares outstanding, September 30, 2025

Volume Weighted Average

Price over a 30-day Period as

of the Grant Date

February 10, 2026

March 4, 2026

The following table summarizes the change in the Company’s restricted stock award shares for the periods indicated.

Three Months Ended March 31,

Number of Shares

Weighted Average Fair

Value at Grant-Date

Average of the Volume

Weighted Average Price

over a 30-day Period as

of the Grant Date

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, September 30, 2025

For the nine months ended September 30, 2025, the Company has recognized $ 8.2 million in compensation cost related to shares granted under the 2025 Plan.

As of September 30, 2025, there was $ 23.6 million of total unrecognized compensation cost related to nonvested shares granted under the 2025 Plan.

Outstanding at beginning of period

Outstanding at end of period

The total intrinsic value of the shares vested during the three months ended March 31, 2026 was $ 14.0 million.

For the three months ended March 31, 2026, the Company recognized $ 3.5 million in compensation cost related to shares granted under the 2025 Plan and $ 2.0 million for the three months ended March 31, 2025.

As of March 31, 2026, there was $ 18.7 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 1.26 years.

No shares of restricted stock vested during the three and nine months ended September 30, 2025.

12,106 shares of restricted stock vested during the three months ended March 31, 2026.

FARMERS & MERCHANTS BANCORP

2 unchanged sentences

Derivatives Not Designated as Hedging Instruments

As a customer accommodation, the Company may enter into interest rate swaps with its loan customers.

As a customer accommodation, the Company may enter into interest rates swaps with its loan customers.

The Company also enters into corresponding offsetting derivatives with third parties.

While these derivatives

represent economic hedges, they do not qualify as hedges for accounting purposes.

While 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.

September 30, 2025

March 31, 2026

December 31, 2025

8 unchanged sentences

Total included in other liabilities

Location of Gain or (Loss)

Recognized in Income on

Three Months Ended

September 30,

Nine Months Ended

September 30,

(Dollars in thousands)

Location of Gain or (Loss)

Recognized in Income on

Derivatives not designated as hedging instruments:

2 unchanged sentences

Note 11—Commitments and Contingencies

In the normal course of business, the Company enters into financial instruments with off-balance-sheet risk/commitments 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.

The Company had the following off-balance-sheet risk/commitments as of the dates indicated.

The Company had the following off balance sheet commitments as of the dates indicated.

(Dollars in thousands)

September 30, 2025

December 31, 2024

Commitments to extend credit, including unsecured commitments of $ 20,926 and $ 20,535

as of September 30, 2025 and December 31, 2024, respectively

Standby letters of credit, including unsecured commitments of $ 4,993 and $ 4,490

as of September 30, 2025 and December 31, 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.

Commitments to extend credit, including unsecured commitments of $ 21,800 and $ 20,995 as of March 31, 2026 and December 31, 2025, respectively

Stand-by letters of credit, including unsecured commitments of $ 5,398 and $ 5,248 as of March 31, 2026 and December 31, 2025, 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.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

The Company uses the same credit policies in making commitments and conditional obligations as it does for recorded balance sheet items.

The Company may or may not require collateral or other security to support financial instruments with credit risk.

Evaluations of each customer’s creditworthiness are performed on a case-by-case basis.

The estimated exposure to loss from these commitments is included in the allowance for credit losses for unfunded loan commitments, which amounted to $ 2.8 million at September 30, 2025 and $ 2.7 million at December 31, 2024.

The Company uses

FARMERS & MERCHANTS BANCORP

1 unchanged sentence

Note 11—Commitments and Contingencies—Continued

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 $ 3.3 million at March 31, 2026 and December 31, 2025.

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 at September 30, 2025 had maturity dates ranging from 1 to 54 months with a final expiration in some cases up to April 1, 2030.

Outstanding standby letters of credit at March 31, 2026 had maturity dates ranging from 1 to 48 months with a final expiration in some cases up to April 1, 2030.

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

2 unchanged sentences

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.

At September 30, 2025 and December 31, 2024, the balance of the investments in LIHTC was $ 45.3 million and $ 43.8 million, respectively.

These balances are reflected in other assets on the consolidated balance sheets.

Total unfunded commitments related to the investments in LIHTC totaled $ 16.0 million and $ 18.9 million at September 30, 2025 and December 31, 2024, respectively.

These balances are reflected in interest payable and other liabilities on the consolidated balance sheets.

At March 31, 2026 and December 31, 2025, the balance of the investments in LIHTC was $ 44.0 million and $ 45.5 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 $ 14.2 million and $ 16.8 million at March 31, 2026 and December 31, 2025, 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 2044.

Additionally, during the nine months ended September 30, 2025 and the year ended December 31, 2024, the Company recognized tax credits from its investments in LIHTC of $ 3.9 million and $ 4.4 million, respectively.

Additionally, during the three months ended March 31, 2026 and 2025, the Company recognized tax credits from its investments in LIHTC of $ 1.5 million and $ 1.3 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.

Note 12—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 September 30, 2025 up through the date the Company issued the financial statements.

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 eval uated all events or transactions that occurred after March 31, 2026 up through the date the

Company issued the financial statements.

During this period, there were no subsequent events that req uired recognition or disclosure.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is intended to provide a comprehensive review of the Company’s operating results and financial condition.

The information contained in this section should be read

in conjunction with the Unaudited Consolidated Financial Statements and the accompanying Notes to Unaudited Consolidated Financial Statements in this Quarterly Report on Form 10-Q included in “Part I.

Financial Statements.”

FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10–Q may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act, as amended, and Section 21E of the Securities

Exchange Act.

These forward-looking statements reflect our current views and are not historical facts.

These statements may include statements regarding projected performance for periods following the date of this report.

These statements

can generally be identified by use of phrases such as “believe,” “expect,” “will,” “seek,” “should,” “anticipate,” “estimate,” “intend,” “plan,” “target,” “project,” “commit” or other words of similar import.

Similarly, statements that

describe our future financial condition, results of operations, objectives, strategies, plans, goals or future performance and business are also forward-looking statements.

Statements that project future financial conditions, results of

operations, and shareholder value are not guarantees of performance and many of the factors that will determine these results and values are beyond our ability to control or predict.

For those statements, we claim the protection of the

safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve known and unknown risks, uncertainties and other factors, including, but not limited to, those described in the “Risk Factors” and “Management’s

Discussion and Analysis of Financial Condition and Results of Operations” sections and other parts of this report and the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (“Form 10-K”), and our actual results may

differ materially from those anticipated in these forward-looking statements.

The following is a non-exclusive list of factors which could cause actual results to differ materially from forward-looking statements in this Quarterly Report

on Form 10-Q:

changes in general economic conditions, either nationally, in California, or in our local markets;

inflation, changes in interest rates, securities market volatility and monetary fluctuations;

increases in competitive pressures among financial institutions and businesses offering similar products and services;

impacts of tariff policies by U.S.

and foreign governments;

risks associated with negative events in the banking industry, and any legislative and/or bank regulatory actions, that could potentially impact earnings, liquidity and/or the availability of capital or

which could increase the cost of our deposit insurance by the FDIC;

higher defaults in our loan and lease portfolio than we expect;

changes in management’s estimate of the adequacy of the allowance for credit losses;

risks associated with our growth and expansion strategy and related costs;

increased lending risks associated with our high concentration of real estate loans or agricultural loans;

legislative or regulatory changes, changes in monetary and fiscal policies or changes in accounting principles, policies or guidelines;

technological changes;

operational risks, including processing, information systems, cybersecurity, vendor problems, business interruption, and fraud;

regulatory or judicial proceedings;

other factors and risks including those described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report and the Company’s 2025

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated,

expected, projected, intended, or believed.

Please take into account that forward-looking statements speak only as of the date of this Form 10-Q (or documents incorporated by reference, if applicable).

The Company does not undertake any obligation to publicly correct or update any forward-looking statements if it later becomes aware that actual results are likely to differ materially from

those expressed in such forward-looking statements, except as required by law.

Farmers & Merchants Bancorp (the “Company” or “FMCB”) is a Delaware registered bank holding company organized in 1999.

As a registered bank holding company, FMCB is subject to

regulation, supervision, and examination by the Federal Reserve and by the California Department of Financial Protection and Innovation (“DFPI”).

The Company’s principal business is to serve as a holding company for Farmers &

Merchants Bank of Central California (the “Bank” or “F&M Bank”) and for other banking or banking related subsidiaries, which the Company may establish or acquire.

Over 109 years ago, August 1, 1916, marked the first day of business

for Farmers & Merchants Bank, later renamed Farmers & Merchants Bank of Central California.

The Bank was incorporated under the laws of the State of California and licensed as a state-chartered bank.

The Bank’s first venture out

of Lodi occurred when the Galt office opened in 1948.

Since then, the Bank has opened full-service branches in Linden, Manteca, Riverbank, Modesto, Sacramento, Elk Grove, Turlock, Hilmar, Stockton, Merced, Walnut Creek, Concord, Walnut

Grove, Oakland, Napa, and Danville.

As a legal entity separate and distinct from its subsidiary, the Company’s principal source of funds is, and will continue to be, dividends paid by and other funds received from the Bank.

limitations are imposed on the amount of dividends that may be paid and loans that may be made by the Bank to the Company.

The Company’s outstanding common stock as of March 31, 2026, consisted of 693,043 shares of common stock, $0.01 par value.

No shares of preferred stock were issued or outstanding as of

March 31, 2026.

The common stock of the Company is not widely held or listed on any exchange.

However, trades are reported on the OTCQX under the symbol “FMCB.”

The primary source of funding for the Company’s growth has been the generation of deposits, which the Company raises through its existing branch locations, newly opened branch locations, or

through acquisitions.

Loan growth over the years is the result of organic growth generated by the Company’s seasoned relationship managers and supporting associates who provide outstanding service and responsiveness to the Company’s

The Company’s results of operations are largely dependent on net interest income.

Net interest income is the difference between interest income earned on interest earning assets, which are

comprised of loans and leases, investment securities, short-term investments and interest-bearing deposits at other banks, and the interest the Company pays on interest bearing liabilities, which are primarily deposits, and, to a lesser

extent, other borrowings.

Management strives to match the re-pricing characteristics of the interest earning assets and interest-bearing liabilities to protect net interest income from changes in market interest rates and changes in the

shape of the yield curve.

The Company measures its performance by calculating the net interest margin, return on average assets, return on average equity and the efficiency ratio.

Net interest margin is calculated

by dividing net interest income, which is the difference between interest income on interest earning assets and interest expense on interest bearing liabilities, by average interest earning assets.

Net interest income is the Company’s

largest source of revenue.

Interest rate fluctuations, as well as changes in the amount and type of earning assets and liabilities, combine to affect net interest income.

The return on average assets is calculated by dividing the

Company’s net income by its total average assets and the return on average equity is calculated by dividing the Company’s net income by its shareholders’ equity.

The efficiency ratio is calculated by dividing non-interest expense by the

sum of net interest income and non-interest income.

Critical Accounting Policies and Estimates

Our accounting policies are fundamental to understanding management’s discussion and analysis of results of operations and financial condition.

We identify critical policies and estimates

as those that require management to make particularly difficult, subjective, and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under

different conditions or using different assumptions.

Our critical accounting policy relates to the allowance for credit losses on loans and leases held for investment.

Further details are described in “Item 7.

Management’s Discussion and

Analysis of Financial Condition and Results of Operations” in our 2025 Form 10-K.

Impact of Recently Issued Accounting Standards

“Basis of Presentation and Significant Accounting Policies” to the Unaudited Consolidated Financial Statements in “Item 1.

Financial Information” in this Quarterly Report on

Non-GAAP Measurements

We use certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of

such financial performance.

The methodology for determining these non-GAAP measures may differ among companies.

We used the following non-GAAP measures in this Form 10-Q:

Tangible common equity ratio and tangible book value per common share:

Given that the use of these measures is prevalent among banking regulators, investors,

and analysts, we disclose them in addition to the related GAAP measures of return on average equity and book value per common share.

The reconciliations of these non-GAAP measurements to the GAAP measurements are presented in the

following tables for and as of the periods presented.

Tangible Common Equity Ratio and

Tangible Book Value Per Common Share

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

Shareholders’ equity

Intangible assets

Tangible common equity

Intangible assets

Tangible assets

Tangible common equity ratio (1)

Book value per common share (2)

Tangible book value per common share (3)

Common shares outstanding

(1) Tangible common equity divided by tangible assets.

(2) Total common equity divided by common shares outstanding.

(3) Tangible common equity divided by common shares outstanding.

Results of Operations

The following discussion and analysis is intended to provide a better understanding of the Company’s performance during each of the three-month periods ended March 31, 2026 and 2025 and the

material changes in financial condition, operating income, and expense of the Company and its subsidiaries as shown in the accompanying unaudited consolidated financial statements.

Information related to the comparison of the results of

operations for the years ended December 31, 2025, and 2024 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2025 Form 10-K.

Factors that determine the level of net income include the volume of earning assets and interest-bearing liabilities, yields earned and rates paid, fee income, non-interest expense, the

level of non-performing loans and other non-earning assets, and the amount of non-interest bearing liabilities supporting earning assets.

Non-interest income includes card processing fees, service charges on deposit accounts, bank-owned

life insurance income, gains/losses on the sale of investment securities, and gains/losses on deferred compensation plan investments.

Non-interest expense consists primarily of salaries and employee benefits, cost of deferred compensation

benefits, occupancy, data processing, deposit insurance, marketing, professional services, and other expenses.

The efficiency ratio is calculated by dividing non-interest expense by net interest income plus non-interest income.

Earnings Performance

The following table presents performance metrics for the periods indicated:

Three Months Ended

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

Earnings Summary:

Interest income

Interest expense

Net interest income

Provision for credit losses

Non-interest income

Non-interest expense

Income before taxes

Income tax expense

Per Common Share Data:

Basic earnings per common share

Diluted earnings per common share

Book value per common share

Tangible book value per common share (1)

Performance Ratios:

Return on average assets

Return on average equity

Net interest margin (tax equivalent)

Yield on average loans and leases (tax equivalent)

Cost of average total deposits

Efficiency ratio

Loan-to-deposit ratio

Percentage of checking deposits to total deposits

Capital Ratios Bancorp:

Common equity tier 1 capital to risk-weighted assets

Tier 1 capital to risk-weighted assets

Risk-based capital to risk-weighted assets

Tier 1 leverage capital ratio

Tangible common equity ratio (1)

(1) See “Non-GAAP Measurements”

Average Balance and Yields

The following table sets forth a summary of average balances with corresponding interest income and interest expense as well as average yield, cost and net interest margin information for

the periods presented.

Average balances are derived from daily balances.

Three Months Ended March 31,

(Dollars in thousands)

Interest earnings deposits in other banks and federal funds sold

Investment securities:

Taxable securities

Non-taxable securities (2)

Total investment securities

Residential and home equity

Total real estate

Commercial & industrial

Commercial leases

Consumer and other

Total loans and leases

Non-marketable securities

Total interest earning assets

Allowance for credit losses

Non-interest earning assets

Total average assets

LIABILITIES AND SHAREHOLDERS’ EQUITY

Interest-bearing deposits:

Savings and money market accounts

Certificates of deposit greater than $250,000

Certificates of deposit equal to or less than $250,000

Total interest-bearing deposits

Short-term borrowings

Subordinated debentures

Total interest-bearing liabilities

Non-interest bearing deposits

Total funding

Other non-interest bearing liabilities

Shareholders’ equity

Total average liabilities and shareholders’ equity

Net interest income and margin (4)

Interest rate spread

Tax equivalent adjustment (2)

Net interest income

(1) Excludes average unrealized losses of $2.0 million and $23.6 million for the three months ended March 31, 2026, and

2025, respectively, which are included in non-interest earning assets.

(2) Yield and interest income are calculated on a fully taxable equivalent basis using the current statutory federal tax

(3) Loan interest income includes loan fees of $2.2 million and $1.7 million for the three months ended March 31, 2026 and

2025, respectively.

(4) Net interest margin is computed by dividing net interest income by average interest earning assets.

Interest-bearing deposits with banks and FRB balances are earning assets available to the Company.

Average interest-bearing deposits with banks

consisted primarily of FRB deposits.

Balances with the FRB earned an average interest rate of 3.57% and 4.44% for the three months ended March 31, 2026 and 2025, respectively.

The decrease was

primarily the result of the Federal Reserve decreasing rates by 75 basis points from September 2025 to December 2025.

Average interest-bearing deposits with banks was $146.0 million and $241.3 million for

the three months ended March 31, 2026 and 2025, respectively.

Interest income on interest bearing deposits with banks was $1.3 million and $2.6 million for the three months ended March 31, 2026 and 2025, respectively.

The decrease was

due to lower average interest-bearing deposits with banks and the decline in interest rates.

The investment portfolio is also a component of the Company’s earning assets.

Historically, the Company invested primarily in:

(1) mortgage-backed securities issued by government-sponsored

(2) debt securities issued by the U.S.

Treasury, government agencies and government-sponsored entities;

and (3) investment grade bank-qualified municipal bonds.

However, at certain times the Company has selectively added

investment grade corporate securities (floating rate and fixed rate with maturities less than 7 years) to the portfolio in order to obtain yields that exceed government agency securities of equivalent maturity.

Since the risk factor for

these types of investments is generally lower than that of loans and leases, the yield earned on investments is generally less than that of loans and leases.

Average total investment securities were $1.66 billion and $1.28 billion for the three months ended March 31, 2026 and 2025, respectively.

The average yield on total investment securities

was 3.70% and 3.20% for the three months ended March 31, 2026 and 2025, respectively.

The increase in the yield reflects the higher interest rates on investment securities based on the yield curve and the higher yields on investment

purchases made during 2025.

Average loans and leases held for investment were $3.65 billion and $3.61 billion for the three months ended March 31, 2026 and 2025, respectively.

The average yield on the loan and lease

portfolio was 6.08% and 6.07% for the three months ended March 31, 2026 and 2025, respectively.

Average interest-bearing deposits were $3.43 billion and $3.24 billion for the three months ended March 31, 2026 and 2025, respectively.

The average rate paid on interest bearing deposits

was 1.73% for the three months ended March 31, 2026 and 2025.

Total interest expense on interest- bearing deposits was $14.6 million and $13.8 million for the three months ended March 31, 2026 and 2025, respectively, with the increase

driven by an increase in average balances.

The average rate paid on total funding costs was 1.20% for the three months ended March 31, 2026 and 2025.

Rate/Volume Analysis

The following table shows the change in interest income and interest expense and the amount of change attributable to variances in volume, rates and the combination of volume and rates

based on the relative changes of volume and rates.

For purposes of this table, the change in interest due to both volume and rate has been allocated to change due to volume and rate in proportion to the relationship of absolute dollar

amounts of change in each.

Three Months Ended March 31, 2026 compared with 2025

Increase (Decrease) Due to:

(Dollars in thousands)

Interest income:

Interest earnings deposits in other banks and federal funds sold

Investment securities:

Taxable securities

Non-taxable securities

Total investment securities

Residential and home equity

Total real estate

Commercial & industrial

Commercial leases

Consumer and other

Total loans and leases

Non-marketable securities

Total interest income

Interest expense:

Interest-bearing deposits:

Savings and money market accounts

Certificates of deposit greater than $250,000

Certificates of deposit equal to or less than $250,000

Total interest-bearing deposits

Subordinated debentures

Total interest expense

Net interest income

Comparison of Results of Operations for the Three Months Ended March 31, 2026 and 2025

Three Months Ended

(Dollars in thousands)

Selected Income Statement Information:

Interest income

Interest expense

Net interest income

Provision for credit losses

Net interest income after provision for credit losses

Non-interest income

Non-interest expense

Income before income tax expense

Income tax expense

For the three months ended March 31, 2026 and 2025, net income was $24.1 million compared with $23.0 million, respectively.

The increase in net income was primarily the result of higher net

interest income of $3.8 million.

This increase was offset by an increase in non-interest expense of $3.7 million during the three months ended March 31, 2026, compared to the same period in the prior year, and a $0.5 million provision for

credit losses during the first quarter of 2026 compared to a $0.3 million provision in 2025.

Net Interest Income and Net Interest Margin

For the three months ended March 31, 2026 and 2025, net interest income was $56.9 million compared with $53.1 million, respectively.

The increase in net interest income is primarily the

result of the net interest margin (tax equivalent basis) increasing 5 basis points to 4.25% compared with 4.20% for the same period a year earlier.

The increase in the net interest margin was primarily the result of the increase in

investment securities income of $5.1 million as the average balance increased $375.9 million compared to the first quarter of 2025.

The investment securities yield during the first quarter of 2026 increased 50 basis points from 3.20% to

3.70% compared to the first quarter of 2025.

The loan yield increased 1 basis point from 6.07% to 6.08% compared to the first quarter of 2025.

The yield on interest-bearing deposits remained flat at 1.73% for the first quarter of 2026 and

The cost of average total deposits was also flat at 1.18% for the first quarter of 2026 and 2025.

Provision for Credit Losses

The provision for credit losses in each period is a charge against earnings in that period.

The provision is the amount required to maintain the allowance for credit losses at a level that,

in management’s judgment, is adequate to absorb expected credit losses over the life of the loans and leases, unfunded loan commitments and HTM securities portfolios.

Based on the Company’s evaluation of the credit quality of the loan and lease portfolio and the calculations of the allowance for credit losses under the current expected

credit losses (“CECL”) methodology, the Company recorded a $0.5 million provision for credit losses during the first three months of 2026 compared to a $0.3 million provision for credit losses during the first three months of 2025.

recoveries for the three months ended March 31, 2026 were $43,000 compared to net charge-offs of $161,000 for the same period a year earlier.

Non-interest Income

Three Months Ended

(Dollars in thousands)

Non-interest Income:

Card processing

Net gain on deferred compensation benefits

Service charges on deposit accounts

Increase in cash surrender value of BOLI

Total non-interest income

Non-interest income increased $138,000, or 2.8%, to $5.2 million for the three months ended March 31, 2026, compared with $5.0 million for the same period a year earlier.

The year-over-year

increase in non-interest income was primarily due to a $0.8 million increase in other income due to a gain on the sale of other real estate owned of $340,000 and a net gain on equity investments of $283,000.

The Company’s deferred compensation plans were terminated and frozen effective November 29, 2024, and all of the components of the plans were liquidated and paid out to eligible

participants on December 10, 2025.

The Company recorded net gains on deferred compensation plan investments of $0.8 million for the three months ended March 31, 2025, due to market value changes in underlying assets and increases in

interest and dividends.

See Note 10, “Employee Benefit Plans,” located in Item 8.

“Financial Statements and Supplementary Data” in the Company’s 2025 Form 10-K for a description of these plans.

Balances in non-qualified deferred

compensation plans may be invested in financial instruments whose market value fluctuates based upon trends in interest rates and stock prices.

Although GAAP requires these investment gains/losses to be recorded in non-interest income, an

offsetting entry is also required to be made to non-interest expense resulting in no net-effect on the Company’s net income.

Non-interest Expense

Three Months Ended

(Dollars in thousands)

Non-interest Expense:

Salaries and employee benefits

Data processing

Net gain on deferred compensation benefits

Deposit insurance

Professional services

Total non-interest expense

Non-interest expense increased $3.7 million, or 14.38%, to $29.2 million for the three months ended March 31, 2026, compared with $25.5 million for the same period a year ago.

year-over-year increase was primarily due to an increase in salaries and employee benefits which included an increase in compensation expense of $2.8 million due to an increase in employee headcount of eleven, annual increases in salaries, an

increase in payroll taxes and three months of stock compensation expense in 2026 versus two months in 2025 since the first ever restricted stock awards were issued in February 2025.

Professional services increased $0.2 million due to higher

legal and consulting services while most expenses continued to rise due in part to ongoing inflation.

The Company’s deferred compensation plans were terminated and frozen effective November 29, 2024, and all of the components of the plans were liquidated and paid out to eligible participants on

December 10, 2025.

Net gains on deferred compensation plan obligations were $0.8 million for the three months ended March 31, 2025, due to market value changes in underlying assets and increases in interest and dividends.

“Employee Benefit Plans,” located in “Item 8.

Financial Statements and Supplementary Data” in the Company’s 2025 Form 10-K for a description of these plans.

Balances in non-qualified deferred compensation plans may be invested in financial

instruments whose market value fluctuates based upon trends in interest rates and stock prices.

Although GAAP requires these gains on obligations to be recorded in non-interest expense, an offsetting entry is also required to be made to

non-interest income resulting in no net-effect on the Company’s net income.

Income Tax Expense

For the three months ended March 31, 2026, income tax expense was $8.3 million compared to $9.3 million for the same period a year earlier.

For the three months ended March 31, 2026, the

Company’s effective tax rate was 25.67% compared to 28.88% for the same period a year earlier.

The Company’s effective tax rate can fluctuate from quarter to quarter due primarily to changes in the mix of taxable and tax-exempt earning

The effective rates were lower than the combined Federal and State statutory rate of 30% primarily due to credits associated with low-income housing tax credit investments (“LIHTC”);

and tax-exempt interest income on municipal

securities and loans.

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 March 31, 2026.

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 related to when the IRS

review will be complete remains uncertain.

Balance Sheet Analysis

Total assets were $5.8 billion at March 31, 2026, compared with $5.7 billion at December 31, 2025, an increase of $146.6 million, or 2.58%.

Total cash and cash equivalents increased $239.4

million from $144.9 million as of December 31, 2025 to $384.2 million as of March 31, 2026.The net investment portfolio decreased by $59.6 million, or 3.57%, to $1.6 billion at March 31, 2026, compared to $1.7 billion at December 31, 2025.

Total loans and leases held for investment were $3.62 billion at March 31, 2026, compared with $3.65 billion at December 31, 2025, a decrease of $32.1 million, or 0.88%.

Total deposits were $5.1 billion at March 31, 2026, compared with $5.0

billion at December 31, 2025, an increase of $138.4 million, or 2.78%.

Our loan to deposit ratio was 71.04% and 73.67% as of March 31, 2026 and December 31, 2025, respectively.

Cash and Cash Equivalents

The Company’s cash and cash equivalents consist of interest-bearing deposits with banks and overnight investments in Federal Reserve balances.

Interest-bearing deposits with banks consisted

primarily of FRB deposits.

Since balances at the FRB are effectively risk free, the Company elected to maintain its excess cash at the FRB.

Interest-bearing deposits with banks totaled $318.1 million at March 31, 2026 and $84.2 million at

December 31, 2025.

The increase in cash was primarily due to the increase in deposits of $138.4 million.

The Company’s total cash and cash equivalents as of March 31, 2026 represented 6.6% of the Company’s total assets as compared to 2.6% of

total assets as of December 31, 2025.

Investment Securities

The Company’s net investment portfolio decreased by $59.6 million, or 3.57%, to $1.61 billion at March 31, 2026, compared to $1.67 billion at December 31, 2025.

The Company uses its investment

portfolio to manage interest rate and liquidity risks.

The Company’s total investment portfolio as of March 31, 2026 represents 27.59% of the Company’s total assets as compared to 29.35% of total assets at December 31, 2025.

Available-for-sale securities are carried at fair value and held-to-maturity securities are carried at amortized cost under GAAP.

The carrying value of our portfolio of investment securities

for the dates indicated are as follows:

(Dollars in thousands)

Available-for-sale securities

Government-sponsored securities

Mortgage-backed securities (1)

Commercial mortgage-backed securities (1)

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

(Dollars in thousands)

Held-to-maturity securities

Mortgage-backed securities (1)

Collateralized mortgage obligations (1)

Municipal securities

Total held-to-maturity securities

Allowance for credit losses

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 following tables show the carrying value for final contractual maturities of investment securities and the weighted average yields of such securities, including the benefit of tax-exempt

As of March 31, 2026

Within One Year

After One but

Within Five Years

After Five but

Within Ten Years

After Ten Years

(Dollars in thousands)

Securities available-for-sale

Government-sponsored securities

Mortgage-backed securities (1)

Commercial mortgage-backed securities (1)

Collateralized mortgage obligations (1)

Municipal securities

Corporate securities

Total securities available-for-sale

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

What changed 10-Q

Item 1. Financial Statements