FMCB 0001140361-24-025234 10-Q as filed: May 9, 2024

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 000-26099

FARMERS & MERCHANTS BANCORP

(Exact name of registrant as specified in its charter)

Delaware		94-3327828
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

111 W. Pine Street, Lodi, California		95240
(Address of principal executive offices)		(Zip Code)

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

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	Not Applicable	Not Applicable

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 Par Value Per Share

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

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

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

Yes ☐ No ☒

As of April 30, 2024, the registrant had 742,095 shares of common stock $0.01 par value per share, outstanding.

FARMERS & MERCHANTS BANCORP

FORM 10-Q

TABLE OF CONTENTS

PART I. - FINANCIAL INFORMATION			Page

	Item 1 - Financial Statements
		Unaudited Consolidated Balance Sheets	3
		Unaudited Consolidated Statements of Income	4
		Unaudited Consolidated Statements of Comprehensive Income	5
		Unaudited Consolidated Statements of Changes in Shareholders’ Equity	6
		Unaudited Consolidated Statements of Cash Flows	7
		Notes to Unaudited Consolidated Financial Statements	8

	Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations		30

	Item 3 - Quantitative and Qualitative Disclosures about Market Risk		50

	Item 4 - Controls and Procedures		52

PART II. - OTHER INFORMATION

	Item 1 – Legal Proceedings		53
	Item 1A – Risk Factors		53
	Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		53
	Item 3 – Defaults upon Senior Securities		53
	Item 4 – Mine Safety Disclosures		53
	Item 5 – Other Information		54
	Item 6 – Exhibits		54
	Signatures		55

Table of Contents

PART 1. FINANCIAL INFORMATION

Item 1.

Financial Statements

FARMERS & MERCHANTS BANCORP

UNAUDITED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share and per share amounts)	March 31, 2024			December 31, 2023
ASSETS
Cash and due from banks	$	65,796		$	72,267
Interest bearing deposits with banks		672,601			338,375
Total cash and cash equivalents		738,397			410,642
Securities available-for-sale, amortized cost $259,318 and $199,374, respectively		239,856			182,512
Securities held-to-maturity, fair value $649,775 and $671,585 respectively		806,971			817,688
Allowance for credit losses - securities held-to-maturity		(450	)		(450	)
Total investment securities		1,046,377			999,750
Non-marketable securities		15,549			15,549
Loans and leases held-for-investment, net of unearned income		3,696,295			3,654,689
Allowance for credit losses - loans and leases		(75,018	)		(74,965	)
Loans and leases held for investment, net		3,621,277			3,579,724
Bank-owned life insurance		75,525			74,931
Premises and equipment, net		51,618			51,907
Deferred income tax assets		34,818			39,979
Accrued interest receivable		23,740			28,520
Goodwill		11,183			11,183
Other intangibles		2,099			2,236
Other real estate owned		873			873
Other assets		93,117			93,634
Total Assets	$	5,714,573		$	5,308,928

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Non-interest bearing	$	1,410,487		$	1,482,571
Interest bearing:
Demand		1,038,920			933,417
Savings and money market		1,632,720			1,607,479
Certificates of deposit		877,462			644,628
Total interest bearing		3,549,102			3,185,524
Total deposits		4,959,589			4,668,095
Federal Home Loan Bank advances		100,000			-
Subordinated debentures		10,310			10,310
Interest payable and other liabilities		79,457			80,768
Total Liabilities		5,149,356			4,759,173

SHAREHOLDERS’ EQUITY
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, 742,770 and 747,971 issued and outstanding at March 31, 2024 and December 31, 2023, respectively		7			7
Additional paid-in capital		31,401			36,852
Retained earnings		548,123			525,360
Accumulated other comprehensive loss, net of taxes		(14,314	)		(12,464	)
TOTAL SHAREHOLDERS’ EQUITY		565,217			549,755
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	5,714,573		$	5,308,928

See accompanying notes to the unaudited consolidated financial statements.

Table of Contents

FARMERS & MERCHANTS BANCORP

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended March 31,
(Dollars in thousands, except share and per share amounts)	2024		2023
Interest income
Interest and fees on loans and leases	$	55,408	$	48,008
Interest and dividends on investment securities		6,703		5,663
Interest on deposits with others		4,530		5,961
Total interest income		66,641		59,632

Interest expense
Deposits		14,645		3,714
Borrowed funds		62		-
Subordinated debentures		221		196
Total interest expense		14,928		3,910
Net interest income		51,713		55,722
Provision for credit losses		-		1,500
Net interest income after provision for credit losses		51,713		54,222
Non-interest income
Card processing		1,629		1,591
Gain on BOLI death benefit		-		4,346
Net gain on deferred compensation benefits		1,158		896
Service charges on deposit accounts		748		634
Increase in cash surrender value of BOLI		595		444
Net loss on sale of securities available-for-sale		-		(5,686	)
Other		945		1,235
Total non-interest income		5,075		3,460
Non-interest expense
Salaries and employee benefits		17,503		19,584
Data processing		1,455		1,260
Occupancy		1,232		1,180
Net gain on deferred compensation benefits		1,158		896
Deposit insurance		712		692
Professional services		541		682
Marketing		480		470
Other		2,440		3,419
Total non-interest expense		25,521		28,183
INCOME BEFORE INCOME TAXES		31,267		29,499
Income tax expense		8,544		5,952
NET INCOME	$	22,723	$	23,547

Earnings per common share:
Basic	$	30.56	$	30.80
Diluted	$	30.56	$	30.80

Weighted average number of common shares
Basic		743,515		764,603
Diluted		743,515		764,603

See accompanying notes to the unaudited consolidated financial statements.

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FARMERS & MERCHANTS BANCORP

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended March 31,
(Dollars in thousands)	2024			2023
Net income	$	22,723		$	23,547
Other comprehensive income
Unrealized (losses)/gains on available-for-sale securities		(2,600	)		2,362
Reclassification adjustment for losses on available-for-sale securities		-			5,685
Amortization of unrealized loss on securities transferred to held-to-maturity		(27	)		(30	)
Net unrealized (losses)/gains on available-for-sale securities		(2,627	)		8,017
Income tax benefit/(expense)		777			(2,379	)
Other comprehensive (loss)/income, net of tax		(1,850	)		5,638
Total comprehensive income	$	20,873		$	29,185

See accompanying notes to the unaudited consolidated financial statements.

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FARMERS & MERCHANTS BANCORP

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

	For the three months ended March 31, 2024 and 2023
(Dollars in thousands, except share amounts)	Common Shares			Amount		Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive (Loss)/Income			Total
Balance as of December 31, 2022		768,337		$	8	$	57,206		$	449,932	$	(21,838	)	$	485,308
Net income		-			-		-			23,547		-			23,547
Other comprehensive income, net of tax		-			-		-			-		5,638			5,638
Repurchase of common stock		(5,406	)		-		(5,591	)		-		-			(5,591	)
Balance as of March 31, 2023		762,931		$	8	$	51,615		$	473,479	$	(16,200	)	$	508,902

Balance as of December 31, 2023		747,971		$	7	$	36,852		$	525,360	$	(12,464	)	$	549,755
Cumulative change from adoption of ASU 2023-02										40					40
Net income		-			-		-			22,723		-			22,723
Other comprehensive loss, net of tax		-			-		-			-		(1,850	)		(1,850	)
Repurchase of common stock		(5,201	)		-		(5,451	)		-		-			(5,451	)
Balance as of March 31, 2024		742,770		$	7	$	31,401		$	548,123	$	(14,314	)	$	565,217

See accompanying notes to the unaudited consolidated financial statements.

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FARMERS & MERCHANTS BANCORP

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended March 31,
(Dollars in thousands)	2024			2023
Cash flows from operating activities:
Net income	$	22,723		$	23,547
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		-			1,500
Depreciation and amortization		698			596
Net amortization of securities premiums and discounts		(320	)		33
Increase in cash surrender value of BOLI		(595	)		(444	)
Gain on BOLI death benefit		-			(4,346	)
Decrease in deferred income taxes, net		3,296			3,933
Loss on sale of securities available-for-sale		-			5,686
Net changes in:
Other assets		8,502			6,307
Other liabilities		477			4,864
Net cash provided by operating activities		34,781			41,676
Cash flows from investing activities:
Net change in loans and leases held-for-investment		(41,541	)		70,927
Purchase of available-for-sale securities		(63,764	)		(3,585	)
Purchase of held-to-maturity securities		(1,130	)		(1,350	)
Proceeds from sales, maturities, calls and pay downs of available-for-sale securities		4,318			40,348
Proceeds from maturities, calls and pay downs of held-to-maturity securities		11,743			10,817
Purchase of premises and equipment		(410	)		(1,543	)
Purchase of other investments		(2,285	)		(2,008	)
Proceeds from bank-owned life insurance		-			11,752
Net cash (used in)/ provided by investing activities		(93,069	)		125,358
Cash flows from financing activities:
Net increase/(decrease) in deposits		291,494			(220,107	)
Federal Home Loan Bank advances		100,000			-
Net cash used in share repurchases of common stock		(5,451	)		(5,591	)
Net cash provided by (used in) financing activities		386,043			(225,698	)
Net change in cash and cash equivalents		327,755			(58,664	)
Cash and cash equivalents, beginning of period		410,642			588,257
Cash and cash equivalents, end of period	$	738,397		$	529,593

Supplemental disclosures of cash flow information:
Cash paid for interest	$	12,852		$	3,389
Income taxes paid	$	-		$	1

Supplemental disclosures of non-cash transactions:
Net change in unrealized gain/(losses) on securities available-for-sale	$	2,600		$	(8,047	)

See accompanying notes to the unaudited consolidated financial statements.

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FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Basis of Presentation and Significant Accounting Policies

The accompanying unaudited condensed 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 condensed 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 preparing these financial statements, the Company has evaluated events and transactions subsequent to March 31, 2024 for potential recognition or disclosure. 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 methodology for the recognition of interest income; (ii) the determination of the provision and allowance for credit losses; (iii) the valuation of financial assets and liabilities recorded at fair value; (iv) the valuation of intangibles, such as goodwill and core deposit intangibles (“CDI”); (v) the valuation of other real estate owned (“OREO”); and (vi) 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 Audited Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations, Summary of Critical Accounting Policies and Estimates, in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 14, 2024 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 2023 Form 10-K. Interim results are not necessarily indicative of results for a full year or any other interim period.

Recently Adopted Accounting Standards — The Accounting Standards Codification™ (“ASC”) is the FASB officially recognized source of authoritative GAAP applicable to all public and non-public non-governmental entities. Periodically, the FASB will issue Accounting Standard updates (“ASU”) to its ASC. Rules and interpretive releases of the SEC under the authority of the federal securities laws are also sources of authoritative GAAP for the Company as an SEC registrant. All other accounting literature is non-authoritative.

On January 1, 2024, the company adopted the FASB issued guidance within ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments in this ASU affect all entities that have investments in equity securities measured at fair value that are subject to a contractual sale restriction. These amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The company adopted this standard on January 1, 2024, with no material impact on the Company’s Consolidated Financial Statements.

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FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Basis of Presentation and Significant Accounting Policies—Continued

On January 1, 2024, the Company adopted the FASB issued ASU 2023-02, Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. ASU 2023-02 allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. The Amendments in ASU 2023-02 apply to all reporting entities that hold (1) tax equity investments that meet the conditions for and elect to account for them using the proportional amortization method or (2) an investment in a low income housing tax credit investments (“LIHTC”) structure through a limited liability entity that is not accounted for using the proportional amortization method and to which certain LIHTC-specific guidance removed from FASB ASC 323-740, Investments – Equity Method and Joint Ventures: Income Taxes, has been applied. The amendments in ASU 2023-02 must be applied on either a modified retrospective or a retrospective basis (except as discussed in the ASU for LIHTC investments not accounted for using the proportional amortization method). The Company adopted this standard to use the proportional amortization method on January 1, 2024, with a $40,000 cumulative-effect adjustment to retained earnings under the modified retrospective method. Under the proportional amortization method the amortization of the LIHTC investments, income tax credits and other income tax benefits are now recognized in the income statement as a component of income tax expense (benefit) rather than other non-interest expense.

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 July 2023, the FASB issued ASU 2023-03, Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718). This ASU amends the FASB Accounting Standards Codification for SEC paragraphs pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. ASU 2023-03 is effective upon addition to the FASB Codification. The Company is currently evaluating the impact this ASU will have on its disclosures.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Updated and Simplification Initiative. ASU 2023-06 amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification (the “Codification”). The ASU was issued in response to the SEC’s August 2018 final rule that updated and simplified disclosure requirements that the SEC believed were “redundant, duplicative, overlapping, outdated, or superseded.” The new guidance is intended to align U.S. GAAP requirements with those of the SEC and to facilitate the application of U.S. GAAP for all entities. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules. For all other entities, the amendments will be effective two years later. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective for any entity. The Company is currently evaluating the impact this ASU will have on its disclosures.

In December 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures”. ASU 2023-07 Requires public entities to disclose significant segment expenses, an amount and description for other segment items, the title and position of the entity’s chief operating decision maker (“CODM”) and an explanation of how the CODM uses the reported measures of profit or loss to assess segment performance, and, on an interim basis, certain segment related disclosures that previously were required only on an annual basis. ASU 2023-07 also clarifies that entities with a single reportable segment are subject to both new and existing segment reporting requirements and that an entity is permitted to disclose multiple measures of segment profit or loss, provided that certain criteria are met. ASU 2023-07 requires annual disclosures for fiscal years beginning January 1, 2024 and interim disclosures for fiscal years beginning January 1, 2025. Early adoption is permitted. The Company is required to apply the amendments in this update retrospectively to all prior periods presented in the financial statements. The Company will update its segment related disclosures upon adoption.

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FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Basis of Presentation and Significant Accounting Policies—Continued

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 threshold. ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things. ASU 2023-09 is effective for us on January 1, 2025, though early adoption is permitted. The Company will update its income tax disclosures upon adoption.

Note 2—Investment Securities

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

	Amortized		Gross Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
As of March 31, 2024
U.S. Government-sponsored securities	$	3,057	$	9	$	18	$	3,048
Mortgage-backed securities⁽¹⁾		235,499		1,739		21,145		216,093
Collateralized mortgage obligations⁽¹⁾		5,695		-		41		5,654
Corporate securities		14,757		34		40		14,751
Other		310		-		-		310
Total available-for-sale securities	$	259,318	$	1,782	$	21,244	$	239,856

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

	Amortized		Gross Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
As of December 31, 2023
U.S. Government-sponsored securities	$	3,230	$	12	$	18	$	3,224
Mortgage-backed securities⁽¹⁾		180,543		3,022		19,727		163,838
Collateralized mortgage obligations⁽¹⁾		548		-		13		535
Corporate securities		14,743		41		179		14,605
Other		310		-		-		310
Total available-for-sale securities	$	199,374	$	3,075	$	19,937	$	182,512

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

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FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 2—Investment Securities—Continued

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

									Allowance
	Amortized		Gross Unrealized						for Credit
(Dollars in thousands)	Cost		Gains		Losses		Fair Value		Losses
As of March 31, 2024
Mortgage-backed securities⁽¹⁾	$	656,028	$	3	$	142,770	$	513,261	$	-
Collateralized mortgage obligations⁽¹⁾		72,950		-		14,231		58,719		-
Municipal securities		77,993		89		287		77,795		450
Total held-to-maturity securities	$	806,971	$	92	$	157,288	$	649,775	$	450

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

									Allowance
	Amortized		Gross Unrealized						for Credit
(Dollars in thousands)	Cost		Gains		Losses		Fair Value		Losses
As of December 31, 2023
Mortgage-backed securities⁽¹⁾	$	664,728	$	30	$	132,043	$	532,715	$	-
Collateralized mortgage obligations⁽¹⁾		74,170		-		14,017		60,153		-
Municipal securities		78,790		107		180		78,717		450
Total held-to-maturity securities	$	817,688	$	137	$	146,240	$	671,585	$	450

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

The allowance for credit losses on held-to-maturity securities is a contra-asset valuation account that is deducted from the amortized cost basis of held-to-maturity securities to present the net amount expected to be collected. Management measures expected credit losses on held-to-maturity securities on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. With regard to residential mortgage-backed securities issued by the U.S. government, or agencies thereof, it is expected that the securities will not be settled at prices less than the amortized cost bases of the securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S. government. Accordingly, no allowance for credit losses has been recorded for these securities. With regard to securities issued by States and political subdivisions and other held-to-maturity securities, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, (iv) internal forecasts and (v) whether or not such securities are guaranteed or pre-refunded by the issuers.

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

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FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 2—Investment Securities—Continued

The following tables show the gross unrealized losses for available-for-sale securities, for which an allowance for credit losses has not been recorded, that are less than 12 months and 12 months or more:

							March 31, 2024
	Less Than 12 Months						12 Months or More						Total
(Dollars in thousands)	Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
Available-for-Sale Securities
U.S. Government-sponsored securities		$	24		$	-		$	1,148		$	18		$	1,172		$	18
Mortgage-backed securities⁽¹⁾			4,560			51			77,695			21,094			82,255			21,145
Collateralized mortgage obligations⁽¹⁾			5,138			29			516			12			5,654			41
Corporate securities			-			-			9,989			40			9,989			40
Total available-for-sale securities		$	9,722		$	80		$	89,348		$	21,164		$	99,070		$	21,244

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

							December 31, 2023
	Less Than 12 Months						12 Months or More						Total
(Dollars in thousands)	Fair Value			Unrealized Losses			Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
Available-for-Sale Securities
U.S. Government-sponsored securities		$	33		$	-		$	1,235		$	18		$	1,268		$	18
Mortgage-backed securities⁽¹⁾			1,629			11			80,746			19,716			82,375			19,727
Collateralized Mortgage Obligations⁽¹⁾			-			-			535			13			535			13
Corporate securities			-			-			9,853			179			9,853			179
Total available-for-sale securities		$	1,662		$	11		$	92,369		$	19,926		$	94,031		$	19,937

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

As of March 31, 2024 the Company held 182 available-for-sale securities of which 6 were in an unrealized loss position for less than twelve months and 138 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 these securities and it is more likely than not that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be impaired. Management evaluates the available-for-sale securities in an unrealized loss position, relying primarily on industry analyst reports and observations of market conditions and interest rate fluctuations.

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

	March 31, 2024
(Dollars in thousands)	Municipal securities			Mortgage-backed securities			Collateralized mortgage obligations			Total
Allowance for credit losses - securities
Beginning balance		$	450		$	-		$	-		$	450
Provision for credit losses			-			-			-			-
Ending balance		$	450		$	-		$	-		$	450

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FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 2—Investment Securities—Continued

	December 31, 2023
(Dollars in thousands)	Municipal securities			Mortgage-backed securities			Collateralized mortgage obligations			Total
Allowance for credit losses - securities
Beginning Balance		$	393		$	-		$	-		$	393
Provision for credit losses			57			-			-			57
Ending Balance		$	450		$	-		$	-		$	450

The amortized cost and estimated fair values of investment securities at March 31, 2024 by contractual final maturity are shown in the following table:

	Available-for-Sale				Held-to-Maturity
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Securities maturing in:
One year or less	$	424	$	423	$	2,230	$	2,230
After one year through five years		20,439		20,242		18,087		17,787
After five years through ten years		5,402		5,228		21,009		19,842
After ten years		233,053		213,963		765,645		609,916
Total	$	259,318	$	239,856	$	806,971	$	649,775

The Company monitors the credit quality of those held-to-maturity securities not issued by the U.S. government or one of its agencies or government sponsored entities, through the use of credit ratings. Credit ratings are reviewed and updated quarterly. The following tables summarize the amortized cost of held-to-maturity municipal securities by credit rating as of the dates indicated:

	Held-to-Maturity
	Amortized Cost
(Dollars in thousands)	AAA/AA/A			BBB/BB/B			Not Rated			Total
March 31, 2024
Municipal securities		$	20,209		$	397		$	57,387		$	77,993
Total		$	20,209		$	397		$	57,387		$	77,993

As of March 31, 2024, there were no past due principal or interest payments associated with these securities.

	Held-to-Maturity
	Amortized Cost
(Dollars in thousands)	AAA/AA/A			BBB/BB/B			Not Rated			Total
December 31, 2023
Municipal securities		$	20,203		$	395		$	58,192		$	78,790
Total		$	20,203		$	395		$	58,192		$	78,790

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FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 2—Investment Securities—Continued

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

(Dollars in thousands)	Gross Proceeds		Gross Gains		Gross Losses
Three months ended March 31, 2024	$	-	$	-	$	-
Three months ended March 31, 2023	$	30,482	$	-	$	5,686

Pledged Securities

As of March 31, 2024, investment securities carried at $661.3 million were pledged to secure public deposits, Federal Home Loan Bank (“FHLB”) borrowings, and other government agency deposits as required by law. The amount of investments pledged was $794.1 million at December 31, 2023.

Note 3—Loans and Leases

Loans and leases as of the dates indicated consisted of the following:

(Dollars in thousands)	March 31, 2024			December 31, 2023
Loans and leases held-for-investment, net
Real estate:
Commercial	$	1,352,014		$	1,323,038
Agricultural		726,041			742,009
Residential and home equity		405,526			399,982
Construction		227,415			212,362
Total real estate		2,710,996			2,677,391
Commercial & industrial		497,028			499,373
Agricultural		317,955			313,737
Commercial leases		174,657			169,684
Consumer and other		5,801			5,212
Total gross loans and leases		3,706,437			3,665,397
Unearned income		(10,142	)		(10,708	)
Total net loans and leases		3,696,295			3,654,689
Allowance for credit losses		(75,018	)		(74,965	)
Total loans and leases held-for-investment, net	$	3,621,277		$	3,579,724

At March 31, 2024, the portion of loans that were approved for pledging as collateral on borrowing lines with the FHLB and the Federal Reserve Bank (“FRB”) were $1.3 billion and $1.6 billion, respectively. The borrowing capacity on these loans was $767.7 million from FHLB and $1.2 billion from the FRB at March 31, 2024.

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FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 3—Loans and Leases—Continued

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:

	March 31, 2024
(Dollars in thousands)	Current		30-89 Days Past Due		90+ Days Past Due		Non-accrual		Total Past Due		Total
Loans and leases held-for-investment, net
Real estate:
Commercial	$	1,344,380	$	-	$	-	$	-	$	-	$	1,344,380
Agricultural		715,367		7,124		3,550		-		10,674		726,041
Residential and home equity		404,832		694		-		-		694		405,526
Construction		227,415		-		-		-		-		227,415
Total real estate		2,691,994		7,818		3,550		-		11,368		2,703,362
Commercial & industrial		497,028		-		-		-		-		497,028
Agricultural		317,955		-		-		-		-		317,955
Commercial leases		172,149		-		-		-		-		172,149
Consumer and other		5,767		34		-		-		34		5,801
Total loans and leases, net	$	3,684,893	$	7,852	$	3,550	$	-	$	11,402	$	3,696,295

	December 31, 2023
(Dollars in thousands)	Current		30-89 Days Past Due		90+ Days Past Due		Non-accrual		Total Past Due		Total
Loans and leases held-for-investment, net
Real estate:
Commercial	$	1,314,928	$	-	$	-	$	-	$	-	$	1,314,928
Agricultural		742,009		-		-		-		-		742,009
Residential and home equity		399,946		36		-		-		36		399,982
Construction		212,362		-		-		-		-		212,362
Total real estate		2,669,245		36		-		-		36		2,669,281
Commercial & industrial		499,341		32		-		-		32		499,373
Agricultural		313,737		-		-		-		-		313,737
Commercial leases		167,086		-		-		-		-		167,086
Consumer and other		5,209		3		-		-		3		5,212
Total loans and leases, net	$	3,654,618	$	71	$	-	$	-	$	71	$	3,654,689

There were no non-accrual loans at March 31, 2024 and December 31, 2023.

Table of Contents

FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 3—Loans and Leases—Continued

The Company did not enter into any loan modifications with borrowers experiencing financial difficulty during the three months ended March 31, 2024 or 2023. 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.

There were no loans that were modified within the last 12 months that had a payment default or were past due during the three months ended March 31, 2024.

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. Risk ratings can be grouped into five major categories, defined as follows:

Pass and watch — A pass loan or lease is a strong credit with no existing or known potential weaknesses deserving of management’s close attention. This category also includes “Watch” loans, which is a loan with an emerging weakness in either the individual credit or industry that requires additional attention. A credit may also be classified Watch if cash flows have not yet stabilized, such as in the case of a development project.

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

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

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

Table of Contents

FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 3—Loans and Leases—Continued

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

The following table presents the credit risk rating categories for loans and leases held-for-investment (accruing and non-accruing) net of unearned income by loan portfolio segment and class as of the dates indicated.

	March 31, 2024
(Dollars in thousands)	Pass		Special Mention		Sub- standard		Doubtful		Total Loans & Leases		Total Allowance for Credit Losses
Loans and leases held-for-investment, net
Real estate:
Commercial	$	1,337,274	$	7,106	$	-	$	-	$	1,344,380	$	22,414
Agricultural		698,309		27,186		546		-		726,041		11,377
Residential and home equity		404,754		126		646		-		405,526		7,721
Construction		227,415		-		-		-		227,415		4,616
Total real estate		2,667,752		34,418		1,192		-		2,703,362		46,128
Commercial & industrial		482,584		13,950		494		-		497,028		11,559
Agricultural		315,136		2,764		55		-		317,955		10,292
Commercial leases		166,044		6,105		-		-		172,149		6,923
Consumer and other		5,572		-		229		-		5,801		116
Total loans and leases, net	$	3,637,088	$	57,237	$	1,970	$	-	$	3,696,295	$	75,018

	December 31, 2023
(Dollars in thousands)	Pass		Special Mention		Sub- standard		Doubtful		Total Loans & Leases		Total Allowance for Credit Losses
Loans and leases held-for-investment, net
Real estate:
Commercial	$	1,308,717	$	6,211	$	-	$	-	$	1,314,928	$	26,093
Agricultural		729,135		12,329		545		-		742,009		7,744
Residential and home equity		399,217		-		765		-		399,982		7,770
Construction		212,362		-		-		-		212,362		4,432
Total real estate		2,649,431		18,540		1,310		-		2,669,281		46,039
Commercial & industrial		486,439		12,458		476		-		499,373		13,380
Agricultural		310,496		3,236		5		-		313,737		8,872
Commercial leases		167,080		6		-		-		167,086		6,537
Consumer and other		5,036		-		176		-		5,212		137
Total loans and leases, net	$	3,618,482	$	34,240	$	1,967	$	-	$	3,654,689	$	74,965

Table of Contents

FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 3—Loans and Leases—Continued

The following table presents outstanding loan and lease balances held-for-investment net of unearned income by segment and class, credit quality indicators, vintage year by class of financing receivable, and current period gross charge-offs by year of origination as follows:

	March 31, 2024
	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost		Total
Net loans and leases held-for-investment
Real estate:
Commercial
Pass	$	30,385	$	120,014	$	166,306	$	219,834	$	141,997	$	321,074	$	337,664	$	1,337,274
Special mention		-		-		3,664		-		-		1,939		1,503		7,106
Substandard		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total Commercial	$	30,385	$	120,014	$	169,970	$	219,834	$	141,997	$	323,013	$	339,167	$	1,344,380
Commercial
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural
Pass	$	2,706	$	36,961	$	70,840	$	40,049	$	49,772	$	166,855	$	331,126	$	698,309
Special mention		-		-		-		-		800		10,172		16,214		27,186
Substandard		-		-		-		-		-		546		-		546
Doubtful		-		-		-		-		-		-		-		-
Total Agricultural	$	2,706	$	36,961	$	70,840	$	40,049	$	50,572	$	177,573	$	347,340	$	726,041
Agricultural
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Residential and home equity
Pass	$	11,492	$	40,743	$	61,230	$	87,405	$	77,721	$	80,780	$	45,383	$	404,754
Special mention		-		-		-		-		-		126		-		126
Substandard		-		-		-		-		-		646		-		646
Doubtful		-		-		-		-		-		-		-		-
Total Residential and home equity	$	11,492	$	40,743	$	61,230	$	87,405	$	77,721	$	81,552	$	45,383	$	405,526
Residential and home equity
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Construction
Pass	$	3,116	$	-	$	1,500	$	-	$	-	$	1,575	$	221,224	$	227,415
Special mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total construction	$	3,116	$	-	$	1,500	$	-	$	-	$	1,575	$	221,224	$	227,415
Construction
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Total Real estate	$	47,699	$	197,718	$	303,540	$	347,288	$	270,290	$	583,713	$	953,114	$	2,703,362

Commercial & industrial
Pass	$	5,994	$	47,400	$	24,885	$	20,443	$	5,991	$	9,417	$	368,454	$	482,584
Special mention		-		2,281		25		4,167		395		-		7,082		13,950
Substandard		-		-		-		41		-		453		-		494
Doubtful		-		-		-		-		-		-		-		-
Total Commercial & industrial	$	5,994	$	49,681	$	24,910	$	24,651	$	6,386	$	9,870	$	375,536	$	497,028
Commercial & industrial
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural
Pass	$	1,066	$	3,937	$	4,138	$	2,140	$	652	$	2,724	$	300,479	$	315,136
Special mention		-		-		50		-		-		-		2,714		2,764
Substandard		-		-		-		-		-		4		51		55
Doubtful		-		-		-		-		-		-		-		-
Total Agricultural	$	1,066	$	3,937	$	4,188	$	2,140	$	652	$	2,728	$	303,244	$	317,955
Agricultural
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Table of Contents

FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 3—Loans and Leases—Continued

	March 31, 2024
	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost		Total
Net loans and leases held for investment
Commercial leases
Pass	$	9,285	$	79,904	$	25,545	$	10,188	$	8,987	$	32,135	$	-	$	166,044
Special mention		594		-		5,511		-		-		-		-		6,105
Substandard		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total Commercial leases	$	9,879	$	79,904	$	31,056	$	10,188	$	8,987	$	32,135	$	-	$	172,149
Commercial leases
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Consumer and other
Pass	$	443	$	1,628	$	824	$	236	$	34	$	1,746	$	661	$	5,572
Special mention		-		-		-		-		-		-		-		-
Substandard		206		-		-		-		-		23		-		229
Doubtful		-		-		-		-		-		-		-		-
Total Consumer and other	$	649	$	1,628	$	824	$	236	$	34	$	1,769	$	661	$	5,801
Consumer and other
Current-period gross charge-offs	$	10	$	-	$	-	$	-	$	-	$	-	$	-	$	10
Total net loans and leases
Pass	$	64,487	$	330,587	$	355,268	$	380,295	$	285,154	$	616,306	$	1,604,991	$	3,637,088
Special mention		594		2,281		9,250		4,167		1,195		12,237		27,513		57,237
Substandard		206		-		-		41		-		1,672		51		1,970
Doubtful		-		-		-		-		-		-		-		-
Total net loans and leases	$	65,287	$	332,868	$	364,518	$	384,503	$	286,349	$	630,215	$	1,632,555	$	3,696,295
Total current-period gross charge-offs	$	10	$	-	$	-	$	-	$	-	$	-	$	-	$	10

Table of Contents

FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 3—Loans and Leases—Continued

	December 31, 2023
	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost		Total
Net loans and leases held for investment
Real estate:
Commercial
Pass	$	121,418	$	169,171	$	221,708	$	143,502	$	67,505	$	261,344	$	324,069	$	1,308,717
Special mention		-		2,395		-		-		-		2,216		1,600		6,211
Substandard		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total Commercial	$	121,418	$	171,566	$	221,708	$	143,502	$	67,505	$	263,560	$	325,669	$	1,314,928
Commercial
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural
Pass	$	37,849	$	71,367	$	40,848	$	50,445	$	12,008	$	165,267	$	351,351	$	729,135
Special mention		-		-		-		594		2,020		9,715		-		12,329
Substandard		-		-		-		-		-		545		-		545
Doubtful		-		-		-		-		-		-		-		-
Total Agricultural	$	37,849	$	71,367	$	40,848	$	51,039	$	14,028	$	175,527	$	351,351	$	742,009
Agricultural
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Residential and home equity
Pass	$	41,173	$	62,505	$	88,559	$	78,810	$	13,299	$	70,339	$	44,532	$	399,217
Special mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		765		-		765
Doubtful		-		-		-		-		-		-		-		-
Total Residential and home equity	$	41,173	$	62,505	$	88,559	$	78,810	$	13,299	$	71,104	$	44,532	$	399,982
Residential and home equity
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	14	$	-	$	14

Construction
Pass	$	-	$	2,500	$	-	$	-	$	1,575	$	-	$	208,287	$	212,362
Special mention		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total construction	$	-	$	2,500	$	-	$	-	$	1,575	$	-	$	208,287	$	212,362
Construction
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Total Real estate	$	200,440	$	307,938	$	351,115	$	273,351	$	96,407	$	510,191	$	929,839	$	2,669,281

Commercial & industrial
Pass	$	49,162	$	25,795	$	21,695	$	7,193	$	4,123	$	6,674	$	371,797	$	486,439
Special mention		2,500		27		4,903		466		-		-		4,562		12,458
Substandard		-		-		-		-		-		476		-		476
Doubtful		-		-		-		-		-		-		-		-
Total Commercial & industrial	$	51,662	$	25,822	$	26,598	$	7,659	$	4,123	$	7,150	$	376,359	$	499,373
Commercial & industrial
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural
Pass	$	3,013	$	4,585	$	2,296	$	688	$	1,026	$	2,116	$	296,772	$	310,496
Special mention		-		52		75		-		-		-		3,109		3,236
Substandard		-		-		-		-		5		-		-		5
Doubtful		-		-		-		-		-		-		-		-
Total Agricultural	$	3,013	$	4,637	$	2,371	$	688	$	1,031	$	2,116	$	299,881	$	313,737
Agricultural
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Table of Contents

FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 3—Loans and Leases—Continued

	December 31, 2023
	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost		Total
Net loans and leases held for investment
Commercial leases
Pass	$	81,287	$	31,954	$	10,786	$	9,514	$	4,667	$	28,872	$	-	$	167,080
Special mention		-		-		-		-		6		-		-		6
Substandard		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total Commercial leases	$	81,287	$	31,954	$	10,786	$	9,514	$	4,673	$	28,872	$	-	$	167,086
Commercial leases
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Consumer and other
Pass	$	1,650	$	930	$	375	$	48	$	45	$	1,400	$	588	$	5,036
Special mention		-		-		-		-		-		-		-		-
Substandard		152		-		-		-		-		24		-		176
Doubtful		-		-		-		-		-		-		-		-
Total Consumer and other	$	1,802	$	930	$	375	$	48	$	45	$	1,424	$	588	$	5,212
Consumer and other
Current-period gross charge-offs	$	41	$	3	$	-	$	-	$	-	$	2	$	-	$	46
Total net loans and leases
Pass	$	335,552	$	368,807	$	386,267	$	290,200	$	104,248	$	536,012	$	1,597,396	$	3,618,482
Special mention		2,500		2,474		4,978		1,060		2,026		11,931		9,271		34,240
Substandard		152		-		-		-		5		1,810		-		1,967
Doubtful		-		-		-		-		-		-		-		-
Total net loans and leases	$	338,204	$	371,281	$	391,245	$	291,260	$	106,279	$	549,753	$	1,606,667	$	3,654,689
Total current-period gross charge-offs	$	41	$	3	$	-	$	-	$	-	$	16	$	-	$	60

Certain directors and executive officers of the Company are defined as related parties. These related parties, including their immediate families and companies in which they are principal owners, were loan customers of the Bank during the three months ended March 31, 2024 and year ended December 31, 2023. Such loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with borrowers not related to the Company. These loans did not involve more than the normal risk of collectibility or have other unfavorable features. A summary of the changes in those loans is as follows:

	March 31,			December 31,
(Dollars in thousands)	2024			2023

Balance at beginning of the period	$	17,035		$	17,521
New loans or advances during year		250			1,706
Repayments		(89	)		(2,192	)
Balance at end of period	$	17,196		$	17,035

Table of Contents

FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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. When management determines that foreclosure is probable, expected credit losses for collateral dependent loans or leases are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. The collateral on the loans and leases is a significant portion of what secures the collateral dependent loans or leases and significant changes to the fair value of the collateral can impact the ACL. During the three months ended March 31, 2024, there were no significant changes to the collateral that secures the collateral dependent loans, whether due to general deterioration or with credit quality indicators like appraisal value. The following tables present the amortized cost basis for collateral dependent loans and leases by type as of March 31, 2024 and December 31, 2023, respectively:

	March 31, 2024
(Dollars in thousands)	Real Estate		Vehicles and Equipment		Total
Collateral dependent loans and leases
Real estate:
Commercial	$	-	$	-	$	-
Agricultural		550		-		550
Residential and home equity		642		-		642
Construction		-		-		-
Total real estate		1,192		-		1,192
Commercial & industrial		-		450		450
Agricultural		-		-		-
Commercial leases		-		-		-
Consumer and other		-		-		-
Total gross loans and leases	$	1,192	$	450	$	1,642

	December 31, 2023
(Dollars in thousands)	Real Estate		Vehicles and Equipment		Total
Collateral dependent loans and leases
Real estate:
Commercial	$	1,517	$	-	$	1,517
Agricultural		6,118		-		6,118
Residential and home equity		1,607		-		1,607
Construction		-		-		-
Total real estate		9,242		-		9,242
Commercial & industrial		-		473		473
Agricultural		-		5		5
Commercial leases		-		-		-
Consumer and other		-		164		164
Total gross loans and leases	$	9,242	$	642	$	9,884

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FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 3—Loans and Leases—Continued

Changes in the allowance for credit losses are as follows:

	For the Three Months Ended March 31, 2024
(Dollars in thousands)	Commercial & Agricultural R/E			Construction		Residential & Home Equity			Commercial & Agricultural			Commercial Leases		Consumer & Other			Total
Allowance for credit losses:
Balance at beginning of period	$	33,837		$	4,432	$	7,770		$	22,252		$	6,537	$	137		$	74,965
Provision for/(recapture of) for credit losses		(46	)		184		(57	)		(419	)		386		(48	)		-
Charge-offs		-			-		-			-			-		(10	)		(10	)
Recoveries		-			-		8			18			-		37			63
Net (charge-offs) / recoveries		-			-		8			18			-		27			53
Balance at end of period	$	33,791		$	4,616	$	7,721		$	21,851		$	6,923	$	116		$	75,018

	Year Ended December 31, 2023
(Dollars in thousands)	Commercial & Agricultural R/E		Construction		Residential & Home Equity			Commercial & Agricultural		Commercial Leases		Consumer & Other			Total
Allowance for credit losses:
Balance at beginning of year	$	32,551	$	3,026	$	7,508		$	21,705	$	1,924	$	171		$	66,885
Provision for/(recapture of) credit losses		1,116		1,406		211			423		4,613		(19	)		7,750
Charge-offs		-		-		(14	)		-		-		(46	)		(60	)
Recoveries		170		-		65			124		-		31			390
Net (charge-offs) / recoveries		170		-		51			124		-		(15	)		330
Balance at end of year	$	33,837	$	4,432	$	7,770		$	22,252	$	6,537	$	137		$	74,965

Note 4—Deposits

Certificates of deposit greater than and less than or equal to the FDIC insurance limit of $250,000 are summarized as follows:

(Dollars in thousands)	March 31, 2024		December 31, 2023
Certificates of deposit:
Certificates of deposit less than or equal to $250,000	$	399,576	$	325,798
Certificates of deposit greater than $250,000		477,886		318,830
Total certificates of deposit	$	877,462	$	644,628

Scheduled maturities for certificates of deposit are as follows:

(Dollars in thousands)	Amount
2024	$	730,301
2025		139,979
2026		5,109
2027		1,066
2028		954
Thereafter		53
Total certificates of deposit	$	877,462

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FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 5—Short-term borrowings

As of March 31, 2024 and December 31, 2023, committed lines of credit arrangements totaling $1.9 billion and $2.2 billion, respectively, were available to the Company from unaffiliated banks, respectively. The average Federal Funds interest rate as of March 31, 2024 was 5.50%.

The Company is a member of the FHLB of San Francisco and has a committed credit line of $769.4 million, which is secured by $1.3 billion in various real estate loans and investment securities pledged as collateral. Borrowings generally provide for interest at the then current published rate, which was 5.63% as of March 31, 2024. At March 31, 2024 there were $100.0 million in advances from the FHLB at a rate of 5.64% with a maturity date of April 26, 2024 and $100.0 million in the form of a letter of credit to collateralize the State of California certificate of deposit. There were no outstanding advances on the above borrowing facilities as December 31, 2023.

The Company has $1.6 billion in pledged loans with the FRB. As of March 31, 2024, the Company’s overnight borrowing capacity using the primary credit facilities from the Fed account was $1.2 billion. The borrowing rate was 5.50% as of March 31, 2024. There were no outstanding advances on the above borrowing facilities at March 31, 2024 and December 31, 2023.

Note 6—Employee Benefit Plans

Executive Retirement Plan

The Company, through the Bank, sponsors an Executive Retirement Plan (“ERP”) for certain executive level employees. The ERP is a non-qualified deferred compensation plan and was developed to supplement the Company’s Profit Sharing Plan, which, as a qualified retirement plan, has a ceiling on benefits as set by the Internal Revenue Service. The ERP is comprised of: (1) a Performance Component which makes contributions based upon long-term cumulative profitability and increase in market value of the Company; (2) a Salary Component which makes contributions based upon participant salary levels; and (3) an Equity Component for which contributions are discretionary and subject to Board of Directors approval. The Company maintains a Rabbi Trust to fund, in part, the ERP. The Rabbi Trust is an irrevocable grantor trust to which the Company may contribute assets for the limited purpose of funding a nonqualified deferred compensation plan. The Company may not use the assets of the Rabbi Trust for any purpose other than meeting its obligations under the ERP; however, the assets of the Rabbi Trust remain subject to the claims of its creditors and are included in the consolidated financial statements. The Company contributes cash to the Rabbi Trust from time to time for the sole purpose of funding the ERP. The Rabbi Trust will use any cash the Company contributes to purchase shares of common stock of the Company, and other financial instruments, on the open market. ERP contributions are invested in a mix of financial instruments; however, the Equity Component contributions are invested primarily in common stock of the Company.

The Company expensed $2.2 million to the ERP during the three months ended March 31, 2024 and $2.3 million during the three months ended March 31, 2023. The Company’s carrying value of the liability under the ERP was $57.7 million as of March 31, 2024 and $57.5 million as of December 31, 2023, which is included in 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 March 31, 2024 and December 31, 2023 totaled 49,044 and 49,276 with an historical cost basis of $31.7 million and $31.6 million, respectively. All amounts have been fully funded into the Rabbi Trust as of March 31, 2024 and December 31, 2023. The consolidated investments held in the Rabbi Trust are recorded at fair value with changes in unrealized gains or losses recorded within non-interest income and the equal and offsetting charges in the related liability are recorded in non-interest expense in the consolidated statements of income.

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FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 6—Employee Benefit Plans—Continued

Net gains on ERP plan investments were $1.0 million and $0.7 million at March 31, 2024 and 2023, 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 nonqualified deferred compensation plan. The Company may not use the assets of the Rabbi Trust for any purpose other than meeting its obligations under the SMRP; however, the assets of the Rabbi Trust remain subject to the claims of its creditors and are included in the consolidated financial statements. The Company contributes cash to the Rabbi Trust from time to time for the sole purpose of funding the SMRP. The Rabbi Trust will use any cash the Company contributes to purchase shares of common stock of the Company, and other financial instruments, on the open market. Contributions to the SMRP are invested primarily in common stock of the Company.

The Company expensed $1.1 million to the SMRP during the three months ended March 31, 2024 and $1.2 million for three months ended March 31, 2023. The Company’s carrying value of the liability under the SMRP was $17.8 million as of March 31, 2024 and $16.9 million as of December 31, 2023, which is included in other liabilities on the balance sheet. The Company’s shares of stock held as investments in the Rabbi Trust of the SMRP as of March 31, 2024 and December 31, 2023 totaled 18,734 and 17,806 shares with an historical cost basis of $13.8 million and $12.8 million, respectively. All amounts have been fully funded into the Rabbi Trust as of March 31, 2024 and December 31, 2023. 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 $0.2 million and $0.2 million at March 31, 2024 and 2023, 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.

Note 7—Fair Value

The Company uses fair value measurements to record fair value adjustments to certain financial and non-financial assets and liabilities and to determine fair value disclosures. Various financial instruments such as available-for-sale securities are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets and liabilities on a non-recurring basis, such as collateral dependent loans and other real estate owned. These non-recurring fair value adjustments typically involve lower of cost or fair value accounting or write-down of individual assets.

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. 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 three levels are defined as follows:

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FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 7—Fair Value—Continued

•

Level 1 – inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

•

Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and inputs that are observable for the assets or liabilities, either directly or indirectly (such as interest rates, yield curves, and prepayment speeds).

•

Level 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.

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. 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.

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

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

Securities classified as 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. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

The Company does not record all loans and leases at fair value on a recurring basis. However, from time to time, a loan or lease is considered collateral dependent and an allowance for credit losses is established. Once a loan or lease is identified as collaterally dependent, management measures impairment in accordance FASB ASC Topic 326.

These appraisals may utilize a single valuation approach or a combination of approaches including sales comparison, cost and the income approach. Adjustments are often made in the appraisal process by the appraisers to take into account differences between the comparable sales and income and other available data. Such adjustments can be significant and typically result in a Level 3 classification of the inputs for determining fair value. The valuation technique used for Level 3 non-recurring collateral dependent loans is primarily the sales comparison approach less estimated selling costs.

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FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 7—Fair Value—Continued

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

The following tables presents information about the Bank’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 Bank to determine such fair value for the periods indicated.

March 31, 2024			Fair Value Measurements
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value
Fair valued on a recurring basis:
Available-for-sale securities
U.S. Government-sponsored securities	$	3,048	$	-	$	3,048	$	-	$	3,048
Mortgage-backed securities		216,093		-		216,093		-		216,093
Collateralized mortgage obligations		5,654		-		5,654		-		5,654
Corporate securities		14,751		-		14,751		-		14,751
Other		310		-		310		-		310

Fair valued on a non-recurring basis:
Collateral dependent loans	$	1,642	$	-	$	-	$	1,642	$	1,642
Other real estate owned		873		-		-		873		873

December 31, 2023			Fair Value Measurements
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value
Fair valued on a recurring basis:
Available-for-sale securities
U.S. Government-sponsored securities	$	3,224	$	-	$	3,224	$	-	$	3,224
Mortgage-backed securities		163,838		-		163,838		-		163,838
Collateralized mortgage obligations		535		-		535		-		535
Corporate securities		14,605		-		14,605		-		14,605
Other		310		-		310		-		310

Fair valued on a non-recurring basis:
Collateral dependent loans	$	9,884	$	-	$	-	$	9,884	$	9,884
Other real estate owned		873		-		-		873		873

Collateral dependent loans

While the overall loan portfolio is not carried at fair value, the Company periodically records nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Nonrecurring adjustments also include certain impairment amounts for collateral dependent loans when establishing the allowance for credit losses on loans. Such amounts are generally based on the fair value of the underlying collateral supporting the loan. In determining the value of real estate collateral, the Company relies on external and internal appraisals of property values depending on the size and complexity of the real estate collateral. The Company maintains a list of qualified property appraisers who review appraisal reports for reasonableness. In the case of non-real estate collateral, reliance is placed on a variety of sources, including external estimates of value and judgments based on the experience and expertise of internal specialists. Values of all loan collateral are regularly reviewed by credit administration. Unobservable inputs to these measurements, which include estimates and judgments often used in conjunction with appraisals, are not readily quantifiable. These measurements are classified as Level 3.

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FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 7—Fair Value—Continued

The following tables summarize the carrying amount and estimated fair values of the Company’s financial assets and liabilities not carried at fair value, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value for the periods indicated.

March 31, 2024			Fair Value Measurements
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value
Financial Assets:
Cash and cash equivalents	$	738,397	$	738,397	$	-	$	-	$	738,397
Held-to-maturity securities		806,521		-		607,853		57,387		665,240
Non-marketable securities, at cost		15,549		-		15,549		-		15,549
Loans and leases, net		3,621,277		-		-		3,402,777		3,402,777

Financial Liabilities:
Total deposits	$	4,959,589	$	-	$	4,082,127	$	871,395	$	4,953,522
Federal Home Loan Bank advances		100,000		-		-		100,003		100,003
Subordinated debentures		10,310		-		12,418		-		12,418

December 31, 2023			Fair Value Measurements
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value
Financial Assets:
Cash and cash equivalents	$	410,642	$	410,642	$	-	$	-	$	410,642
Held-to-maturity securities		817,238		-		629,051		58,192		687,243
Non-marketable securities, at cost		15,549		-		15,549		-		15,549
Loans and leases, net		3,579,724		-		-		3,369,255		3,369,255

Financial Liabilities:
Total deposits	$	4,668,095	$	-	$	4,023,467	$	639,315	$	4,662,782
Subordinated debentures		10,310		-		12,763		-		12,763

Non-marketable securities include FHLB stock, Pacific Coast Bankers’ Bank (“PCBB”) stock and The Independent BankersBank (“TIB”) stock which are recorded at cost. Ownership of these stocks is restricted to member banks and the securities do not have a readily determinable market value. 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.

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FARMERS & MERCHANTS BANCORP

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 8—Commitments and Contingencies

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

(Dollars in thousands)	March 31, 2024		December 31, 2023

Commitments to extend credit, including unsecured commitments of $20,085 and $19,858 as of March 31, 2024 and December 31, 2023, respectively	$	1,074,963	$	1,150,142
Stand-by letters of credit, including unsecured commitments of $5,485 and $7,010 as of March 31, 2024 and December 31, 2023, respectively		14,889		16,858

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 reserve for unfunded loan commitments, which amounted to $3.7 million at March 31, 2024 and December 31, 2023.

Standby letters of credit are conditional commitments issued by the Company to guarantee performance of or payment for a customer to a third-party. Outstanding standby letters of credit have maturity dates ranging from 1 to 60 months with final expiration in August 2028. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

The Company has commitments to fund investments in LIHTC partnerships and limited liability companies. At March 31, 2024 and December 31, 2023, the balance of the investments in LIHTC was $35.8 million and $36.5 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 $13.7 million and $15.5 million at March 31, 2024 and December 31, 2023, respectively. These balances are reflected in the other liabilities line on the consolidated balance sheets. The Company expects to fulfill these commitments through 2039. Additionally, during the three months ended March 31, 2024 and the year ended December 31, 2023, the Company recognized tax credits from its investments in LIHTC of $1.1 million and $3.6 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.

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.

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Item 2.

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

The following discussion is intended to provide a more 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. Item 1. 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, 2023 (“Form 10-K”), could cause actual results to 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;

◾	risks associated with negative events in the banking industry in the past year, 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;

◾	legislative or regulatory changes 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; and

◾	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 Annual Report on Form 10-K for the year ended December 31, 2023.

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, committed 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).

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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.

Overview

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 107 years ago, August 1, 1916, marked the first day of business for Farmers & Merchants Bank (the “Bank”). 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 and Napa. 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. Legal limitations are imposed on the amount of dividends that may be paid and loans that may be made by the Bank to the Company.

In March 2002, F & M Bancorp, Inc. was created to protect the name “F & M Bank.” During 2002, the Company completed a fictitious name filing in California to begin using the streamlined name, “F & M Bank,” as part of a larger effort to enhance the Company’s image and build brand name recognition. Since 2002, the Company has converted all of its daily operating and image advertising to the “F & M Bank” name and the Company’s logo, slogan and signage were redesigned to incorporate the trade name, “F & M Bank.”

The Company’s outstanding common stock as of March 31, 2024, consisted of 742,770 shares of common stock, $0.01 par value. No shares of preferred stock were issued or outstanding as of March 31, 2024. 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 core 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 clients.

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 shareholder equity. The efficiency ratio is calculated by dividing non-interest expense by the sum of net interest income and non-interest income.

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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. These policies and estimates relate to the allowance for credit losses on loans and leases held for investment, investment securities, the carrying value of goodwill and other intangible assets, fair value measurements and the realization of deferred income tax assets and liabilities.

Our critical accounting policies and estimates are described in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Form 10-K.

Impact of Recently Issued Accounting Standards

See Note 1. “Basis of Presentation and Significant Accounting Policies” to the Unaudited Consolidated Financial Statements in “Item 1. Financial Information” in this Quarterly Report on Form 10-Q.

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	March 31, 2024			December 31, 2023			March 31, 2023
(Dollars in thousands, except per share data)
Shareholders' equity	$	565,217		$	549,755		$	508,902
Less: Intangible assets		13,282			13,419			13,849
Tangible common equity	$	551,935		$	536,336		$	495,053

Total Assets	$	5,714,573		$	5,308,928		$	5,133,771
Less: Intangible assets		13,282			13,419			13,849
Tangible assets	$	5,701,291		$	5,295,509		$	5,119,922

Tangible common equity ratio⁽¹⁾		9.68	%		10.13	%		9.67	%
Book value per common share⁽²⁾	$	760.96		$	735.00		$	667.04
Tangible book value per common share⁽³⁾	$	743.08		$	717.05		$	648.88
Common shares outstanding		742,770			747,971			762,931

(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.

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Results of Operations

The following discussion and analysis is intended to provide a better understanding of the Company’s and its subsidiaries’ performance during each of the three month periods ended March 31, 2024 and 2023, and at December 31, 2023 and the material changes in financial condition, operating income, and expense of the Company and its subsidiaries as shown in the accompanying consolidated financial statements. Information related to the comparison of the results of operations for the years ended December 31, 2023, and 2022 can be found in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2023 Annual Report on Form 10-K filed with the SEC on March 14, 2024.

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.

Earnings Performance

The following table presents performance metrics for the periods indicated:

	Three Months Ended
(dollars in thousands, except per share amounts)	March 31, 2024			December 31, 2023			March 31, 2023
Earnings Summary:
Interest income	$	66,641		$	67,392		$	59,632
Interest expense		14,928			13,592			3,910
Net interest income		51,713			53,800			55,722
Provision for credit losses		-			2,350			1,500
Non-interest income		5,075			2,401			3,460
Non-interest expense		25,521			24,866			28,183
Income before taxes		31,267			28,985			29,499
Income tax expense		8,544			7,560			5,952
Net Income	$	22,723		$	21,425		$	23,547

Per Common Share Data:
Diluted earnings per common share	$	30.56		$	28.55		$	30.80
Book value per common share	$	760.96		$	735.00		$	667.04
Tangible book value per common share⁽¹⁾	$	743.08		$	717.05		$	648.88

Performance Ratios:
Return on average assets		1.71	%		1.63	%		1.80	%
Return on average equity		16.33	%		16.54	%		18.93	%
Net interest margin (tax equivalent)		4.14	%		4.24	%		4.55	%
Yield on average loans and leases (tax equivalent)		6.09	%		6.10	%		5.69	%
Cost of average total deposits		1.27	%		1.14	%		0.32	%
Efficiency ratio		44.94	%		44.24	%		47.62	%
Loan-to-deposit ratio		74.73	%		78.52	%		75.73	%
Percentage of checking deposits to total deposits		49.39	%		51.76	%		55.89	%

Capital Ratios Bancorp:
Common equity tier 1 capital to risk-weighted assets		12.73	%		12.30	%		12.19	%
Tier 1 capital to risk-weighted assets		12.95	%		12.53	%		12.43	%
Risk-based capital to risk-weighted assets		14.21	%		13.78	%		13.68	%
Tier 1 leverage capital ratio		10.83	%		10.38	%		9.94	%
Tangible common equity ratio⁽¹⁾		9.68	%		10.13	%		9.67	%

(1) See "Non-GAAP Measurements"

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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,
	2024									2023
(Dollars in thousands)	Average Balance			Interest Income / Expense			Average Yield / Rate			Average Balance			Interest Income / Expense			Average Yield / Rate
ASSETS
Interest earnings deposits in other banks and federal funds sold	$	332,575		$	4,530			5.48	%	$	521,147		$	5,961			4.64	%
Investment Securities:⁽¹⁾
Taxable securities		969,234			5,708			2.37	%		967,699			4,805			2.01	%
Non-taxable securities⁽²⁾		63,079			762			4.83	%		57,513			704			4.90	%
Total investment securities		1,032,313			6,470			2.52	%		1,025,212			5,509			2.18	%
Loans:⁽³⁾
Real estate:
Commercial		1,322,337			17,622			5.36	%		1,280,959			16,649			5.27	%
Agricultural		725,078			10,322			5.73	%		715,756			9,614			5.45	%
Residential and home equity		401,578			4,792			4.80	%		387,369			4,095			4.29	%
Construction		225,430			3,898			6.95	%		169,913			2,937			7.01	%
Total real estate		2,674,423			36,634			5.51	%		2,553,997			33,295			5.29	%
Commercial & industrial		499,071			9,261			7.46	%		465,383			7,624			6.64	%
Agricultural		313,653			6,479			8.31	%		280,467			5,204			7.52	%
Commercial leases		168,526			2,946			7.03	%		116,948			1,805			6.26	%
Consumer and other		5,619			88			6.30	%		5,580			80			5.81	%
Total loans and leases		3,661,292			55,408			6.09	%		3,422,375			48,008			5.69	%
Non-marketable securities		15,549			388			10.04	%		15,549			301			7.85	%
Total interest earning assets		5,041,729			66,796			5.33	%		4,984,283			59,779			4.86	%
Allowance for credit losses		(75,448	)								(67,691	)
Non-interest earning assets		339,939									311,140
Total average assets	$	5,306,220								$	5,227,732

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing deposits:
Demand	$	914,618			888			0.39	%	$	1,068,504			444			0.17	%
Savings and money market accounts		1,618,678			7,186			1.79	%		1,561,684			2,503			0.65	%
Certificates of deposit greater than $250,000		378,714			3,094			3.29	%		147,704			487			1.34	%
Certificates of deposit less than $250,000		338,031			3,477			4.14	%		206,214			280			0.55	%
Total interest bearing deposits		3,250,041			14,645			1.81	%		2,984,106			3,714			0.50	%
Short-term borrowings		5,497			62			4.54	%		3			-			0.00	%
Subordinated debentures		10,310			221			8.62	%		10,310			196			7.71	%
Total interest bearing liabilities		3,265,848			14,928			1.84	%		2,994,419			3,910			0.53	%
Non-interest bearing deposits		1,403,384									1,663,152
Total funding		4,669,232			14,928			1.29	%		4,657,571			3,910			0.34	%
Other non-interest bearing liabilities		80,276									72,710
Shareholders' equity		556,712									497,451
Total average liabilities and shareholders' equity	$	5,306,220								$	5,227,732

Net interest income and margin⁽⁴⁾				$	51,868			4.14	%				$	55,869			4.55	%
Interest rate spread								3.49	%								4.33	%
Tax equivalent adjustment					(155	)								(147	)
Net interest income				$	51,713			4.13	%				$	55,722			4.53	%

⁽¹⁾Excludes average unrealized losses of $18.5 million and $28.2 million for the three months ended March 31, 2024, and 2023, respectively, which are included in non-interest earning assets.

⁽²⁾ Yields and interest income are calculated on a fully taxable equivalent basis using the current statutory federal tax rate of 21%.

⁽³⁾Loan interest income includes loan fees of $1.4 million and $2.0 million for the three months ended March 31, 2024 and 2023, respectively.

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

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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 5.48% and 4.64% for the three months ended March 31, 2024 and 2023, respectively. The increase was primarily the result of the Federal Reserve increasing rates by 75 basis points from March 2023 to July 2023. Average interest-bearing deposits with banks was $333 million and $521 million for the three months ended March 31, 2024 and 2023, respectively. Interest income on interest-bearing deposits with banks was $4.5 million and $6.0 million for the three months ended March 31, 2024 and 2023, respectively.

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 entities; (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 $1.0 billion for the three months ended March 31, 2024 and 2023, respectively. The average yield on total investment securities was 2.52% and 2.18% for the three months ended March 31, 2024 and 2023, respectively. The increase in the yield reflects the increase in yields on purchases over the last year.

Average loans and leases held for investment were $3.7 billion and $3.4 billion for the three months ended March 31, 2024 and 2023, respectively. The average yield on the loan and lease portfolio was 6.09% and 5.69% for the three months ended March 31, 2024 and 2023, respectively. The increase in the loan yield reflects the increase in market interest rates over the last year.

Average interest-bearing deposits were $3.3 billion and $3.0 billion for the three months ended March 31, 2024 and 2023, respectively. The average rate paid on interest-bearing deposits was 1.81% and 0.50% for the three months ended March 31, 2024 and 2023, respectively. Total interest expense on interest-bearing deposits was $14.6 million and $3.7 million for the three months ended March 31, 2024 and 2023, respectively, with the increases driven by increases in short-term market interest rates from March 2023 to July 2023 and customers seeking higher rates on deposit products. The average rate paid on total funding costs was 1.29% and 0.34% for the three months ended March 31, 2024 and 2023, respectively.

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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, 2024 compared with 2023
	Increase (Decrease) Due to:
(Dollars in thousands)	Volume			Rate			Net
Interest income:
Interest earnings deposits in other banks and federal funds sold	$	(6,787	)	$	5,356		$	(1,431	)
Investment securities:
Taxable securities		8			895			903
Non-taxable securities		118			(60	)		58
Total investment securities		126			835			961
Loans:
Real estate:
Commercial		640			333			973
Agricultural		144			564			708
Residential and home equity		164			534			698
Construction		1,123			(162	)		961
Total real estate		2,071			1,269			3,340
Commercial & industrial		605			1,032			1,637
Agricultural		678			597			1,275
Commercial leases		892			249			1,141
Consumer and other		1			7			8
Total loans and leases		4,247			3,154			7,401
Non-marketable securities		-			87			87
Total interest income		(2,414	)		9,432			7,018

Interest expense:
Interest bearing deposits:
Demand		(424	)		868			444
Savings and money market accounts		96			4,587			4,683
Certificates of deposit greater than $250,000		1,350			1,257			2,607
Certificates of deposit less than $250,000		286			2,911			3,197
Total interest bearing deposits		1,308			9,623			10,931

Short-term borrowings		-			62			62
Subordinated debentures		-			25			25
Total interest expense		1,308			9,710			11,018
Net interest income	$	(3,722	)	$	(278	)	$	(4,000	)

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Comparison of Results of Operations for the Three Months Ended March 31, 2024 and 2023

	Three Months Ended March 31,				$ Better / (Worse)			$ Better / (Worse)
	Three Months Ended March 31,
(Dollars in thousands)	2024		2023
Selected Income Statement Information:
Interest income	$	66,641	$	59,632	$	7,009			11.75	%
Interest expense		14,928		3,910		(11,018	)		(281.79	%)
Net interest income		51,713		55,722		(4,009	)		(7.19	%)
Provision for credit losses		-		1,500		1,500			N/A
Net interest income after provision for credit losses		51,713		54,222		(2,509	)		(4.63	%)
Non-interest income		5,075		3,460		1,615			46.68	%
Non-interest expense		25,521		28,183		2,662			9.45	%
Income before income tax expense		31,267		29,499		1,768			5.99	%
Income tax expense		8,544		5,952		(2,592	)		(43.55	%)
Net income	$	22,723	$	23,547	$	(824	)		(3.50	%)

For the three months ended March 31, 2024 and 2023, net income was $22.7 million compared with $23.5 million, respectively. The decrease in net income was primarily the result of lower net interest income of $4.0 million and a higher income tax expense of $2.6 million. The first quarter of 2023 benefited from cash proceeds from a non-taxable death benefited on bank-owned life insurance (“BOLI”) of $4.3 million which was partially offset by a $5.7 million loss on the sale of securities based on the decision to reposition the securities portfolio given the interest rate environment. This decrease was offset by an increase in non-interest income of $1.6 million, no provision for credits losses compared to $1.5 million in 2023 and a decrease in non-interest expense of $2.7 million.

Net Interest Income and Net Interest Margin

For the three months ended March 31, 2024 and 2023, net interest income was $51.7 million compared with $55.7 million, respectively. The decrease is primarily the result of the net interest margin (tax equivalent basis) decreasing 41 basis points to 4.14% compared with 4.55% for the same period a year earlier. The decrease in the net interest margin was primarily the result of the increase in deposit costs due the interest rate environment as the federal funds rate increased 75 basis points from March through July of 2023 and customer expectations for higher rates on deposit products. The loan yield increased 40 basis points from 5.69% to 6.09% compared to the first quarter of 2023. The deposit yield increased 131 basis points from 0.50% to 1.81% and outpaced the increase in loan yield over the same period a year earlier.

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.

The Company had no provision for credit losses during the first three months of 2024 compared to a $1.5 million provision for credit losses the same period a year earlier. For the three month ended March 31, 2024 net recoveries were $53,000 compared to net recoveries of $188,000 for the same period a year earlier.

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Non-interest Income

	Three Months Ended March 31,
(Dollars in thousands)	2024		2023			$ Better / (Worse)			% Better / (Worse)
Non-interest Income:
Card processing		1,629		1,591		$	38			2.39	%
Gain on BOLI death benefit		-		4,346			(4,346	)		-
Net gain on deferred compensation benefits		1,158		896			262			29.24	%
Service charges on deposit accounts		748		634			114			17.98	%
Increase in cash surrender value of BOLI		595		444			151			34.01	%
Net loss on sale of securities available-for-sale		-		(5,686	)		5,686			-
Other		945		1,235			(290	)		(23.48	%)
Total non-interest income	$	5,075	$	3,460		$	1,615			46.68	%

Non-interest income increased $1.6 million, or 46.7%, to $5.1 million for the three months ended March 31, 2024 compared with $3.5 million for the same period a year earlier. The year-over-year increase in non-interest income was primarily due to no loss on sale of investment securities during 2024 compared to a $5.7 million loss on sale of investment securities during the first quarter of 2023 and no gain on BOLI death benefits in the first quarter of 2024 compared to $4.3 million gain in the first quarter of 2023. Excluding these items, non-interest income in the first quarter of 2023 would have been $4.8 million with a net increase in the first quarter of 2024 of $0.3 million.

The Company recorded net gains on deferred compensation plan investments of $1.2 million for the three months ended March 31, 2024 compared with net gains of $0.9 million for the same period a year earlier. See Note 10, located in “Item 8. Financial Statements and Supplementary Data” in the Company’s December 31, 2023 Form 10-K filed on March 14, 2024 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 March 31,
(Dollars in thousands)	2024		2023		$ Better / (Worse)			% Better / (Worse)
Non-interest Expense:
Salaries and employee benefits		17,503		19,584	$	2,081			10.63	%
Data processing		1,455		1,260		(195	)		(15.48	%)
Occupancy		1,232		1,180		(52	)		(4.41	%)
Net gain on deferred compensation benefits		1,158		896		262			29.24	%
Deposit insurance		712		692		(20	)		(2.89	%)
Professional services		541		682		141			20.67	%
Marketing		480		470		(10	)		(2.13	%)
Other		2,440		3,419		979			28.63	%
Total non-interest expense	$	25,521	$	28,183	$	2,662			9.45	%

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Non-interest expense decreased $2.7 million, or 9.45%, to $25.5 million for the three months ended March 31, 2024 compared with $28.2 million for the same period a year ago. This year-over-year decrease was primarily comprised of a $2.1 million decrease in salaries and employee benefits and a $1.0 million decrease in other miscellaneous expenses. The decrease in salaries and employee benefits was due primarily to reduced discretionary compensation. The decrease in miscellaneous expenses was due primarily to the adoption of ASU 2023-02 which shifts the benefits of low-income housing tax credits to the income tax line under the proportional amortization method. For the first quarter of 2024 this amounted to $1.0 million. These decreases were partially offset by a $0.3 million increase in net gains on deferred compensation plan investments and a $0.2 million increase in data processing expenses.

Net gains on deferred compensation plan obligations were $1.2 million for the three months ended March 31, 2024 compared with net gains of $0.9 million for the same respective period. See Note 10, located in “Item 8. Financial Statements and Supplementary Data” in the Company’s December 31, 2023 Form 10-K filed on March 14, 2024 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, 2024, income tax expense was $8.5 million compared to $6.0 million for the same period a year earlier. For the three months ended March 31, 2024, the effective tax rate was 27.33% compared to 20.18% for the same period a year earlier. The Company’s effective tax rate for the three months ended March 31, 2023 was lower than its historical effective tax rate primarily due to a non-taxable BOLI death benefit of $4.3 million recognized during the three months ended March 31, 2023. 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 sources. The effective rates were lower than the combined Federal and State statutory rate of 30% credits associated with low income housing tax credit investments (LIHTC); and tax-exempt interest income on municipal securities and loans.

Balance Sheet Analysis

Total assets were $5.7 billion at March 31, 2024 compared with $5.3 billion at December 31, 2023, an increase of $405.6 million or 7.64%. Loans held for investment were $3.7 billion at March 31, 2024, an increase of $41.6 million, or 1.14% compared with $3.7 billion at December 31, 2023. Total deposits were $5.0 billion at March 31, 2024 compared with $4.7 billion at December 31, 2023, an increase of $291.5 million or 6.24%. Our loan to deposit ratio was 74.73% and 78.52% as of March 31, 2024 and December 31, 2023, 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 $672.6 million at March 31, 2024 and $338.4 million at December 31, 2023. The increase was primarily due to steps taken to manage on-balance sheet liquidity which included $200.0 million in brokered deposits and $100.0 million in FHLB advances. The Company’s total cash and cash equivalents as of March 31, 2024 represented 12.9% of the Company’s total assets as compared to 7.7% as of December 31, 2023.

Investment Securities

The Company’s net investment portfolio increased by $46.6 million or 4.66% to $1.0 billion at March 31, 2024 compared to December 31, 2023. During the first quarter of 2024 the Company purchased $64.9 million of investment securities. The Company uses its investment portfolio to manage interest rate and liquidity risks. The Company's total investment portfolio as of March 31, 2024 represents 18.32% of the Company’s total assets as compared to 18.84% at December 31, 2023.

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The carrying value of our portfolio of investment securities was as follows:

(Dollars in thousands)	March 31, 2024		December 31, 2023
Available-for-Sale Securities
U.S. Government-sponsored securities	$	3,048	$	3,224
Mortgage-backed securities⁽¹⁾		216,093		163,838
Collateralized mortgage obligations⁽¹⁾		5,654		535
Corporate securities		14,751		14,605
Other		310		310
Total available-for-sale securities	$	239,856	$	182,512

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

(Dollars in thousands)	March 31, 2024		December 31, 2023
Held-to-Maturity Securities
Mortgage-backed securities⁽¹⁾	$	656,028	$	664,728
Collateralized mortgage obligations⁽¹⁾		72,950		74,170
Municipal securities		77,993		78,790
Total held-to-maturity securities	$	806,971	$	817,688

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

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

	As of March 31, 2024
	Within One Year					After One but Within Five Years					After Five but Within Ten Years					After Ten Years					Total
(Dollars in thousands)	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Securities available-for-sale
U.S. Government-sponsored securities	$	1		6.87	%	$	88		6.40	%	$	242		6.63	%	$	2,717		6.43	%	$	3,048		6.44	%
Mortgage-backed securities⁽¹⁾		112		1.90	%		5,404		2.56	%		4,986		3.76	%		205,592		4.09	%		216,093		4.04	%
Collateralized mortgage obligations⁽¹⁾		-		0.00	%		-		0.00	%		-		0.00	%		5,654		6.27	%		5,654		6.27	%
Corporate securities		-		0.00	%		14,750		5.80	%		-		0.00	%		-		0.00	%		14,751		5.80	%
Other		310		8.44	%		-		0.00	%		-		0.00	%		-		0.00	%		310		8.44	%
Total securities available-for-sale	$	423		6.70	%	$	20,242		4.94	%	$	5,228		3.89	%	$	213,963		4.18	%	$	239,856		4.24	%

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

	As of March 31, 2024
	Within One Year					After One but Within Five Years					After Five but Within Ten Years					After Ten Years					Total
(Dollars in thousands)	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Securities held-to-maturity
Mortgage-backed securities⁽¹⁾	$	-		0.00	%	$	1,887		0.87	%	$	11,758		1.44	%	$	642,382		1.89	%	$	656,028		1.88	%
Collateralized mortgage obligations⁽¹⁾		-		0.00	%		-		0.00	%		-		0.00	%		72,950		1.75	%		72,950		1.75	%
Municipal securities		2,230		6.41	%		16,200		3.60	%		9,251		3.04	%		50,313		4.00	%		77,993		3.87	%
Total securities held-to-maturity	$	2,230		6.41	%	$	18,087		3.32	%	$	21,009		2.14	%	$	765,645		2.02	%	$	806,971		2.06	%

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

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	As of December 31, 2023
	Within One Year					After One but Within Five Years					After Five but Within Ten Years					After Ten Years					Total
(Dollars in thousands)	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Securities available-for-sale
U.S. Government-sponsored securities	$	1		5.91	%	$	99		6.47	%	$	269		6.65	%	$	2,855		6.44	%	$	3,224		6.46	%
Mortgage-backed securities⁽¹⁾		169		1.79	%		6,138		2.57	%		4,916		3.78	%		152,615		3.52	%		163,838		3.44	%
Collateralized mortgage obligations⁽¹⁾		-		0.00	%		-		0.00	%		-		0.00	%		535		2.27	%		535		2.27	%
Corporate securities		-		0.00	%		14,605		5.71	%		-		0.00	%		-		0.00	%		14,605		5.71	%
Other		310		8.20	%		-		0.00	%		-		0.00	%		-		0.00	%		310		8.20	%
Total securities available-for-sale	$	480		5.94	%	$	20,842		4.79	%	$	5,185		3.93	%	$	156,005		3.57	%	$	182,512		3.68	%

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

	As of December 31, 2023
	Within One Year					After One but Within Five Years					After Five but Within Ten Years					After Ten Years					Total
(Dollars in thousands)	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield
Securities held-to-maturity
Mortgage-backed securities⁽¹⁾	$	-		0.00	%	$	2,058		0.78	%	$	12,418		1.41	%	$	650,252		1.90	%	$	664,728		1.88	%
Collateralized mortgage obligations⁽¹⁾		-		0.00	%		-		0.00	%		-		0.00	%		74,170		1.75	%		74,170		1.75	%
Municipal securities		875		4.01	%		15,962		4.23	%		10,703		3.76	%		51,250		3.88	%		78,790		3.93	%
Total securities held-to-maturity	$	875		4.01	%	$	18,020		3.84	%	$	23,121		2.50	%	$	775,672		2.02	%	$	817,688		2.07	%

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

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 penalties. The Company evaluates securities for expected credit losses at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.

Loans and Leases

Loans and leases can be categorized by borrowing purpose and use of funds. For detailed descriptions of the various loan types offered by the Company see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the SEC on March 14, 2024.

The Company's loan and lease portfolio at March 31, 2024 totaled $3.7 billion, an increase of $41.6 million or 1.14% over December 31, 2023.

The following table sets forth the distribution of the loan and lease portfolio by type and percent at the end of each period presented:

	March 31, 2024					December 31, 2023
(Dollars in thousands)	Dollars		Percent of Total			Dollars		Percent of Total
Gross loans and leases
Real estate:
Commercial	$	1,352,014		36.48	%	$	1,323,038		36.10	%
Agricultural		726,041		19.59	%		742,009		20.24	%
Residential and home equity		405,526		10.94	%		399,982		10.91	%
Construction		227,415		6.13	%		212,362		5.80	%
Total real estate		2,710,996		73.14	%		2,677,391		73.05	%
Commercial & industrial		497,028		13.41	%		499,373		13.62	%
Agricultural		317,955		8.58	%		313,737		8.56	%
Commercial leases		174,657		4.71	%		169,684		4.63	%
Consumer and other		5,801		0.16	%		5,212		0.14	%
Total gross loans and leases	$	3,706,437		100.00	%	$	3,665,397		100.00	%

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The following table shows the maturity distribution and interest rate sensitivity of the loan and lease portfolio of the Company as of March 31, 2024.

	Loan Contractual Maturity
(Dollars in thousands)	One Year or Less		After One But Within Five Years		After Five Years But Within Fifteen Years		After Fifteen Years		Total
Gross loan and leases:
Real estate:
Commercial	$	85,828	$	388,701	$	842,417	$	35,068	$	1,352,014
Agricultural		51,740		174,911		438,218		61,172		726,041
Residential and home equity		111		4,315		111,926		289,174		405,526
Construction		183,815		42,741		859		-		227,415
Total real estate		321,494		610,668		1,393,420		385,414		2,710,996
Commercial & industrial		216,756		179,670		98,271		2,331		497,028
Agricultural		194,378		102,542		21,035		0		317,955
Commercial leases		4,939		50,174		119,544		-		174,657
Consumer and other		731		3,677		922		471.00		5,801
Total gross loans and leases	$	738,298	$	946,731	$	1,633,192	$	388,216	$	3,706,437
Rate structure for loans and leases
Fixed rate	$	200,541	$	589,620	$	1,138,467	$	223,302	$	2,151,930
Adjustable rate		537,757		357,111		494,725		164,914		1,554,507
Total gross loans and leases	$	738,298	$	946,731	$	1,633,192	$	388,216	$	3,706,437

The following table summarizes the loans for which the accrual of interest has been discontinued and loans more than 90 days past due and still accruing interest, and OREO (as hereinafter defined):

(Dollars in thousands)	March 31, 2024			December 31, 2023
Non-performing assets:
Non-accrual loans and leases
Real estate:
Commercial	$	-		$	-
Agricultural		-			-
Residential and home equity		-			-
Construction		-			-
Total real estate		-			-
Commercial & industrial		-			-
Agricultural		-			-
Commercial leases		-			-
Consumer and other		-			-
Subtotal		-			-
Accruing loans and leases
Real estate:
Commercial	$	-		$	-
Agricultural		3,550			-
Residential and home equity		-			-
Construction		-			-
Total real estate		3,550			-
Commercial & industrial		-			-
Agricultural		-			-
Commercial leases		-			-
Consumer and other		-			-
Subtotal		3,550			-
Total non-performing loans and leases	$	3,550		$	-
Other real estate owned ("OREO")	$	873		$	873
Total non-performing assets	$	4,423		$	873

Selected ratios:
Non-performing loans to total loans and leases		0.10	%		0.00	%
Non-performing assets to total assets		0.08	%		0.02	%

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Non-Accrual Loans and Leases - Accrual of interest on loans and leases is generally discontinued when a loan or lease becomes contractually past due by 90 days or more with respect to interest or principal. When loans and leases are 90 days past due, but in management's judgment are well secured and in the process of collection, they may not be classified as non-accrual. When a loan or lease is placed on non-accrual status, all interest previously accrued but not collected is reversed. Income on such loans and leases is then recognized only to the extent that cash is received and where the future collection of principal is probable. Non-accrual loans and leases were zero at March 31, 2024 and December 31, 2023. The Company had one non-performing loan which was 90+ days past due and still accruing interest at March 31, 2024 as steps were already in process of bringing the loan current. Those steps were completed in early April 2024 and the loan returned to current and performing status.

Other Real Estate Owned – OREO represents real property taken either through foreclosure or through a deed in lieu thereof from the borrower. The Company records all OREO properties at amounts equal to or less than the fair market value of the properties based on current independent appraisals reduced by estimated selling costs. The Company reported $873,000 of foreclosed OREO at March 31, 2024, and at December 31, 2023.

Although management believes that non-performing loans and leases are generally well-secured and that potential losses are provided for in the Company’s allowance for credit losses, there can be no assurance that future deterioration in economic conditions and/or collateral values will not result in future credit losses. See Note 3. “Loans and Leases”, located in “Item 1. Financial Statements” in this Quarterly Report on Form 10-Q for an allocation of the allowance classified to collateral dependent loans and leases.

Allowance for Credit Losses—Loans and Leases

The Company maintains an allowance for credit losses (“ACL”) under ASC Topic 326, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“CECL”). The allowance is established through a provision for credit losses, which is charged to expense. Additions to the allowance are expected to maintain the adequacy of the total allowance after credit losses and loan and lease growth. Credit exposures determined to be uncollectible are charged against the allowance. Cash received on previously charged off amounts is recorded as a recovery to the allowance. The overall allowance consists of two primary components: specific reserves related to impaired loans and leases and general reserves comprised of both quantitative and qualitative factors for current expected credit losses related to loans and leases that are not collateral dependent. The Company uses the Weighted Average Remaining Maturity (“WARM”) method to calculate the ACL, as this method is deemed the most appropriate given the Company’s current size and complexity. See “Critical Accounting Policies and Estimates - Allowance for Credit Losses – Loans and Leases.”

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The following table sets forth the activity in our ACL for the periods indicated:

	Three Months Ended March 31,
(Dollars in thousands)	2024			2023
Allowance for credit losses:
Balance at beginning of year	$	74,965		$	66,885
Provision for credit losses		-			1,500
Charge-offs:
Real estate:
Commercial		-			-
Agricultural		-			-
Residential and home equity		-			(14	)
Construction		-			-
Total real estate		-			(14	)
Commercial & industrial		-			-
Agricultural		-			-
Commercial leases		-			-
Consumer and other		(10	)		(10	)
Total charge-offs		(10	)		(24	)
Recoveries:
Real estate:
Commercial		-			170
Agricultural		-			-
Residential and home equity		8			10
Construction		-			-
Total real estate		8			180
Commercial & industrial		18			19
Agricultural		-			1
Commercial leases		-			-
Consumer and other		37			12
Total recoveries		63			212
Net recoveries / (charge-offs)		53			188
Balance at end of year	$	75,018		$	68,573

Selected financial information:
Net loans and leases held-for-investment	$	3,696,295		$	3,427,133
Average loans and leases		3,661,292			3,422,375
Non-performing loans and leases		3,550			387
Allowance for credit losses to non-performing loans and leases		2113.18	%		17719.12	%
Net (recoveries)/charge-offs to average loans and leases		(0.00	%)		(0.01	%)
Provision for credit losses to average loans and leases		0.00	%		0.04	%
Allowance for credit losses to gross loans and leases held-for-investment		2.02	%		1.99	%

The increase in ACL during the first quarter of 2024 was related to net recoveries.

(Dollars in thousands)	March 31, 2024		December 31, 2023

ACL - Loans and leases	$	75,018	$	74,965
ACL - Unfunded commitments		3,690		3,690
Total ACL		78,708		78,655

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The following table indicates management’s allocation of the ACL for loan and leases by loan type as of each of the following dates:

	March 31, 2024								December 31, 2023
(Dollars in thousands)	Dollars		Percent of Each Loan Type to Total Loans			Percent of ACL to Each Loan Type			Dollars		Percent of Each Loan Type to Total Loans			Percent of ACL to Each Loan Type
Allowance for credit losses:
Real estate:
Commercial	$	22,414		36.48	%		1.66	%	$	26,093		36.10	%		1.97	%
Agricultural		11,377		19.59	%		1.57	%		7,744		20.24	%		1.04	%
Residential and home equity		7,721		10.94	%		1.90	%		7,770		10.91	%		1.94	%
Construction		4,616		6.13	%		2.03	%		4,432		5.80	%		2.09	%
Total real estate		46,128		73.14	%		1.70	%		46,039		73.05	%		1.72	%
Commercial & industrial		11,559		13.41	%		2.33	%		13,380		13.62	%		2.68	%
Agricultural		10,292		8.58	%		3.24	%		8,872		8.56	%		2.83	%
Commercial leases		6,923		4.71	%		3.96	%		6,537		4.63	%		3.85	%
Consumer and other		116		0.16	%		2.00	%		137		0.14	%		2.63	%
Total allowance for credit losses	$	75,018		100.00	%		2.02	%	$	74,965		100.00	%		2.05	%

Deposits

Total deposits were $5.0 billion and $4.7 billion as of March 31, 2024 and December 31, 2023, respectively an increase of $291.5 million or 6.24%. The increase in deposits was primarily due to $100.0 million in a State of California certificate of deposit and $200.0 million in brokered deposits. Deposits, net of this $300.0 million, had a slight decrease of $8.5 million. The slight decrease in deposits was primarily attributable to the shift in customer behavior over the last year as customers seek higher yielding deposit products or other investment alternatives such as U.S. Treasuries or money market funds given the interest rate environment.

Non-interest bearing demand deposits were $1.4 billion as of March 31, 2024 and $1.5 billion at December 31, 2023. Non-interest bearing deposits were 28.44% of total deposits, as of March 31, 2024 and 31.76% as of December 31, 2023. Interest bearing deposits were $3.5 million and $3.2 million at March 31, 2024 and December 31, 2023, respectively. Interest bearing deposits are comprised of interest-bearing transaction accounts, money market accounts, regular savings accounts, and certificates of deposit. Interest bearing deposits are comprised of interest-bearing transaction accounts, money market accounts, regular savings accounts, and certificates of deposit. The decrease in non-interest bearing deposits and the increase in interest-bearing deposits primarily reflects changes in customer behavior as customers shifted from non-interest bearing accounts to higher interest earning accounts given the interest rate environment. Checking account deposits were 49.39% of total deposits as of March 31, 2024 compared to 51.76% of total deposits as of December 31, 2023.

The following table shows the average amount and average rate paid on the categories of deposits for each of the periods presented:

	Three Months Ended March 31,
	2024							2023
(Dollars in thousands)	Average Balance		Interest Expense		Average Rate			Average Balance		Interest Expense		Average Rate
Total deposits:
Interest bearing deposits:
Demand	$	914,618	$	888		0.39	%	$	1,068,504	$	444		0.17	%
Savings and money market		1,618,678		7,186		1.79	%		1,561,684		2,503		0.65	%
Certificates of deposit greater than $250,000		378,714		3,094		3.29	%		147,704		487		1.34	%
Certificates of deposit less than $250,000		338,031		3,477		4.14	%		206,214		280		0.55	%
Total interest bearing deposits		3,250,041		14,645		1.81	%		2,984,106		3,714		0.50	%
Non-interest bearing deposits		1,403,384							1,663,152				0.00	%
Total deposits	$	4,653,425	$	14,645		1.27	%	$	4,647,258	$	3,714		0.32	%

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Deposits are gathered from individuals and businesses in our market areas. The interest rates paid are competitively priced for each particular deposit product and structured to meet our funding requirements. The increase in short-term interest rates during 2023 and customers seeking higher yielding deposit products placed pressure on deposit pricing. The average cost of total deposits, including non-interest bearing deposits, increased to 1.27% for the three months ended March 31, 2024 compared with 0.32% for the same period a year ago and 1.14% as of December 31, 2023.

The following table shows deposits with a balance greater than $250,000 at March 31, 2024 and December 31, 2023:

	March 31,		December 31,
(Dollars in thousands)	2024		2023
Non-maturity deposits greater than $250,000	$	2,401,894	$	2,496,749
Certificates of deposit greater than $250,000, by maturity:
Less than 3 months		215,377		84,460
3 months to 6 months		109,740		111,866
6 months to 12 months		148,784		107,080
More than 12 months		3,985		15,423
Total certificates of deposit greater than $250,000	$	477,886	$	318,829
Total deposits greater than $250,000	$	2,879,780	$	2,815,578

Refer to the Year-To-Date Average Balances and Rate Schedules located in this "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" for information on separate deposit categories.

The Bank participates in a program wherein the State of California places time deposits with the Bank at the Bank’s option. The Bank had $103.0 million and $3.0 million of these deposits at March 31, 2024 and December 31, 2023, respectively.

Total estimated uninsured deposits based on our regulatory reporting amounted to $2.4 billion and $2.2 billion at March 31, 2024 and December 31, 2023, respectively.

Federal Home Loan Bank Advances and Federal Reserve Bank Borrowings

Lines of Credit with the Federal Home Loan Bank and FRB are other key sources of funds to support earning assets and liquidity. These sources of funds are also used to manage the Company’s interest rate risk exposure; and, as opportunities arise, to borrow and invest the proceeds at a positive spread through the investment portfolio. FHLB advances as of March 31, 2024 were $100.0 million compared to no advances at December 31, 2023. The average rate on FHLB advances during the first quarter of 2024 was 4.54% compared to zero during the first quarter of 2023. The $100.0 million in FHLB advances have a one-month term and may or may not be renewed. There were no Federal Funds purchased or advances from the FRB at March 31, 2024 or December 31, 2023.

Long-Term Subordinated Debentures

On December 17, 2003, the Company raised $10.0 million through the sale of subordinated debentures to an off-balance-sheet trust and its sale of trust-preferred securities. See Note 9. “Long-Term Subordinated Debentures” located in “Item 8. Financial Statements and Supplementary Data” in our Annual Report on Form 10-K filed with the SEC on March 14, 2024. Although this amount is reflected as subordinated debt on the Company’s balance sheet, under current regulatory guidelines, our Trust Preferred Securities will continue to qualify as regulatory capital.

These securities accrue interest at a variable rate based upon 3-month SOFR plus 2.85%. Interest rates reset quarterly (the next reset is June 18, 2024) and the rate was 8.44% as of March 31, 2024 and 8.49% at December 31, 2023. The average rate paid for these securities was 8.62% for the first three months of 2024 and 7.71% for the first three months of 2023. Additionally, if the Company decided to defer interest on the subordinated debentures, the Company would be prohibited from paying cash dividends on the Company’s common stock.

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Capital Resources

The Company relies primarily on capital generated through the retention of earnings to satisfy its capital requirements. The Company engages in an ongoing assessment of its capital needs in order to support business growth and to insure depositor protection. Shareholders’ Equity totaled $565.2 million at March 31, 2024, and $549.8 million at December 31, 2023.

The Company and the Bank are subject to various regulatory capital adequacy guidelines as outlined under Part 324 of the FDIC Rules and Regulations. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Company and the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company and the Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

As of March 31, 2024, the Company was in compliance with all of these capital requirements and there were no restrictions on the Company’s business activity. As of March 31, 2024 the Bank met the requirements to be categorized as “well-capitalized” under the FDIC regulatory framework for prompt corrective action. To be categorized as “well-capitalized,” the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following tables as of March 31, 2024 and December 31, 2023.

The Company’s and Bank’s actual and required capital amounts and ratios are as follows:

	March 31, 2024
	Actual					Required for Capital Adequacy Purposes					Minimum to be Categorized as "Well Capitalized" Under Prompt Corrective Action Regulation
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Bancorp:
CET1 capital to risk-weighted assets	$	565,238		12.73	%	$	199,884		4.50	%		N/A		N/A
Tier 1 capital to risk-weighted assets		575,238		12.95	%		266,511		6.00	%		N/A		N/A
Risk-based capital to risk-weighted assets		631,053		14.21	%		355,349		8.00	%		N/A		N/A
Tier 1 leverage capital ratio		575,238		10.83	%		212,410		4.00	%		N/A		N/A

Bank:
CET1 capital to risk-weighted assets	$	575,347		12.95	%	$	199,872		4.50	%	$	288,704		6.50	%
Tier 1 capital to risk-weighted assets		575,347		12.95	%		266,496		6.00	%		355,328		8.00	%
Risk-based capital to risk-weighted assets		631,159		14.21	%		355,328		8.00	%		444,159		10.00	%
Tier 1 leverage capital ratio		575,347		10.84	%		212,322		4.00	%		265,403		5.00	%

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	December 31, 2023
	Actual					Required for Capital Adequacy Purposes					Minimum to be Categorized as "Well Capitalized" Under Prompt Corrective Action Regulation
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Bancorp:
CET1 capital to risk-weighted assets	$	546,045		12.30	%	$	199,724		4.50	%		N/A		N/A
Tier 1 capital to risk-weighted assets		556,045		12.53	%		266,298		6.00	%		N/A		N/A
Risk-based capital to risk-weighted assets		611,815		13.78	%		355,064		8.00	%		N/A		N/A
Tier 1 leverage capital ratio		556,045		10.38	%		214,267		4.00	%		N/A		N/A

Bank:
CET1 capital to risk-weighted assets	$	557,500		12.56	%	$	199,722		4.50	%	$	288,487		6.50	%
Tier 1 capital to risk-weighted assets		557,500		12.56	%		266,295		6.00	%		355,061		8.00	%
Risk-based capital to risk-weighted assets		613,270		13.82	%		355,061		8.00	%		443,826		10.00	%
Tier 1 leverage capital ratio		557,500		10.42	%		214,078		4.00	%		267,597		5.00	%

On November 14, 2023, the Board of Directors authorized an extension to its share repurchase program through December 31, 2024 for an additional $25.0 million of the Company’s common stock (“Repurchase Plan”), which represented approximately 4% of outstanding shareholders’ equity at the time of approval. Repurchases by the Company under the Repurchase Plan may be made from time to time through open market purchases, trading plans established in accordance with SEC rules, privately negotiated transactions, or by other means.

Off-Balance-Sheet Arrangements

Off-balance-sheet arrangements are any contractual arrangement to which an unconsolidated entity is a party, under which the Company has: (1) any obligation under a guarantee contract; (2) a retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity, or market risk support to that entity for such assets; (3) any obligation under certain derivative instruments; or (4) any obligation under a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk, or credit risk support to the Company, or engages in leasing, hedging, or research and development services with the Company. The Company had the following off balance sheet commitments as of the dates indicated.

The following table sets forth our off-balance-sheet lending commitments as of March 31, 2024:

			Amount of Commitment Expiration per Period
(Dollars in thousands)	Total Committed Amount		Less than One Year		One to Three Years		Three to Five Years		After Five Years
Off-balance sheet commitments
Commitments to extend credit	$	1,074,963	$	508,786	$	311,172	$	75,258	$	179,747
Standby letters of credit		14,889		12,629		1,760		500		-
Total off-balance sheet commitments	$	1,089,852	$	521,415	$	312,932	$	75,758	$	179,747

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. Additionally, the Company maintains an allowance for credit losses for unfunded loan commitments, which totaled $3.7 million at March 31, 2024 and December 31, 2023.

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Standby letters of credit are conditional commitments issued by the Company to guarantee performance of or payment for a customer to a third-party. Most standby letters of credit have maturity dates ranging from 1 to 60 months with final expiration in August 2028. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

Liquidity

The ability to have readily available funds sufficient to repay maturing liabilities is of primary importance to depositors, creditors and regulators. In an effort to satisfy our liquidity needs, we actively manage our assets and liabilities. We have access to immediate liquid resources in the form of cash, which totaled $738.4 million or 12.92% of total assets as of March 31, 2024. The majority of cash is on deposit with the FRB and amounted to $672.6 million. Potential sources of liquidity also include investment securities in our available-for-sale securities portfolio, our ability to sell loans in the secondary market, and our ability borrow from the FRB and FHLB. Our diversified deposit portfolio has historically provided us with a long-term source of stable low cost funding. Maturities and payments on outstanding loans and investment securities also provide a steady flow of funds. Our liquidity, represented by cash borrowing lines, federal funds and available-for-sale securities, is a result of our operating, investing and financing activities and related cash flows. In order to ensure funds are available at all times, we devote resources to projecting the amount of funds that will be required and we maintain relationships with a diversified client base so funds are accessible. Liquidity requirements can also be met through short-term borrowings or the disposition of short-term assets. We had the following borrowing lines available at March 31, 2024:

	March 31, 2024
(Dollars in thousands)	Total Credit Line Limit		Outstanding Amount		Remaining Credit Line Available		Value of Collateral Pledged
Additional liquidity sources:
Federal Reserve Bank	$	1,239,186	$	-	$	1,239,186	$	1,583,638
Federal Home Loan Bank		769,429		200,000		569,429		1,263,816
US Bank Fed Funds		50,000		-		50,000		-
PCBB Fed Funds		50,000		-		50,000		-
FHLB Fed Funds		18,000		-		18,000		-
Total additional liquidity sources	$	2,126,615	$	200,000	$	1,926,615	$	2,847,454

We continued our focus on maintaining a strong liquidity position throughout the first three months of 2024 and we believe our liquid assets and short-term borrowing credit lines are adequate to meet our cash flow needs for loan and lease funding and deposit cash withdrawal for the foreseeable future. As of March 31, 2024, we had internal sources of liquidity comprised of $738.4 million in cash and $287.4 million unencumbered investment securities, which represented in the aggregate 17.95% of total assets. We also had $1.9 billion in external sources of liquidity as outlined in the table above bringing our total available liquidity to $2.9 billion. Our pledged collateral on short-term borrowing lines was comprised of $2.8 billion in loans and $1.7 million in investment securities. We have the option of either borrowing on our credit lines or selling these investment securities for cash flow needs. The $200.0 million in outstanding at the FHLB represents $100.0 million in FHLB advances and $100.0 million in the form of a letter of credit to collateralize the State of California certificate of deposit. The letter of credit is not an on balance sheet liability but it does reduce our borrowing capacity as illustrated in the table above.

On a long-term basis, we intend to meet our liquidity needs by changing the relative distribution of our asset portfolios by reducing our investment or loan and lease volumes, or selling or encumbering assets. Further, we would increase liquidity by soliciting higher levels of deposit accounts through promotional activities and/or borrowing from our correspondent banks as well as the FHLB. At the current time, our long-term liquidity needs primarily relate to funds required to support loan and lease originations and commitments and deposit withdrawals.

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We believe we can meet all of these needs from existing liquidity sources. Our liquidity is comprised of three primary classifications: cash flows from or used in operating activities; cash flows from or used in investing activities; and cash flows from or used in financing activities. Net cash provided by or used in operating activities has consisted primarily of net income adjusted for certain non-cash income and expense items such as the credit loss provision, investment and other amortization and depreciation.

Our primary investing activities are the origination of loans and lease and purchases and sales of investment securities. As of March 31, 2024, we had unfunded loan commitments of $1.1 billion and unfunded letters of credit of $14.9 million. At March 31, 2024, we believe that we had sufficient funds available to meet current loan commitments.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

The Company’s assessment of market risk at March 31, 2024 indicates there have been no material changes in the quantitative and qualitative disclosures from those made in the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2024.

Market risk is the risk of loss in a financial instrument arising from adverse changes in market prices and rates, foreign currency exchange rates, commodity prices and equity prices. Our market risk arises primarily from interest rate risk inherent in our lending and deposit taking activities. Management actively monitors and manages our interest rate risk exposure. We do not have any market-risk sensitive instruments entered into for trading purposes. In monitoring interest rate risk we continually analyze and manage our earning assets and funding liabilities based on their payment streams and interest rates, the timing of their maturities and/or prepayments, and their sensitivity to actual or potential changes in market interest rates.

Management uses various asset/liability strategies to manage the re-pricing characteristics of our assets and liabilities designed to ensure that exposure to interest rate fluctuations is limited within our guidelines of acceptable levels of risk-taking. Hedging strategies, including the terms and pricing of loans and deposits, and managing the deployment of our securities, are considered to reduce mismatches in interest rate re-pricing opportunities of portfolio assets and their funding sources.

Since our earnings are primarily dependent on our ability to generate net interest income, we focus on actively monitoring and managing the effects of adverse changes in interest rates on our net interest income. Our Asset Liability Management Committee (“ALCO”), which is comprised of members of the Board of Directors and Executive Officers, manages market risk. ALCO monitors interest rate risk by analyzing the potential impact on net interest income from potential changes in interest rates, and considers the impact of alternative strategies or changes in balance sheet structure. ALCO manages our balance sheet in part to maintain the potential impact of changes in interest rates on net interest income within acceptable ranges despite changes in interest rates. ALCO and management utilize a third party to assist with asset liability management including the use of simulation models.

Our exposure to interest rate risk is reviewed on at least a quarterly basis by ALCO. Interest rate risk exposure is measured using interest rate sensitivity analysis to determine our change in net interest income in the event of hypothetical changes in interest rates. If potential changes to net interest income resulting from hypothetical interest rate changes are not within risk tolerances determined by ALCO, and approved by the full Board of Directors, management may make adjustments to the Company’s asset and liability mix to bring interest rate risk levels within the Board approved limits.

Net Interest Income Simulation. In order to measure interest rate risk, we use a simulation model to project changes in net interest income that result from forecasted changes in interest rates. This analysis calculates the difference between net interest income forecasted using a rising and a falling interest rate scenario and a net interest income forecast using a base market interest rate derived from the current Treasury yield curve. The income simulation model includes various assumptions regarding the re-pricing relationships for each of our products. Many of our assets are floating rate loans, which are assumed to re-price immediately, and to the same extent as the change in market rates according to their contracted index.

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Some loans and investment vehicles include the opportunity of prepayment (embedded options), and accordingly the simulation model uses various proprietary models to estimate these prepayments and assumes the reinvestment of the proceeds at current yields. Our non-term deposit products re-price more slowly, usually changing less than the change in market rates and at our discretion.

This analysis indicates the impact of changes in net interest income for the given set of rate changes and assumptions. It assumes the balance sheet size remains static throughout the simulation horizon by replacing existing cash flows/amortization into similar products at current rates to try and capture the ongoing activity of the balance sheet without forecasting any level of growth. It does not account for all factors that affect this analysis, including changes by management to mitigate the effect of interest rate changes or secondary impacts such as changes to our credit risk profile as interest rates change.

Furthermore, loan prepayment-rate estimates and spread relationships change regularly. Interest rate changes create changes in actual loan prepayment rates that will differ from the market estimates incorporated in this analysis. Changes that vary significantly from the assumptions may have significant effects on our net interest income.

For the rising and falling interest rate scenarios, the base market interest rate forecast was increased or decreased, on an instantaneous and sustained basis, by 100, 200 and 300 basis points. We then evaluate the simulation results using two approaches: Net Interest Income at Risk (“NII at Risk”) and Economic Value of Equity (“EVE”). Under NII at Risk, the impact on net interest income from the changes in interest rates on interest-earning assets and interest-bearing liabilities is modeled using various assumptions of assets and liabilities. EVE measures the period-end present value of assets minus the present value of liabilities. Management uses this value to measure the changes in the economic value of the Company under various interest rate scenarios.

Based on our quarterly simulations, our net interest margin exposure related to these hypothetical changes in market interest rates was within the current guidelines established by us. Our simulation model highlights the fact that our balance sheet is asset sensitive, which means that our net interest income rises in a rising interest rate environment as rates earned on our interest-bearing assets reprice higher and at a faster pace than rates paid on our interest-bearing liabilities.

The ratio of variable to fixed-rate loans in our loan portfolio, the ratio of short-term (maturing at a given time within 12 months) to long-term loans, and the ratio of our demand, money market and savings deposits to CDs (and their time periods), are the primary factors affecting the sensitivity of our net interest income to changes in market interest rates. Our short-term loans are typically priced at prime plus a margin, and our long-term loans are typically priced based on a specific term of the Treasury Curve for comparable maturities, plus a margin. The composition of our rate-sensitive assets or liabilities is subject to change and could result in a more unbalanced position that would cause market rate changes to have a greater impact on our net interest margin. As of March 31, 2024, our loan and lease portfolio was comprised of 58.1% fixed rate and 41.9% variable rate loans. The vast majority of our variable loans also contain interest rate floors which are designed to mitigate the impact of decreases in interest rates as index rates drop.

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The following table presents the projected change in the Company’s net interest income over the next twelve months and the economic value of equity at March 31, 2024, that would occur upon an immediate change in interest rates, but without giving effect to any steps that management might take to counteract that change:

	Estimated Change in Net Interest Income (NII) (as a % of NII)			Estimated Change in Economic Value of Equity (EVE) (as a % of EVE)
March 31, 2024
+300 bps		(0.2	%)		(10.1	%)
+200 bps		(0.4	%)		(7.3	%)
+100 bps		0.0	%		(2.9	%)
0 bps		-			-
-100 bps		(1.5	%)		(0.6	%)
-200 bps		(3.2	%)		(3.6	%)
-300 bps		(5.3	%)		(9.2	%)

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the disclosure controls and procedures (as required by Exchange Act Rules 240.13a-15(b) and 15d-14(a)). Based on that evaluation, the CEO and CFO have concluded that as of the end of the period covered by this Report, the disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed by the Company in reports that are filed or submitted under the Exchange Act are recorded, processed, summarized and timely reported as provided in the SEC’s rules and forms.

Changes in Internal Controls

There have been no material changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2024, to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

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

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

Item 1A.

Risk Factors

There have been no material changes in the risk factors previously disclosed in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The following table reports information regarding repurchases of our common stock during the three months ended March 31, 2024:

Period	Total number of shares purchased		Average price paid per share⁽²⁾		Total number of shares purchased as part of publicly announced plans or programs		Maximum number (or approximate dollar value) of shares that may yet purchased under the plans or programs (In thousands) ⁽¹⁾

January 1, 2024 to January 31, 2024		4,853	$	1,042.00		4,853	$	19,479
February 1, 2024 to February 29, 2024		87		971.00		87		19,394
March 1, 2024 to March 31, 2024		261		974.00		261		19,140
Total 1st Quarter 2024		5,201	$	1,038.00		5,201	$	19,140

⁽¹⁾As of November 14, 2023 the Board approved a further extension to the repurchase program through December 31, 2024 and for an additional $25 million of the Company's common stock.

⁽²⁾The aggregate purchase price and weighted average price per share does not include the effect of excise tax expense incurred on net stock repurchases. For the three months ended March 31, 2024, the excise tax expense accrual totaled $54,000.

During the first three months of 2024 the Company repurchased 5,201 shares under the Repurchase Plan, for a total of $5.5 million. As of March 31, 2024, there remains $19.1 million authorized for repurchases under the Repurchase Plan. All of these shares were purchased at prices ranging from $960.00 to $1,065.00 per share, based upon the then current price on the OTCQX.

Item 3.

Defaults upon Senior Securities

Not Applicable

Item 4.

Mine Safety Disclosures

Not Applicable

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Item 5.

Other Information

During the three months ended March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Item 6.

Exhibits

List of Financial Statements and Financial Statement Schedules

(a) The following documents are filed as a part of this Quarterly Report on Form 10-Q:

(1) Financial Statements and

(2) Financial Statement schedules required to be filed by Item 1 of this Quarterly Report on Form 10-Q.

(3) The following exhibits are required by Item 601 of Regulation S-K and are included as part of this Quarterly Report on Form 10-Q:

Exhibit Number		Description
10.1		Amended and Restated Employment Agreement effective April 1, 2024, between Farmers & Merchants Bank of Central California and Kent A. Steinwert, filed on Registrant’s Form 10-Q for the quarter ended March 31, 2024.
10.2		Amended and Restated Employment Agreement effective April 1, 2024, between Farmers & Merchants Bank of Central California and Deborah E. Skinner, filed on Registrant’s Form 10-Q for the quarter ended March 31, 2024.
10.3		Amended and Restated Employment Agreement effective April 1, 2024, between Farmers & Merchants Bank of Central California and Bart R. Olson, filed on Registrant’s Form 10-Q for the quarter ended March 31, 2024.
10.4		Amended and Restated Employment Agreement effective April 1, 2024, between Farmers & Merchants Bank of Central California and Ryan J. Misasi, filed on Registrant’s Form 10-Q for the quarter ended March 31, 2024.
10.5		Amended and Restated Employment Agreement effective April 1, 2024, between Farmers & Merchants Bank of Central California and David M. Zitterow, filed on Registrant’s Form 10-Q for the quarter ended March 31, 2024.
10.6		Amended and Restated Employment Agreement effective April 1, 2024, between Farmers & Merchants Bank of Central California and John W. Weubbe, filed on Registrant’s Form 10-Q for the quarter ended March 31, 2024.
10.7		Employment Agreement effective April 22, 2024, between Farmers & Merchants Bank of Central California and Thomas Bennett, filed on Registrant’s Form 10-Q for the quarter ended March 31, 2024.
31(a)		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31(b)		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32		Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*Filed herewith

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SIGNATURES

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

	FARMERS & MERCHANTS BANCORP

Date: May 9, 2024	/s/ Kent A. Steinwert
	Kent A. Steinwert
	Director, Chairman, President and Chief Executive Officer (Principal Executive Officer)


Date: May 9, 2024	/s/ Bart R. Olson
	Bart R. Olson
	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Exhibit 10.1

PRESIDENT & CHIEF EXECUTIVE OFFICER

EMPLOYMENT, CONFIDENTIALITY

AND NON-DISCLOSURE AGREEMENT

PART I

PARTIES TO AGREEMENT

Section 1.01 Parties: This Employment Agreement (hereinafter referred to as the “Agreement”) is entered into by and between Farmers & Merchants Bank of Central California, a California banking corporation (the “Bank”) and Farmers & Merchants Bancorp, a Delaware corporation (“Bancorp”) their successors and assigns (hereinafter collectively referred to as “Employer”), and Kent A. Steinwert (hereinafter referred to as “Employee”). Employer and Employee are sometimes collectively referred to hereinafter as the “Parties” and individually as a “Party”.

PART II

EMPLOYMENT

Section 2.01 Employment: Employer hereby agrees to continue employing Employee, and Employee hereby accepts such continued employment with Employer, in accordance with the terms and conditions set forth herein.

Section 2.02 Term of Employment: This Agreement shall become effective on April 1, 2024. This Agreement shall terminate on December 31, 2025 unless earlier terminated pursuant to the provisions of Part VII herein or Part VIII. If this Agreement is not terminated pursuant to Part VII, the Agreement shall renew automatically for an additional two year term, and for successive additional two year terms thereafter, unless earlier terminated pursuant to the provisions of Part VII or Part VIII.

PART III

DUTIES OF EMPLOYEE

Section 3.01 General Duties: During the term of this Agreement, Employee shall be employed as President and Chief Executive Officer of the Bank and Bancorp under the direction of Bank’s and Bancorp’s Board of Directors and shall perform and discharge well and faithfully the duties that may be assigned to Employee from time to time by the Bank’s and Bancorp’s Board of Directors in connection with the conduct of the Employer’s business. Employee shall report to such Boards of Directors and shall have the powers and duties customarily associated with the office of chief executive officer. During the term of this Agreement, Bancorp and Bank shall use their best efforts to cause Employee to be elected to their respective Boards of Directors.

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Section 3.02 Outside Activities: Employee agrees that, while employed by Employer, Employee will refrain from any outside activities which actually or potentially are in direct conflict with the essential enterprise-related or reputational interest of Employer, that would cause disruption of the Employer’s operations, or that would be in direct competition with the Employer or assist competitors of the Employer. It shall not be a violation of this Agreement for Employee (A) to serve on corporate, civic or charitable boards or committees, or (B) to deliver lectures or fulfill speaking engagements, so long as such activities do not significantly interfere with the performance of Employee’s responsibilities as an employee of the Employer; provided, however, that Employee shall give the Employer’s Board of Directors not less than fourteen (14) days’ notice of any actions contemplated by clauses (A) or (B), and will refrain from any such action to which the Board of Directors in their sole discretion, objects. It shall not be a violation of this Agreement for Employee to manage personal investments, so long as such activities do not represent a conflict with Employer, as described in Employer’s Employee Code of Conduct, and other pertinent policies and agreements.

PART IV

COMPENSATION

Section 4.01 Salary: Employee shall be paid an annual base salary of no less than $895,000 per year. This base salary shall be paid to Employee in such intervals and at such times as other salaried executives of Employer are paid. Employer’s Board of Directors reserves the right to set the timing and level of salary adjustments for all employees and any particular employee at its sole discretion.

Section 4.02 Incentive and Retention Programs: Employee shall be eligible for an annual discretionary incentive bonus. The amount of the bonus for a given year shall be determined by Employer’s Board of Directors annually by January 31st of each following year and shall be paid no later than February 28th of each following year, provided Employee is still employed by Employer on the payment date. Employee shall be entitled to participate in the “Farmers & Merchants Bank of Central California Executive Retirement Plan – Salary Component”, “Farmers & Merchants Bank of Central California Split Dollar Agreement”, “Farmers & Merchants Bank of Central California Executive Retirement Plan – Equity Component”, and “Farmers & Merchants Bank of Central California Executive Retirement Plan – Performance Component”, the terms and conditions of which are set forth in separate agreements so titled.

PART V

BENEFITS

Section 5.01 Benefits: Employee shall be entitled to participate in whatever vacation, medical, dental, pension, sick leave, 401(k), profit sharing, disability insurance or other plans of general application, or other benefits which are in effect as to other executive officers of Employer, or as may be in effect from time to time, in accordance with the rules established for individual participation in any such plan.

Section 5.02 Automobile/Automobile Allowance: Employer shall provide Employee with either an automobile for business and incidental personal use or an automobile allowance as per Employer policy.

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Section 5.03 Membership Fees: Employer shall reimburse Employee for all appropriate and reasonable expenses incurred in performing Employee’s duties, including providing and paying for the dues and fees of membership in local social, service and civic clubs and/or organizations as Employer deems appropriate and necessary for enhancement of its presence within the local business community. In order to be eligible for reimbursement of these expenses, Employee must obtain pre-approval for such memberships from Employer’s Board of Directors and must provide Employer with receipts and documented evidence as is required by federal and state laws and regulations.

Section 5.04 Directors and Officers Liability Insurance Coverage: To the extent commercially reasonable to do so under prevailing conditions in the insurance market, Employer shall provide directors and officers liability insurance coverage for the protection of Employee on terms and conditions no less favorable to Employee than are in effect on the date that this Agreement shall become effective. Following any termination of Employee’s employment with Employer, such coverage shall be continued under substantially the same terms and conditions as are in effect immediately prior to such termination of employment at no cost to Employee until all applicable statutes of limitation expire with respect to claims arising prior to such termination of employment. Employee expressly acknowledges, however, that Employer cannot and shall not guarantee the performance of the insurance company issuing such directors and officers liability insurance coverage pursuant to this Section. In addition to the foregoing, Employer shall also continue to make indemnification and advancement of litigation expense payments to Employee to the maximum extent and for the maximum period permitted by law.

PART VI

EXPENSES

Section 6.01 Travel and Entertainment Expenses: During the term of this Agreement, Employer shall reimburse Employee for reasonable out of pocket expenses incurred in connection with Employer’s business, including travel expenses, food and lodging while away from Employee’s home, subject to such policies as Employer may from time to time establish for other officers of equivalent title. Employee shall keep records of Employee’s travel and entertainment expenses in a form suitable to the Internal Revenue Service and the Franchise Tax Board to qualify this reimbursement as a federal and state income tax deduction for Employer. In addition, Employee shall provide Employer with receipts for all expenses for which Employee seeks reimbursement.

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PART VII

TERMINATION OF EMPLOYMENT

Section 7.01 Termination without Cause or for Good Reason: Employer may terminate this Agreement at any time and without “Cause” (as defined below) by giving Employee sixty (60) days written notice of Employer’s intent to terminate this Agreement. The 60th day after Notice of Termination shall be deemed Employee’s Separation Date. This Agreement may also be terminated by Employee for “Good Reason” (as defined below) by giving written notice to Employer in reasonable detail of the basis for “Good Reason” within thirty (30) days of the first date on which Employer has knowledge of such conduct and providing Employer at least thirty (30) days following the date on which notice is provided to cure such conduct. Failing such cure, the end of the cure period shall be deemed Employee’s Separation Date. In the event Employee’s employment is terminated by Employer or Employee pursuant to this Section, Employee shall be paid all accrued salary, accrued but unused vacation, and reimbursement expenses for which expense reports have been provided to Employer, or which are provided to Employer prior to the Separation Date, in accordance with Employer’s policies and this Agreement. In addition to the foregoing amounts, if Employee is terminated by Employer or Employee pursuant to this Section, and subject to (A) Employee’s continued employment through, and termination of employment on, the Separation Date; (B) Employee’s continued loyalty to Employer, which includes, but is not limited to, Employee or any outside third party, operating under the direction of Employee, refraining from any announcements to anyone inside or outside Employer that the Employee is leaving Employer; and (C) Employee’s execution and non-revocation of a general release of all claims in the form attached hereto as Exhibit A (the “Release”) , which Release becomes irrevocable within sixty (60) days following the Separation Date or such earlier deadline provided by Employer, then Employee will be entitled to receipt of the following Severance Package:

A Severance Payment equivalent to two (2) times Employee’s highest Annual Compensation for services (“Annual Compensation,” defined as Total Compensation as reported in Employer’s previous years’ proxy statements) which Employee has earned during Employee’s employment with Employer. The Severance Payment shall be paid out in a lump sum no later than thirty (30) days following the Separation Date, provided that any payment delayed pending the effectiveness of the release shall be paid in a lump sum on the next pay day following the effectiveness of the Release.

2.	A document acknowledging all of Bancorp’s or its successor’s responsibilities under the Farmers & Merchants Bank of Central California Split Dollar Agreement and the related Farmers & Merchants Bank of Central California Executive Bonus Agreement.

Payment of all awards of qualified and nonqualified benefit plans and incentive and retention programs in accordance with the terms of those plans and programs, including applicable vesting and forfeiture provisions. Any such payment or distribution from a nonqualified deferred compensation plan shall be governed by the terms of such plan relating to the timing of distributions.

“Good Reason” for purposes of this Agreement shall be defined as a material breach by Employer of any of the covenants in this Agreement, any material reduction in Employee’s annual base salary or annual discretionary incentive bonus opportunity, any material and adverse change in Employee’s position, title or reporting lines or any change in Employee’s job duties, authority or responsibilities to those of lesser status, or a material change in the geographic location of Employer’s headquarters, which shall mean the relocation of the Employer’s headquarters to a location that is more than 50 miles from its current location, in each case, without Employee’s consent.

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Section 7.02 Termination for Cause: Employer may terminate Employee’s employment at any time for “Cause” upon written Notice of Termination to Employee, setting forth in reasonable detail the basis for the determination of “Cause.” Termination for Cause shall be effective immediately upon receipt of the Notice of Termination by Employee, and the date on which the Notice of Termination is received shall be deemed to be the Separation Date. If Employee is terminated pursuant to this Section 7.02, Employee shall be entitled only to accrued salary, vacation and reimbursement of expenses for which expense reports have been provided to Employer, or which are provided to Employer within two weeks of the Separation Date, in accordance with Employer’s policies and this Agreement. Employee shall be entitled to no further compensation or severance payment of any nature; provided however, that Employee will also be entitled to payment of all awards of qualified and nonqualified benefit plans and incentive and retention programs in accordance with the terms of those plans, including any applicable vesting and forfeiture provisions. Any such payment or distribution from a nonqualified deferred compensation plan shall be governed by the terms of such plan relating to the timing of distributions.

“Cause” for purposes of this Agreement shall be defined as conviction of a felony resulting in a material adverse economic effect on Employer; provided that the determination of such material adverse economic effect shall in any case be made pursuant to a resolution duly adopted by a vote of no less than two-thirds (2/3’s) of the entire Board of Directors of the Bank at a meeting duly held and called for such purpose; and provided further, that Employee shall be given reasonable notice of such meeting and shall have the opportunity, together with counsel, to be heard before the Board of Directors at any such meeting.

Section 7.03 Termination by Employee without Good Reason: This Agreement may be terminated by Employee without Good Reason at Employee’s sole discretion by giving one hundred twenty (120) days written Notice of Resignation to Employer. If Employee terminates his/her employment pursuant to this Section 7.03, and subject to Employee’s continued satisfactory performance of such tasks and duties that may be assigned to Employee through the Separation Date, and Employee’s continued loyalty to Employer through the Separation Date (which includes, but is not limited to, refraining from any announcements by Employee or any outside third party, operating under the direction of Employee, to anyone inside or outside Employer that the Employee is leaving Employer), Employee shall receive accrued salary and payment for accrued but unused vacation through the Separation Date. Employee shall also be entitled to payment of all awards of qualified and nonqualified benefit plans and incentive and retention programs, in accordance with the terms of those plans, including applicable vesting and forfeiture provisions. Any such payment or distribution from a nonqualified deferred compensation plan shall be governed by the terms of such plan relating to the timing of distributions. Alternatively, Employer may, at its option, at any time after Employee gives written Notice of Resignation as herein provided, pay Employee’s accrued salary up to and including the effective Separation Date set forth in Employee’s Notice of Resignation, and thereupon immediately terminate Employee’s employment. Notwithstanding the foregoing, if Employer determines at any time during the120-day notice period that Employee materially breaches the obligations imposed by the provisions of this Section 7.03 and Part IX of this Agreement, Employer may shorten the notice period and accelerate the Separation Date, thereby reducing the compensation otherwise payable to Employee pursuant to this Section.

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Section 7.04 Option to Terminate on Permanent Disability of Employee: Employer may terminate this Agreement if, during the term of this Agreement, Employee shall become “Permanently Disabled”, as that term is defined herein. A termination pursuant to this Section 7.04 shall be deemed a termination without “Cause,” and shall be governed by the procedures, and shall entitle Employee to the Severance Package specified in Section 7.01. For purposes of this Agreement, Employee shall be deemed to have become Permanently Disabled if Employee dies or is unable to perform his/her current duties, with or without reasonable accommodation, for an aggregate of 120 working days over a six month period, by reason of any medically determinable physical or mental impairment. Employer shall issue its Notice of Termination to Employee on or after the 90working days of Permanent Disability, as defined herein.

The Notice of Termination shall be deemed withdrawn and the Agreement shall remain in effect after a Notice of Termination has been given to Employee under the following circumstances.

A.	Within thirty (30) days of the Notice of Termination being given to Employee, Employee returns to the full performance of Employee’s duties and provides medical certification that Employee can perform the essential functions of Employee’s duties with or without reasonable accommodation.

Within thirty (30) days of the Notice of Termination being given to Employee, Employee requests a reasonable accommodation from Employer which would permit Employee to perform the essential functions of Employee’s duties and such reasonable accommodation can be provided by Employer without an undue hardship.

Section 7.05 Continuation of Medical Benefits: In the event Employee’s employment is terminated Employee shall be afforded the right to continue his/her medical benefits to the extent provided in the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), at his/her expense. Employer shall provide Employee with the appropriate COBRA notification within the time required by the law from the Separation Date.

PART VIII

MERGERS AND ACQUISITIONS

Section 8.01 Merger or Acquisition With a Change of Control.

Change of Control means a change of control of Bancorp. Such a Change of Control will be deemed to have occurred immediately before any of the following occur: (i) a merger, consolidation or acquisition, directly or indirectly, of more than 30% of the voting power or outstanding shares of any class of voting securities of Bancorp by any Person; (ii) a sale of all, or substantially all, of the assets of Bancorp or the Bank; or (iii) there is a change, during any period of one year or less, of a majority of the Board of Directors of Bancorp as constituted as of the beginning of such period, unless the election of each director who is not a director at the beginning of such period was approved by a vote of at least a majority of the directors then in office who were directors at the beginning of such period. If the events or circumstances described in (i)-(iii), above, shall occur to or be applicable to Bank, then such Change of Control shall be deemed for all purposes of this Agreement to also be a “Change of Control” of Bancorp. For purposes of this Agreement, the term “Person” shall mean and include any individual, corporation, partnership, group, association or other “person”, as such term is used in Section 14(d) of the Securities Exchange Act of 1934, other than Bancorp, Employer, any other wholly owned subsidiary of Bancorp or any employee benefit plan(s) sponsored by Bancorp, Bank or other subsidiary of Bancorp. Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred unless the change also constitutes the occurrence of a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5), with respect to the Employee.

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2.	In the event of either:

(i) the Employee’s termination of employment during the term of this Agreement and after the signing of an agreement providing for, or otherwise in anticipation of a Change of Control of the Bank, Employer or Bancorp or

(ii) a Change of Control of the Bank, Employer or Bancorp closes or otherwise occurs during the term of this Agreement and prior to Employee’s termination of employment,

Employer will provide Employee with the following Change of Control Compensation Package to be paid and commence immediately prior to the earlier of the (i) termination of employment or (ii) Change of Control:

a cash payment in consideration of Employee’s assistance, support and cooperation in the Change in Control of Bancorp or the Bank and the retention and preservation of Bank and Bancorp goodwill equal to either 0.50% of the Total Bancorp Shareholder Value, in the event of a Change of Control as described in (i) or (ii) of Section 8.01.1 above, or $250,000, in the event of a Change of Control as described in (iii) of Section 8.01.1 above.

Two (2) times Employee’s highest Annual Compensation (as defined in Section 7.01.1 of this Agreement).

Employee’s monthly premium for continuation coverage under COBRA (as defined in Section 7.05), determined as of the closing or other occurrence of the Change of Control, multiplied by thirty-six (36) months, whether or not such continuation coverage is elected by Employee.

Employee’s Bank car valued for tax purposes using the vehicle’s Kelley Blue Book Trade-In Value in Good Condition.

A gross-up payment as defined and set forth herein in Section 8.01.3.

Employer will also (i) provide employee with a document acknowledging all of Bancorp’s or its successor’s responsibilities under the Farmers & Merchants Bank of Central California Split Dollar Agreement (the “Split Dollar Agreement”) and the related Farmers & Merchants Bank of Central California Executive Bonus Agreement (the “Circle of Funds Agreement”), and (ii) if not previously done, contribute such assets as are necessary to fund its obligations under both agreements, including but not limited to (i) all insurance policies on the life of Employee taken out to provide funding for the Split Dollar Agreement, and (ii) cash in an amount to fund the estimated Circle of Funds payments over the remaining actuarially forecasted life span of the Employee, to an irrevocable grantor trust that conforms substantially with the model trust published in IRS Revenue Procedure 92-64, subject to a trustee selected by Bancorp prior to the Change of Control.

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In addition, Employee will be entitled to payment of all awards of benefit plans and incentive and retention programs in accordance with the terms of those plans and programs, including applicable vesting and forfeiture provisions.

Payment of the Change in Control Compensation Package shall be contingent upon the execution by Employee and non-revocation of (A) a general Release of all claims provided by Employer in the form attached hereto as Exhibit A and (B) a non-competition and non-solicitation agreement in the form attached hereto as Exhibit B,

Immediately prior to the closing or other occurrence of the Change of Control transaction or termination under 8.01.2(i), and subject to the provisions of this Section 8.01, Employee shall receive disbursement of payments due Employee under this Section (except for payments or distributions from or pursuant to any nonqualified deferred compensation plan), in one lump sum payment, less any withholding required by state, federal or local law. Any payment or distribution from or pursuant to any nonqualified deferred compensation plan shall be governed by the terms of such plan. If Employee becomes entitled to payment under this Section 8.01.2, Employee shall not be entitled to the Severance Package under Sections 7.01 or 7.04, notwithstanding Employee’s subsequent termination of employment pursuant to those Sections.

3.	Gross-Up Payment: Employee shall be entitled to a “Gross-Up Payment” under the terms and conditions set forth herein, and such payment shall include the Excise Tax reimbursement due pursuant to Section 8.01.3.a and any federal and state tax reimbursements due pursuant to Section 8.01.3.b.

In the event that any payment or benefit (as those terms are defined within the meaning of Internal Revenue Code Section 280G(b)(2)) paid, payable, distributed or distributable to the Employee (hereinafter referred to as “Payments”) pursuant to the terms of this Agreement or otherwise in connection with or arising out of Employee’s employment with Employer or a change of control would be subject to the Excise Tax imposed by Section 4999 of the Internal Revenue Code or any interest or penalties are incurred by Employee with respect to such Excise Tax, then Employee will be entitled to receive an additional payment (“Gross-Up Payment”) in an amount equal to the total Excise Tax, interest and penalties imposed on Employee as a result of the payment and the Excise Taxes on any federal and state tax reimbursements as set forth in Section 8.01.3.b.

If Employer is obligated to pay Employee pursuant to Section 8.01.3.a, Employer shall also pay Employee an amount equal to the “total presumed federal and state taxes” that could be imposed on Employee with respect to the Excise Tax reimbursements due to Employee pursuant to Section 8.01.3.a and the federal and state tax reimbursements due to Employee pursuant to this section. For purposes of the preceding sentence, the “total presumed federal and state taxes” that could be imposed on Employee shall be conclusively calculated using a combined tax rate equal to the sum of the (a) the highest individual income tax rate in effect under Federal tax law applicable to Employee and the tax laws of the state in which Employee will be subject to tax on the payment and (b) the hospital insurance portion of FICA.

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No adjustments will be made in this combined rate for the deduction of state taxes on the federal return, the loss of itemized deductions or exemptions, or for any other purpose for paying the actual taxes.

It is further intended that in the event that any payments would be subject to other “penalty” taxes (in addition to the Excise Tax in section 8.01.3.a) imposed applicable federal tax law, that these taxes would also be included in the calculation of the Gross-Up Payment, including any federal and state tax reimbursements pursuant to section 8.01.3.b.

Determination of Eligibility for and Amount of Gross-Up Payment: An initial determination as to whether a Gross-Up Payment is required pursuant to this Agreement and the amount of such Gross-Up Payment shall be made at Employer’s expense by an accounting firm appointed by Employer prior to any Change of Control. The accounting firm shall provide its determination, together with detailed supporting calculations and documentation to Employer and Employee prior to submission of the proposed Change of Control to Employer’s or Bancorp’s shareholders, Board of Directors or appropriate regulators for approval. If the accounting firm determines that no Excise Tax is payable by Employee with respect to a Payment or Payments, it shall furnish Employee with an opinion reasonably acceptable to Employee that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the determination to Employee, Employee shall have the right to dispute the determination. The existence of the dispute shall not in any way affect Employee’s right to receive the Gross-Up Payment in accordance with the determination. Upon the final resolution of a dispute, Employer or its successor shall promptly pay to Employee any additional amount required by such resolution. If there is no dispute, the determination shall be binding, final and conclusive upon Employer and Employee, except to the extent that any taxing authority subsequently makes a determination that the Excise Tax or additional Excise Tax is due and owing on the payments made to Employee. If any taxing authority determines that the Excise Tax or additional Excise Tax is due and owing, Employer or the entity acquiring control of Employer shall pay the Excise Tax and any penalties assessed by such taxing authority.

Excise Tax Withholding: Notwithstanding anything contained in this Agreement to the contrary, in the event that according to the determination, an Excise Tax will be imposed on any Payment or Payments, Employer or its successor shall pay to the applicable government taxing authorities as Excise Tax withholding, the amount of the Excise Tax that Employer has actually withheld from the Payment or Payments.

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Section 8.02 Merger or Acquisition Without a Change of Control: In the event of a merger or acquisition involving Bancorp that falls short of the numerical thresholds for a “change of control” set forth in Section 8.01, Employee shall be credited with a payment in consideration of Employee’s assistance, support and cooperation in the merger or acquisition and the retention and preservation of Bank and Bancorp goodwill equal to 0.5% of the Target Company Shareholder Value, subject to a minimum of $250,000, which payment shall be made by the Bank or Bancorp immediately prior to closing of the merger or acquisition in the form of a contribution to the Non-Qualified Executive Retirement Plan – Equity Component.

PART IX

COVENANTS

Section 9.01 Confidential Nature of Relationship. Employee acknowledges (i) the highly competitive nature of the business and the industry in which Employer competes; (ii) that as a key executive of Employer he has participated in and will continue to participate in the service of current customers and/or the solicitation of prospective customers, through which, among other things, Employee has obtained and will continue to obtain knowledge of the “know-how” and business practices of Employer, in which matters Employer has a substantial proprietary interest; (iii) that his/her employment hereunder renders the performance of services which are special, unique, extraordinary and intellectual in character, and his/her position with Employer placed and places him/her in a position of confidence and trust with the customers and employees of Employer; and (iv) that his/her rendering of services to the customers of Employer necessarily requires the disclosure to Employee of Trade and Business Secrets, Proprietary and Confidential Information, and Employer Materials (as defined in Section 9.03 below) of Employer. In the course of Employee’s employment with Employer, Employee has and will continue to develop a personal relationship with the customers and prospective customers (defined for purposes of this Agreement as customers that Employer is either actively soliciting or in the process of making a proposal for services to as of Employee’s Separation Date) of Employer and a knowledge of those customers’ and prospective customers’ affairs and requirements, and the relationship of Employer with its established clientele has been, and will continue to be, placed in Employee’s hands in confidence and trust. Employee consequently agrees that it is a legitimate interest of Employer, and reasonable and necessary for the protection of the confidential information, goodwill and business of Employer, which is valuable to Employer, that Employee make the covenants contained herein.

Employee Initials ____

Section 9.02 Restrictions: Accordingly, Employee agrees that during the period that he is employed by Employer, unless in the normal course of business, he shall not, as an individual, employee, consultant, independent contractor, partner, shareholder, or in association with any other person, business or enterprise, directly or indirectly, and regardless of the reason for him/her ceasing to be employed by Employer, engage in the following:

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Disclosure of Proprietary Information or Materials. Employee agrees that he will not directly or indirectly reveal, report, publish or disclose to any person, firm, or corporation not expressly authorized in writing by Employer’s Board of Directors to receive any Trade and Business Secret, Proprietary and Confidential Information or Employer Materials (as defined in Section 9.03 below). Employee further agrees that he will not use any Trade and Business Secret, Proprietary and Confidential Information and/or Employer Materials for any purpose except to perform his/her employment duties for Employer and such Trade and Business Secret, Proprietary and Confidential Information and/or Employer Materials may not be used or disclosed by Employee for his/her own benefit or purpose or for the benefit or purpose of a subsequent employer. These agreements will continue to apply after Employee is no longer employed by Employer so long as such Trade and Business Secrets, Proprietary and Confidential Information and Employer Materials are not nor have become, by legitimate means, generally known to the public.

Solicitation of Employees. Employee recognizes that he possesses and will possess confidential information about other employees of Employer and its affiliates relating to their education, experience, skills, abilities, compensation and benefits, and inter-personal relationships with customer(s) of Employer and its affiliates. Employee recognizes that the information he possesses and will possess about these other employees is not generally known, is of substantial value to Employer and its affiliates in developing their business and in securing and retaining customers, and in managing general daily operations of Employer, and has been and will be acquired by Employee because of his/her business position with Employer and its affiliates. Employee agrees that at all times during his/her employment with Employer and for a period of twelve (12) months thereafter, Employee will not, directly or indirectly, solicit or recruit any employee of Employer or its affiliates for the purpose of being employed by, or serving as a consultant or information resource to, the Employee, or any competitor of Employer or its affiliates on whose behalf Employee is acting as an agent, representative or employee, and that Employee will not convey such confidential information or trade secrets about other employees of Employer and its affiliates to any other Person or legal entity. In view of the nature of Employee’s employment with Employer, Employee likewise agrees that Employer and its affiliates would be irreparably harmed by any such solicitation or recruitment in violation of the terms of this paragraph and that Employer and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting the Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph and to any other relief, including financial compensation commensurate with damages caused, available to them.

Solicitation of Customers. During the Employee’s employment by Employer and its affiliates and for a period of twelve (12) months after such employment ceases, the Employee shall not, directly or indirectly (whether as an officer, director, owner, employee, partner, consultant or other participant), use any Trade and Business Secret, Proprietary and Confidential information, or Employer Materials to identify, solicit or entice any Customer or Prospective Customer of Employer or its affiliates to make any changes whatsoever in their current or prospective relationships with Employer or its affiliates, and will not assist any other Person or entity to interfere with or dispute such current or prospective relationships. If Employee leaves Employer and goes to work for a new employer that is a competitor of Employer, and if that new employer already has an existing relationship with a Customer or Prospective Customer of Employer or its affiliates, this paragraph does not preclude Employee from making contact with such Customer or Prospective Customer on the new employer’s behalf, so long as such contact otherwise complies with the provisions of this paragraph. In view of the nature of the Employee’s employment with Employer, the Employee likewise agrees that Employer and its affiliates would be irreparably harmed by any such interference or competitive actions in violation of the terms of this paragraph and that Employer and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting the Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph, in addition to any other relief, including financial compensation commensurate with damages caused, available to them.

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Employee Initials _____

Section 9.03 Definitions:

A. TRADE AND BUSINESS SECRETS means information, including a formula, pattern, compilation, program, device, method, technique or process that derives independent economic value, actual or potential from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

B. PROPRIETARY AND CONFIDENTIAL INFORMATION means trade secrets, computer programs, designs, technology, ideas, know-how, processes, formulas, compositions, data, techniques, improvements, inventions (whether patentable or not), works of authorship, or other information concerning Employer’s:

(i) Business Activities, including but not limited to: actual or anticipated strategic plans and initiatives; marketing plans, advertising and collateral materials; new product development plans; competitor analyses; analyses of internal financial performance; financial forecasts and budgets; customer and prospect strategies and lists; proprietary designs of facilities and other delivery systems and processes; and any similar information to which Employee has access by virtue of performing his/her duties for Employer.

(ii) Customers, including but not limited to: information about Employer’s customers or prospective customers, such as the customer’s or prospect’s key decision-makers; customer preferences; customer strategies; terms of any contractual arrangements with Employer; business considerations; loan, deposit and other product and service pricing, terms and conditions, repayment structures, fee arrangements, structure of guarantees from other entities; and any similar information to which Employee has access by virtue of performing his/her duties for Employer.

(iii) Employees, including but not limited to: names of and contact information for Employer’s employees; their compensation, incentive plans, retirement plans, terms of employment, areas of expertise, projects, and experience; and any similar information to which Employee has access by virtue of performing his/her duties for Employer.

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“Proprietary and Confidential Information” includes any information, in whatever form or format, including that which has not been memorialized in writing.

C. EMPLOYER MATERIALS means documents or other media or tangible items that contain or embody PROPRIETARY AND CONFIDENTIAL INFORMATION or any other information concerning the business, operations or plans of Employer and its customers and prospective customers, whether such documents have been prepared by Employee or by others. EMPLOYER MATERIALS include, but are not limited to blueprints, drawings, photographs, charts, graphs, notebooks, customer lists, computer disks, photographs of proprietary information or documents on cell phones, iPads or other electronic devices, photocopies of proprietary information or documents, emails, text messages, tapes or printouts, sound recordings and other printed, typewritten, handwritten or computer generated documents, as well as samples, prototypes, product collateral materials, advertising materials, models, products and the like.

D. TOTAL BANCORP SHAREHOLDER VALUE means the sum of any cash and the fair market value of any securities or other assets or property available for distribution to the holders of any and all classes of Bancorp’s equity securities in connection with a Change of Control, including any net amounts distributed after the closing of the Change of Control pursuant to any escrow, earn-out or other similar arrangement, after deduction of any items subtracted from proceeds to be distributed to holders of Bancorp’s equity securities, such as costs and fees that are associated with the ultimate disposition of such arrangements. The fair market value of any securities or other assets or property available for distribution to the holders of Bancorp’s equity securities in connection with a Change of Control will be determined on the same basis on which such securities were valued in such Change of Control for purposes of distributing such securities or property to the holders of Bancorp’s equity securities.

Employee Initials ____

E. TARGET COMPANY SHAREHOLDER VALUE means the sum of any cash and the fair market value of any Bancorp securities or other assets or property available for distribution to the holders of any and all classes of the merger or acquisition target company’s equity securities in connection with a merger or acquisition by Bancorp that does not constitute a Change of Control of Bancorp, including any net amounts distributed after the closing of the merger or acquisition pursuant to any escrow, earn-out or other similar arrangement, after deduction of any items subtracted from proceeds to be distributed to holders of the target company’s equity securities, such as costs and fees that are associated with the ultimate disposition of such arrangements. The fair market value of any Bancorp securities or other assets or property available for distribution to the holders of the target company’s equity securities in connection with a merger or acquisition that does not constitute a Change of Control of Bancorp will be determined on the same basis on which such securities were valued in such merger or acquisition for purposes of distributing such securities or property to the holders of the target company’s equity securities.

Employee Initials _____

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Section 9.04 Return of Employer’s Property: Upon termination of his/her employment with Employer for any reason, Employee will promptly deliver to Employer, without copying or summarizing, all Trade and Business Secrets, Proprietary and Confidential Information, and Employer Materials that are in Employee’s possession or under Employee’s control, including, without limitation, all physical property, keys, documents, lists, electronic storage media, cell phones, iPads, manuals, letters, notes, reports, including all originals, reproductions, recordings, disks, or other media.

Employee acknowledges that Employee has been apprised of the provisions of Labor Code Section 2860 which provides: “Everything which an Employee acquires by virtue of his employment, except the compensation which is due him from his Employer, belongs to the Employer, whether acquired lawfully or unlawfully, or during or after the expiration of the term of his employment.” Employee understands that any work that Employee created or helped create at the request of Employer, including user manuals, training materials, sales materials, customer and prospective customer information and business data, process manuals, and other written and visual works, are works made for hire in which Employer owns the copyright. Employee may not reproduce or publish these copyrighted works, except in the pursuit of his/her employment duties with Employer.

Employee Initials ____

Section 9.05 Separate Covenants: The covenants of Part IX of this Agreement shall be construed as separate covenants covering their particular subject matter. In the event that any covenant shall be found to be judicially unenforceable, said covenant shall not affect the enforceability or validity of any other part of this Agreement.

Employee Initials ____

Section 9.06 Continuing Obligation: Employee’s obligations set forth in Part IX of this Agreement shall expressly continue in effect beyond Employee’s employment period in accordance with their terms and such obligations shall be binding on Employee’s assigns, executors, administrators and other legal representatives.

Employee Initials ____

PART X

ARBITRATION

Section 10.01 Dispute Resolution: Except as prohibited by law, the Parties agree that arbitration shall be the sole and exclusive remedy to redress any dispute, claim, or controversy (“Grievance”) involving the interpretation of this Agreement, the terms and conditions of this Agreement, or any other claims arising out of Employee’s employment with Employer or the termination thereof. It is the intention of the Parties that the arbitration decision will be final and binding and that any and all Grievances shall be disposed of as described herein.

Section 10.02 Process.

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A. Grievance. Any and all Grievances must be submitted in writing by the aggrieved Party. A Grievance from Employee shall be submitted to Employer’s Chief Executive Officer. Within Thirty (30) days following the submission of the written Grievance, the Party to whom the Grievance is submitted shall respond in writing. If no written response is submitted within Thirty (30) days, the Grievance shall be deemed denied.

B. Mediation. If the Grievance is denied, and before invoking the arbitration procedure described below, at the Bank’s option and with Employee’s agreement, the Parties shall first participate in mediation. The mediator shall be selected by mutual agreement of the Parties, and shall be conducted in San Joaquin County, California, or such other location as is mutually agreed. The mediation cost (other than attorney fees) shall be borne by Employer.

C. Arbitration. Unless otherwise prohibited by law or specified below, if the Grievance is denied and mediation is unsuccessful, either Party may, within Thirty (30) days of such denial, and prior to the expiration of any applicable statute of limitations, refer the Grievance to arbitration before a single arbitrator pursuant to the Federal Arbitration Act, 9 U.S.C. section 1 et seq., administered by JAMS pursuant to its Employment Arbitration Rules then in effect, and subject to JAMS’ Policy on Employment Arbitration Minimum Standards of Procedural Fairness. Both Parties shall be entitled to adequate discovery prior to the arbitration as determined by the arbitrator, who shall be selected in accordance with JAMS’ rules. Both Employee and Employer shall have the right to be represented by counsel of his/her/its choice, and Employee will be responsible for retaining his/her own attorney. Employee understands that copies of the JAMS rules and policy are available to him/her at http://www.jamsadr.com. The arbitration shall take place in San Joaquin County, California, unless an alternative location is mutually agreed.

(i) The Parties will select a single arbitrator. If no agreement on an arbitrator can be reached, the arbitrator will be selected by alternately striking names from a list of qualified employment arbitrators supplied by JAMS (i.e., Employee strikes one, Employer strikes one, and so forth; the last name remaining is the arbitrator selected). The arbitrator shall have the exclusive authority to decide whether the conduct complained of in section (A) above violates the complaining Party’s rights, and if so, to grant any relief authorized by law. The arbitrator also shall have the exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability, or formation of this arbitration agreement, including, but not limited to, any claim that all or any part of this arbitration agreement is void or voidable. The arbitrator shall not have the authority to modify, change or refuse to enforce the lawful terms of any employment agreement between the parties and/or any lawful policy or benefit plan.

(ii) Employer shall bear any costs unique to the arbitration proceeding. If Employer prevails, Employee will pay the cost of arbitration to the extent permissible under applicable law. Each Party shall pay his/her/its own attorney fees, unless the arbitrator orders otherwise pursuant to applicable law.

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(iii) Arbitration shall be the exclusive final remedy for any dispute between the Parties, including, but not limited to, claims for discrimination or harassment (such as claims under the California Fair Employment and Housing Act and similar state and local laws), Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, and the Age Discrimination in Employment Act), wrongful termination, breach of contract, breach of public policy, bad faith, infliction of physical or mental harm or distress, claims for benefits (except where an employee benefit or pension plan specifies a procedure for resolving claims different from this one), and/or any other disputes, and the Parties agree that no dispute shall be submitted to arbitration where the complaining Party has not complied with the preliminary steps provided for in sections (A) and (B) above.

(iv) Employer and Employee expressly intend and agree as follows: (1) that class action, collective action, and representative action procedures shall not be asserted, nor will they apply, in any arbitration pursuant to this agreement to arbitrate; (2) that neither Employer nor Employee will assert, participate in, or join class action, collective action, or representative action claims against the other in arbitration or otherwise; and (3) that Employer and Employee shall only submit his/her/its own, individual claims in arbitration and will not seek to represent the interests of any other person, except to the extent a representative action under the California Private Attorneys General Act (or other similar law) is, as a matter of law, not deemed subject to such a waiver.

(v) Nothing in this agreement to arbitrate shall be construed as limiting Employee’s right to file a claim with or seek the assistance of the Equal Employment Opportunity Commission, the National Labor Relations Board, the Department of Labor, or any similar state or federal administrative agency; however, any claim that cannot be resolved administratively or is not submitted to the applicable agency for resolution shall be subject to this agreement to arbitrate. The following disputes and claims are not covered by this agreement to arbitrate and shall therefore be resolved by both Employee and Employer in any appropriate forum, including courts of law, as required by the laws then in effect: (i) claims for workers’ compensation benefits; (ii) claims for unemployment insurance benefits; and (iii) claims for state or federal disability insurance benefits; and (c) neither Employee nor Employer waives the right to seek, through judicial process, preliminary injunctive relief to preserve the status quo or prevent irreparable injury before the matter can be heard in arbitration.

(vi) The arbitrator shall issue a written arbitration decision stating the arbitrator’s essential findings and conclusions upon which any award is based.

(vii) This agreement to arbitrate will survive the termination of Employee’s employment.

If any court of competent jurisdiction declares that any part of this agreement to arbitrate is illegal, invalid or unenforceable, such a declaration will not affect the legality, validity or enforceability of the remaining parts of the agreement to arbitrate, and the illegal, invalid or unenforceable part will no longer be part of this Agreement.

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BOTH EMPLOYEE AND EMPLOYER WAIVE THEIR CONSTITUTIONAL RIGHT TO HAVE MATTERS COVERED BY THIS AGREEMENT DETERMINED BY A JURY. Either Party may bring an action in any court of competent jurisdiction to compel arbitration under this Agreement and to enforce an arbitration award. A Party opposing enforcement of the award itself may bring a separate action in a court of competent jurisdiction to set aside the award on grounds allowable under federal or California law regulating arbitration, as applicable.

Employee Initials ____

PART XI

TAXES

Section 11.01 Withholding: All payments to be made to Employee under this Agreement will be subject to required withholding of federal, state and local income and employment taxes as applicable.

Section 11.02 Section 409A:

A. Notwithstanding any provision to the contrary in this Agreement, Employer shall delay the commencement of payments or benefits coverage to which Employee would otherwise become entitled under the Agreement in connection with Employee’s termination of employment until the earlier of (i) the expiration of the six-month period measured from the date of Employee’s “separation from service” with Employer (as such term is defined in Treasury Regulations issued under Section 409A of the Code (defined below)) or (ii) the date of Employee’s death, if Employer in good faith determines that Employee is a “specified employee” within the meaning of that term under Code Section 409A at the time of such separation from service and that such delayed commencement is otherwise required in order to avoid a prohibited distribution under Section 409A(a)(2) of the Code. Upon the expiration of the applicable Code Section 409A(a)(2) deferral period, all payments and benefits deferred pursuant to this Section 11.02 (whether they would have otherwise been payable in a single sum or in installments in the absence of such deferral) shall be paid or reimbursed to Employee in a lump sum, and any remaining payments and benefits due under the Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

B. In addition, to the extent Employer is required pursuant to this Agreement to reimburse expenses incurred by Employee, and such reimbursement obligation is subject to Section 409A of the Code, Employer shall reimburse any such eligible expenses by the end of the calendar year next following the calendar year in which the expense was incurred, subject to any earlier required deadline for payment otherwise applicable under this Agreement; provided, however, that the following sentence shall apply to any tax gross-up payment and related expense reimbursement obligation, including any payment obligations described in Section 8.01, to the extent subject to Section 409A. Any such tax gross-up payment will be made by the end of the calendar year next following the calendar year in which Employee remits the related taxes.

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C. For purposes of the provisions of this Agreement which require commencement of payments or benefits subject to Section 409A upon a termination of employment, the terms “termination of employment” and “Separation Date” shall mean a “separation from service” with Employer (as such term is defined in Treasury Regulations issued under Code Section 409A), notwithstanding anything in this Agreement to the contrary.

D. In each case where this Agreement provides for the payment to the Employee of an amount that constitutes nonqualified deferred compensation under Section 409A and such payment is subject to the execution and non-revocation of a release of claims, (1) any payments delayed pending the effectiveness of the release shall be accumulated and paid in a lump sum following the effectiveness of the release, with any remaining payments due paid in accordance with the schedule otherwise provided herein, and (2) if the period between the Separation Date and the last day on which the release could become irrevocable assuming the Employee’s latest possible execution and delivery of the release spans two calendar years, then such deferred payments shall not be made before the second calendar year, even if the release becomes irrevocable in the first calendar year, if such payments constitute nonqualified deferred compensation under Section 409A.

E. Any series of payments provided under this Agreement (excluding plans or agreements incorporated by reference) shall for all purposes of Code Section 409A be treated as a series of separate payments and not as single payments.

F. The provisions of this Part XI are intended to comply with Code Section 409A and shall be interpreted consistent with such section.

PART XII

GENERAL PROVISIONS

Section 12.01 Notices: Any notice to be given to Employer under the terms of this Agreement, and any notice to be given to Employee, shall be addressed to such Party at the mailing address the Party may hereafter designate in writing to the other. Any such notice shall be deemed to have been duly given four days after the same shall be enclosed in a properly sealed and addressed envelope, registered or certified, and deposited (postage or registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government or upon actual delivery to the Party by messenger or delivery service, with receipt acknowledged in writing by the Party to whom such notice is addressed.

Section 12.02 Entire Agreement: This Agreement and the agreements incorporated by reference herein (“Farmers & Merchants Bank of Central California Executive Retirement Plan” and “Farmers & Merchants Bank of Central California Deferred Compensation Plan”) supersede any and all other agreements or understandings, whether oral, implied, or in writing, between the parties hereto with respect to the subject matter hereof and contain all of the covenants and agreements between the Parties with respect to such matters in their entirety. Each Party to this Agreement acknowledges that no representations, inducements, promises or agreements, orally or otherwise, have been made by any Party, or anyone acting on behalf of any Party, which is not embodied herein, and that no other agreement, statement or promise not contained in this Agreement shall be valid or binding. Any modification(s) to this Agreement will be effective only if in writing and signed by the Parties hereto.

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Section 12.03 Notwithstanding any other provision of this Agreement, this Agreement and all rights and obligations of the Parties hereunder shall be subject to the provisions of the Federal Deposit Insurance Act and the regulations adopted thereunder, including without limitation 12 Code of Federal Regulations, Part 359.

Section 12.04 Partial Invalidity: If any provisions in this Agreement are held by a court of competent jurisdiction or an arbitrator to be invalid, void or unenforceable, the remaining provisions shall nevertheless continue in full force and effect without being impaired or invalidated in any way.

Section 12.05 Continuing Obligations: The obligations of the covenants contained in this Agreement shall survive the termination of the Agreement and any employment relationship between Employer and Employee. Accordingly, neither Employer nor Employee shall be relieved of the continuing obligations of the covenants contained in this Agreement.

Section 12.06 Employee’s Representations: Employee represents and warrants that Employee is free to enter into this Agreement and to perform each of the terms and covenants in it. Employee represents and warrants that Employee is not restricted or prohibited, contractually or otherwise, from entering into and performing this Agreement, and that Employee’s execution and performance of this Agreement is not a violation or breach of any other agreement or other legal obligation between Employee and any other person or entity.

Section 12.07 Governing Law: This Agreement (not including any plans or agreements incorporated by reference) shall be construed and enforced in accordance with, and the rights of the Parties shall be governed by, the laws of the State of California.

Section 12.08 Full Settlement: Employer’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set off, counterclaim, recoupment, defense or other claim, right or action which Employer may have against Employee or others. In no event shall Employee be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Employee under any of the provisions of this Agreement and such amount shall not be reduced whether or not Employee obtains other employment.

Section 12.09 No Waiver: The failure of any of the Parties hereto to insist on strict compliance with any provision of this Agreement, or the failure to assert any right of any Party hereto may have hereunder, shall not be deemed to be a waiver of such provision or right or of any other provision or right contained in this Agreement.

Section 12.10 Advice of Counsel: Employee warrants that he has consulted with legal counsel of his/her choice to advise him/her with respect to the terms and conditions of this Agreement.

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Exhibit 10.1

FARMERS & MERCHANTS BANK OF

CENTRAL CALIFORNIA and FARMERS &

MERCHANTS BANCORP

Date:

4/9/2024

By:

/s/ Edward Corum Jr.

	Edward Corum Jr.
	Chairman of the Personnel Committee

By:

/s/ Stephenson K. Green

	Stephenson K. Green
	Member of the Personnel Committee

By:

/s/ Kevin Sanguinetti

	Kevin Sanguinetti
	Member of the Personnel Committee

Employee:

/s/ Kent A. Steinwert

Date:

4/9/2024

Kent A. Steinwert

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EXHIBIT A

AGREEMENT AND GENERAL RELEASE

This Agreement and General Release (“Agreement”) is entered into by and between Kent A. Steinwert (“Employee”) and Farmers & Merchants Bank of Central California, California banking corporation (the “Bank”), and Farmers & Merchants Bancorp, a Delaware corporation (“Bancorp”) and together with the Employee, the “Parties”);

WHEREAS, pursuant to Sections 7.01 and 8.01 of the Parties’ Employment, Confidentiality and Non-Disclosure Agreement dated as of April 1, 2024, as may be amended or automatically renewed (“Employment Agreement”), Employee is required to enter into a release of claims in the Bank’s and Bancorp’s favor in exchange for the payment of certain benefits; and

WHEREAS, the Parties wish to memorialize either the terms of Employee’s departure under Section 7.01 of the Employment Agreement or the payment of the Change of Control Compensation Package (as defined in Section 8.01 of the Employment Agreement), and to resolve all issues or disputes arising out of or related to (i) their employment relationship and the termination thereof under Section 7.01 of the Employment Agreement or (ii) their employment relationship prior to a Change of Control (as defined in the Employment Agreement), as the case may be;

NOW, THEREFORE, the Parties hereby agree as follows:

Section 1.

Release of the Bank and Bancorp. In consideration of receipt by Employee of the Severance Package or the Change of Control Compensation Package, as applicable, which Employee acknowledges is in addition to anything of value to which he is otherwise entitled, Employee, on behalf of himself/herself and his/her heirs, attorneys, executors, successors, administrators and assigns, on an individual basis and as the representative of any class, does hereby release, acquit and forever discharge the Bank and Bancorp and their respective predecessors, successors, assigns, subsidiaries, divisions, holding companies, affiliated companies and benefit plans, and each of their respective present and former affiliates, directors, officers, fiduciaries, employees, agents, successors and assigns, from any and all liabilities, damages, causes of action and claims of any nature, kind or description whatsoever, whether accrued or to accrue, which Employee ever had, now has or hereafter may have against any of them, known or unknown, that are based on facts occurring up to the day Employee executes this Agreement, including, but not limited to, any claims under any state or federal law or statute, including, but not limited to, the Age Discrimination in Employment Act of 1967 (29 U.S.C. section 621 et seq.), the Americans with Disabilities Act of 1990, the Civil Rights Acts of 1964 and 1991, the Equal Pay Act, any claim based on tort, contract or otherwise, any claim for attorneys’ fees or costs, or any matter or action related to Employee employment and/or affiliation with, or termination and separation from the Bank, Bancorp and their affiliates.

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This Agreement recognizes the rights and responsibilities of the Equal Employment Opportunity Commission (“EEOC”) and the California Department of Fair Employment and Housing (“DFEH”) to enforce the statutes which come under their jurisdiction. This Agreement is not intended to prevent Employee from initiating or participating in any investigation or proceeding conducted by the EEOC or the DFEH; provided, however, that nothing in this section limits or affects the finality or the scope of the Release. Employee has waived and released any claim that he may have for damages based on any alleged discrimination, harassment or retaliation, that is based on facts occurring the day of and prior to the day of Employee executes this Agreement, and may not recover damages in any proceeding conducted by the EEOC or the DFEH.

Section 2.

No Release of Vested Benefits. Notwithstanding anything in Section 1 hereof, Employee does not by this Agreement waive any rights he may have to vested benefits or account balances in any retirement plan, which vested benefits or account balances, as the case may be, shall be paid over to Employee in accordance with the provisions of the respective plans, subject to any applicable forfeiture provisions set forth therein.

Section 3.

Release of Employee. The Bank and Bancorp, and its respective parents, predecessors, successors, assigns, subsidiaries, divisions, affiliated companies and benefit plans, and each of their respective present and former affiliates, directors, officers, fiduciaries, employees, agents, successors and assigns, does hereby release, acquit and forever discharge from any and all liabilities, damages, causes of action and claims of any nature, kind or description whatsoever, whether accrued or to accrue, which the Bank or Bancorp ever had, now has or hereafter may have against Employee, known or unknown, that are based on facts occurring up to the day Employee executes this Agreement, including, but not limited to, any claims under any state or federal law or statute, any claim based on tort, contract or otherwise, any claim for attorneys’ fees or costs, or any matter or action related to Employee employment and/or affiliation with the Bank or Bancorp and their affiliates.

Section 4.

Confidentiality of Agreement. As a material of inducement to the Bank and Bancorp to enter into this Agreement, Employee represents and agrees that he will keep all terms of this Agreement completely confidential, and that he will not disclose any information concerning this Agreement to any person, including, but not limited to, any past, present or prospective employee of the Bank or Bancorp, except for her spouse, attorney, tax account and financial advisor. Employee further agrees that disclosure by him/her of the terms and conditions of this Agreement in violation of this Section constitutes a material breach of the Agreement.

Section 5.

Confidentiality of Proprietary Information. Employee acknowledges and agrees that he has an obligation to continue to keep in confidence and not use for his/her own or any other person's or entity's benefit all proprietary and confidential information concerning the Bank or Bancorp, as defined in Part IX of the Employment Agreement.

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Section 6.

Non-Disparagement. Employee agrees to refrain from any disparagement, defamation, libel or slander of the Bank, Bancorp or Bank or Bancorp-affiliates or tortious interference with the contracts and relationships of the Bank or Bancorp.

Employee agrees not to act in any manner that might damage the business of the Bank or Bancorp. Employee agrees not to counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against the Bank or Bancorp and/or any officer, director, employee, agent, representative, shareholder or attorney of the Bank or Bancorp, unless under a subpoena or other court order to do so.

Section 7.

Acknowledgments. Employee acknowledges, represents and agrees, in compliance with the Older Workers’ Benefit Protection Act, that:

(a)

Employee has been fully informed and is fully aware of his/her right to discuss any and all aspects of this matter with an attorney of his/her choice and is specifically advised that he should seek such advice;

(b)

Employee has carefully read and fully understands all of the provisions of this Agreement;

(c)

Employee has had up to and including a full twenty-one (21) days within which to consider this Agreement before executing it, unless by his/her own choice he has waived all or part of this period;

(d)

Employee has a full seven (7) days following the execution of this Agreement to revoke this Agreement, and has been and is hereby advised in writing that this Agreement shall not become effective or enforceable as to Employee’s rights under the federal Age Discrimination in Employment Act (29 U.S.C. section 621 et seq.) until the revocation period has expired (but shall be immediately effective as to all other claims). Any revocation shall be made in writing and delivered to Bank’s and Bancorp’s Chief Executive Officer on or before the seventh day following Employee execution of this Agreement; and

(e)

Employee accepts the terms of this Agreement as fair and equitable under all the circumstances and voluntarily executes this Agreement.

Section 8.

Non-Admission. Nothing in this Agreement shall be construed as an admission of liability by the Bank or Bancorp, its past and present affiliates, officers, directors, owners, employees or agents, and the Bank and Bancorp specifically disclaims liability to or wrongful treatment of Employee on the part of itself, its past and present affiliates, officers, directors, owners, employees and agents.

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Section 9.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

Section 10.

Savings Clause. If any provision of this Agreement is invalid under applicable law, such provision shall be deemed to not be a part of this Agreement, but shall not invalidate any other provision hereby.

Section 11.

Integration Clause. This Agreement is intended by the parties to be their final agreement. The statements, promises and agreements in this Agreement may not be contradicted by any prior understandings, agreements, promises or statements. Employee states and promises that in signing this Agreement he has not relied on any statements or promises made by the Bank or Bancorp, other than the promises contained in this Agreement. Any changes to this Agreement must be in writing and signed by both Parties.

THIS IS A RELEASE OF ALL CLAIMS – READ THOROUGHLY BEFORE SIGNING

Date:

Employee:
	Kent A. Steinwert

Date:

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA and FARMERS & MERCHANTS BANCORP

By:

	Edward Corum, Jr.
	Chairman of the Personnel Committee

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EXHIBIT B

NON-COMPETITION AND NON-SOLICITATION AGREEMENT

This Non-Competition and Non-Solicitation Agreement (“Agreement”) is entered into by and between Kent A. Steinwert (“Employee”) and Farmers & Merchants Bank of Central California, a California banking corporation (the “Bank”).

WHEREAS, pursuant to Section 8.01 of the Parties’ Employment, Confidentiality and Non-Disclosure Agreement dated as of April 1, 2024 , as may be amended or automatically renewed (“Employment Agreement”), the Parties wish to memorialize the covenants to which Employee will become subject upon a termination of employment in anticipation of, upon or following a Change of Control and the portion of Employee’s Change of Control Compensation Package that is intended to serve as compensation for compliance with such covenants;

NOW, THEREFORE, the Parties hereby agree as follows:

Section 1.

Change of Control Compensation Package. Subject to the terms of this Agreement, Employee shall receive the following compensation for compliance with the terms of the covenants described herein (the “Restrictive Covenants”), which compensation is part of (and not in addition to) the Change of Control Compensation Package described in Section 8.01 of the Employment Agreement to be paid or commence immediately prior to the earlier of the (i) termination of employment or (ii) Change of Control: In the event of a Change of Control of Employer or Farmers & Merchants Bancorp (“Bancorp”), (A) either a goodwill preservation payment equal to 0.50% of the Total Bancorp Shareholder Value in the event of a Change of Control as described in (i) or (ii) of Section 8.01.1 of the Employment Agreement, or a goodwill preservation payment of $250,000 in the event of a Change of Control as described in (iii) of Section 8.01.1 of the Employment Agreement, (B) two (2) times the Employee’s highest Annual Compensation (as defined in Section 7.01.1 of the Employment Agreement), (C) Employee’s monthly premium for continuation coverage under COBRA (as defined in Section 7.05 of the Employment Agreement), determined as of the closing or other occurrence of the Change of Control, multiplied by thirty-six (36) months, whether or not such continuation coverage is elected by Employee, (D) Employee’s Bank car valued for tax purposes using the vehicle’s Kelley Blue Book Trade-In Value in Good Condition, and (E) a gross-up payment as defined and set forth in Section 8.01.3 of the Employment Agreement.

The compensation set forth above is in consideration for the covenants of Employee as set forth in this Agreement.

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Section 2.

Restrictive Covenants: Employee agrees that for a period of two (2) years after a termination of employment in anticipation of, upon or following the Change of Control (in the event of a Change of Control of Employer, the Bank or Bancorp under Section 8.01.1 of the Employment Agreement) (the “Restricted Period), he shall not, as an individual, employee, consultant, independent contractor, partner, shareholder, or in association with any other person, business or enterprise, directly or indirectly, and regardless of the reason for him/her ceasing to be employed by Employer, engage in the following (which periods shall run concurrent with the periods of the restrictive covenants described in Section 9.02 of the Employment Agreement and not consecutively):

Non-Competition. Employee recognizes that if he were to become employed by, or substantially involved in, the business of a competitor of Employer or any of its affiliates, it would be very difficult for Employee not to rely on or use Employer’s and its affiliates’ Trade and Business Secrets, Proprietary and Confidential information or Employer Materials. To protect Employer’s Trade and Business Secrets, Proprietary and Confidential information and Employer Materials and its affiliates’ relationships and goodwill with customers, Employee will not, directly or indirectly through any other Person, engage in, enter the employ of, render any services to, have any ownership interest in, or participate in the financing, operation, management or control of, any Competing Business (as defined below). For purposes of this Agreement, the phrase “directly or indirectly through any other Person” shall include, without limitation, any direct or indirect ownership or profit participation interest in such enterprise, whether as an owner, stockholder, member, partner, joint venturer or otherwise, and shall include any direct or indirect participation in such enterprise as an employee, independent contractor, consultant, director, officer, licensor of technology or otherwise. For purposes of this Agreement, “Competing Business” means a Person which has a branch office or conducts material business in any county in which the Bank has an office immediately prior to the Change of Control or opens a branch or office in the county in which the Bank, immediately prior to the change of control, has a branch office during the Restricted Period (the “Restricted Area”) that competes with Employer and its affiliates by soliciting, offering and/or selling any services or products substantially similar in function or capability to or competitive with the existing services and products sold, licensed, distributed, marketed, provided, being developed or otherwise offered, performed or provided by Employer and its affiliates as of the Change of Control, or the services or products of Employer and its affiliates being actively planned or developed as of the Change of Control, or any other business, product or service in which Employee has been engaged for more than a de minimis amount of time during the twelve (12)-month period immediately preceding the date of Change of Control. Nothing herein shall prohibit Employee from being a passive owner of not more than 4.9% of the outstanding stock of any class of a corporation which is publicly traded, so long as Employee has no active participation in the business of such corporation. In view of the nature of Employee’s employment with Employer and Employee’s contribution of equity in Employer to the Change of Control, Employee likewise agrees that Employer and its affiliates would be irreparably harmed by any such competition in violation of the terms of this paragraph and that Employer and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph and to any other relief, including financial compensation commensurate with damages caused, available to them.

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Solicitation of Employees. Employee recognizes that he possesses and will possess confidential information about other employees of Employer and its affiliates relating to their education, experience, skills, abilities, compensation and benefits, and inter-personal relationships with customer(s) of Employer and its affiliates. Employee recognizes that the information he possesses and will possess about these other employees is not generally known, is of substantial value to Employer and its affiliates in developing their business and in securing and retaining customers, and in managing general daily operations of Employer, and has been and will be acquired by Employee because of his/her business position with Employer and its affiliates. Employee agrees that Employee will not, directly or indirectly, solicit or recruit any employee of Employer or its affiliates for the purpose of being employed by, or serving as a consultant or information resource to, Employee, or any competitor of Employer or its affiliates on whose behalf Employee is acting as an agent, representative or employee, and that Employee will not convey such confidential information or trade secrets about other employees of Employer and its affiliates to any other Person or legal entity. In view of the nature of Employee’s employment with Employer, Employee likewise agrees that Employer and its affiliates would be irreparably harmed by any such solicitation or recruitment in violation of the terms of this paragraph and that Employer and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph and to any other relief, including financial compensation commensurate with damages caused, available to them.

Solicitation of Customers. Employee shall not, directly or indirectly (whether as an officer, director, owner, employee, partner, consultant or other participant), use any Trade and Business Secret, Proprietary and Confidential information or Employer Materials to identify, solicit or entice any Customer or Prospective Customer of Employer or its affiliates to make any changes whatsoever in their current or prospective relationships with Employer or its affiliates, and will not assist any other Person or entity to interfere with or dispute such current or prospective relationships. If Employee leaves Employer and goes to work for a new employer that is a competitor of Employer, and if that new employer already has an existing relationship with a Customer or Prospective Customer of Employer or its affiliates, this paragraph does not preclude Employee from making contact with such Customer or Prospective Customer on the new employer’s behalf, so long as such contact otherwise complies with the provisions of this paragraph. In view of the nature of Employee’s employment with Employer, Employee likewise agrees that Employer and its affiliates would be irreparably harmed by any such interference or competitive actions in violation of the terms of this paragraph and that Employer and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph, in addition to any other relief, including financial compensation commensurate with damages caused, available to them.

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Representations. Without limiting the generality of Employee’s agreements in this Section 2, Employee (i) represents that he is familiar with and has carefully considered the Restrictive Covenants, (ii) represents that he is fully aware of his obligations hereunder, (iii) agrees to the reasonableness of the length of time, scope and geographic coverage, as applicable, of the Restrictive Covenants, (iv) agrees that Employer and its affiliates currently conduct business throughout the Restricted Area, and (v) agrees that the Restrictive Covenants will continue in effect for the applicable periods set forth above in this Section 2 regardless of whether Employee is then entitled to receive severance pay or benefits from Employer. Employee understands that the Restrictive Covenants may limit his/her ability to earn a livelihood in a business similar to the business of Employer and any of its affiliates, but he nevertheless believes that he has received and will receive sufficient consideration and other benefits as an employee of Employer and as otherwise provided hereunder or as described in the recitals hereto to clearly justify such restrictions which, in any event (given his/her education, skills and ability), Employee does not believe would prevent him/her from otherwise earning a living. Employee agrees that the Restrictive Covenants do not confer a benefit upon Employer and its affiliates disproportionate to the detriment of Employee.

Section 3.

Confidentiality of Agreement. As a material inducement to the Bank to enter into this Agreement, Employee represents and agrees that he will keep all terms of this Agreement completely confidential, and that he will not disclose any information concerning this Agreement to any person, including, but not limited to, any past, present or prospective employee of the Bank, except for his/her spouse, attorney, tax account and financial advisor or with the consent of the Bank’s Board of Directors. Employee further agrees that disclosure by him/her of the terms and conditions of this Agreement in violation of this Section constitutes a material breach of the Agreement.

Section 4.

Confidentiality of Proprietary Information. Employee acknowledges and agrees that he has an obligation to continue to keep in confidence and not use for his/her own or any other person's or entity's benefit all proprietary and confidential information concerning the Bank, as defined in Part VIII of the Employment Agreement.

Section 5.

Non-Disparagement. Employee agrees to refrain from any disparagement, defamation, libel or slander of the Bank or Bank-affiliates or tortious interference with the contracts and relationships of the Bank.

Employee agrees not to act in any manner that might damage the business of the Bank. Employee agrees not to counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against the Bank and/or any officer, director, employee, agent, representative, shareholder or attorney of the Bank, unless under a subpoena or other court order to do so.

Section 6.

Acknowledgments. Employee acknowledges, represents and agrees that:

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(a)

(b)

Employee has carefully read and fully understands all of the provisions of this Agreement; and

(c)

Employee accepts the terms of this Agreement as fair and equitable under all the circumstances and voluntarily executes this Agreement.

Section 7.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

Section 8.

Section 9.

Capitalized Terms. Any capitalized term in this Agreement that is not defined herein shall have the meaning given to such term in the Employment Agreement.

Section 10.

Integration Clause. This Agreement is intended by the parties to be their final agreement. The statements, promises and agreements in this Agreement may not be contradicted by any prior understandings, agreements, promises or statements. Employee states and promises that in signing this Agreement he has not relied on any statements or promises made by the Bank, other than the promises contained in this Agreement. Any changes to this Agreement must be in writing and signed by both Parties.

Date:

Employee:
	Kent A. Steinwert

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA and FARMERS & MERCHANTS BANCORP

By:
	Edward Corum, Jr.
	Chairman of the Personnel Committee

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Exhibit 10.2

EXECUTIVE VICE PRESIDENT

EMPLOYMENT, CONFIDENTIALITY

AND NON-DISCLOSURE AGREEMENT

PART I

PARTIES TO AGREEMENT

Section 1.01 Parties: This Employment Agreement (hereinafter referred to as the “Agreement”) is entered into by and between Farmers & Merchants Bank of Central California, a California banking corporation (the “Bank”) and Farmers & Merchants Bancorp, a Delaware corporation (“Bancorp”) their successors and assigns (hereinafter collectively referred to as “Employer”), and Deborah E. Skinner (hereinafter referred to as “Employee”). Employer and Employee are sometimes collectively referred to hereinafter as the “Parties” and individually as a “Party”.

PART II

EMPLOYMENT

Section 2.02 Term of Employment: This Agreement shall become effective on April 1, 2024. This Agreement shall terminate on December 31, 2024 unless earlier terminated pursuant to the provisions of Part VII herein or Part VIII. If this Agreement is not terminated pursuant to Part VII, the Agreement shall renew automatically for an additional two year term, and for successive additional two year terms thereafter, unless earlier terminated pursuant to the provisions of Part VII or Part VIII.

PART III

DUTIES OF EMPLOYEE

Section 3.01 General Duties: During the term of this Agreement, Employee shall be employed as Executive Vice President and Chief Administrative Officer of the Bank under the direction of the Chairman, President and Chief Executive Officer and shall perform and discharge well and faithfully the duties that may be assigned to Employee from time to time by the Chairman, President and Chief Executive Officer in connection with the conduct of the Bank’s business. Nothing herein shall preclude the Bank’s Board of Directors or Chief Executive Officer from changing Employee’s title or duties as long as the resulting title and duties are reasonably commensurate with the education, employment background and qualifications of the Employee and involve similar responsibilities and scope of duties and any such changes will not be deemed a cause of Termination for Good Reason under the terms of this Agreement.

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PART IV

COMPENSATION

Section 4.01 Salary: Employee shall be paid an annual base salary of no less than $500,000 per year. This base salary shall be paid to Employee in such intervals and at such times as other salaried executives of Employer are paid. Employer’s Board of Directors reserves the right to set the timing and level of salary adjustments for all employees and any particular employee at its sole discretion.

PART V

BENEFITS

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Section 5.02 Automobile: Employer shall provide Employee with an automobile for business and incidental personal use. However, at the sole discretion of the Board of Directors and/or the Bank’s Chief Executive Officer, the Bank reserves the right to change or eliminate this benefit at any time.

Section 5.03 Membership Fees: Employer shall reimburse Employee for all appropriate and reasonable expenses incurred in performing Employee’s duties, including providing and paying for the dues and fees of membership in local social, service and civic clubs and/or organizations as Employer deems appropriate and necessary for enhancement of its presence within the local business community. In order to be eligible for reimbursement of these expenses, Employee must obtain pre-approval for such memberships from Employer’s Chief Executive Officer and must provide Employer with receipts and documented evidence as is required by federal and state laws and regulations.

PART VI

EXPENSES

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PART VII

TERMINATION OF EMPLOYMENT

A Severance Payment equivalent to one (1) time Employee’s highest Annual Compensation for services (“Annual Compensation,” defined as Total Compensation as reported in Employer’s previous years’ proxy statements) which Employee has earned during Employee’s employment with Employer. The Severance Payment shall be paid out in a lump sum no later than thirty (30) days following the Separation Date, provided that any payment delayed pending the effectiveness of the release shall be paid in a lump sum on the next pay day following the effectiveness of the Release.

2.	A document acknowledging all of Bancorp’s or its successor’s responsibilities under the Farmers & Merchants Bank of Central California Split Dollar Agreement and the related Farmers & Merchants Bank of Central California Executive Bonus Agreement.

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“Cause” for purposes of this Agreement shall be defined as follows:

1.	The death of Employee;

2.	Conviction of a felony resulting in a material economic adverse effect on the Bank or its affiliates;

3.	Committing acts of dishonesty, theft, embezzlement or other acts of moral turpitude against the Bank or its affiliates;

A material breach of, or intentional failure to perform any of Employee’s duties which is not cured by Employee to the reasonable satisfaction of the Bank’s Chief Executive Officer within thirty (30) days, or within a deadline jointly defined by Employee and the Bank’s Chief Executive Officer after written notice is provided by the Bank’s Chief Executive Officer setting forth in reasonable detail the nature of the breach or failure;

5.	An unauthorized, willful, knowing or reckless disclosure of any confidential information concerning the Bank or its affiliates or any of its directors, shareholders, customers or employees; or

Any action that constitutes a material disruption of Bank personnel relationships, that damages the Bank’s reputation or the reputation of any of its directors, shareholders, customers or employees, or that materially adversely affects the professional or business operations or practices of the Bank.

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The Notice of Termination shall be deemed withdrawn and the Agreement shall remain in effect after a Notice of Termination has been given to Employee under the following circumstances.

A.	Within thirty (30) days of the Notice of Termination being given to Employee, Employee returns to the full performance of Employee’s duties and provides medical certification that Employee can perform the essential functions of Employee’s duties with or without reasonable accommodation.

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PART VIII

MERGERS AND ACQUISITIONS

Section 8.01 Merger or Acquisition With a Change of Control.

2.	In the event of either:

(ii) a Change of Control of the Bank, Employer or Bancorp closes or otherwise occurs during the term of this Agreement and prior to Employee’s termination of employment,

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a cash payment in consideration of Employee’s assistance, support and cooperation in the Change in Control of Bancorp or the Bank and the retention and preservation of Bank and Bancorp goodwill equal to either 0.25% of the Total Bancorp Shareholder Value, in the event of a Change of Control as described in (i) or (ii) of Section 8.01.1 above, or $125,000, in the event of a Change of Control as described in (iii) of Section 8.01.1 above.

Two (2) times Employee’s highest Annual Compensation (as defined in Section 7.01.1 of this Agreement).

Employee’s Bank car valued for tax purposes using the vehicle’s Kelley Blue Book Trade-In Value in Good Condition.

A gross-up payment as defined and set forth herein in Section 8.01.3.

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3.	Gross-Up Payment: Employee shall be entitled to a “Gross-Up Payment” under the terms and conditions set forth herein, and such payment shall include the Excise Tax reimbursement due pursuant to Section 8.01.3.a and any federal and state tax reimbursements due pursuant to Section 8.01.3.b.

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Section 8.02 Merger or Acquisition Without a Change of Control: In the event of a merger or acquisition involving Bancorp that falls short of the numerical thresholds for a “change of control” set forth in Section 8.01, Employee shall be credited with a payment in consideration of Employee’s assistance, support and cooperation in the merger or acquisition and the retention and preservation of Bank and Bancorp goodwill equal to 0.25% of the Target Company Shareholder Value, subject to a minimum of $125,000, which payment shall be made by the Bank or Bancorp immediately prior to closing of the merger or acquisition in the form of a contribution to the Non-Qualified Executive Retirement Plan – Equity Component.

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PART IX

COVENANTS

Employee Initials ____

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Employee Initials _____

Section 9.03 Definitions:

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“Proprietary and Confidential Information” includes any information, in whatever form or format, including that which has not been memorialized in writing.

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Employee Initials ____

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Employee may not reproduce or publish these copyrighted works, except in the pursuit of his/her employment duties with Employer.

Employee Initials ____

PART X

ARBITRATION

Section 10.02 Process.

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(vi) The arbitrator shall issue a written arbitration decision stating the arbitrator’s essential findings and conclusions upon which any award is based.

(vii) This agreement to arbitrate will survive the termination of Employee’s employment.

Employee Initials ____

PART XI

TAXES

Section 11.01 Withholding: All payments to be made to Employee under this Agreement will be subject to required withholding of federal, state and local income and employment taxes as applicable.

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Section 11.02 Section 409A:

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F. The provisions of this Part XI are intended to comply with Code Section 409A and shall be interpreted consistent with such section.

PART XII

GENERAL PROVISIONS

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Section 12.10 Advice of Counsel: Employee warrants that he has consulted with legal counsel of his/her choice to advise him/her with respect to the terms and conditions of this Agreement.

FARMERS & MERCHANTS BANK OF

CENTRAL CALIFORNIA and FARMERS & MERCHANTS BANCORP

			Date:	4/9/2024
BY:	/s/ Edward Corum Jr.

	Edward Corum Jr.
	Chairman of the Personnel Committee

EMPLOYEE:

/s/ Deborah E. Skinner

Date:

4/9/2024

Deborah E. Skinner

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EXHIBIT A

AGREEMENT AND GENERAL RELEASE

This Agreement and General Release (“Agreement”) is entered into by and between Deborah E. Skinner (“Employee”) and Farmers & Merchants Bank of Central California, California banking corporation (the “Bank” and together with the Employee, the “Parties”).

WHEREAS, pursuant to Sections 7.01 and 8.01 of the Parties’ Employment, Confidentiality and Non-Disclosure Agreement dated April 1, 2024 as may be amended or automatically renewed (“Employment Agreement”), Employee is required to enter into a release of claims in the Bank’s favor in exchange for the payment of certain benefits; and

NOW, THEREFORE, the Parties hereby agree as follows:

Section 1.

Release of the Bank. In consideration of receipt by Employee of the Severance Package or the Change of Control Compensation Package, as applicable, which Employee acknowledges is in addition to anything of value to which he is otherwise entitled, Employee, on behalf of himself/herself and his/her heirs, attorneys, executors, successors, administrators and assigns, on an individual basis and as the representative of any class, does hereby release, acquit and forever discharge the Bank and its respective predecessors, successors, assigns, subsidiaries, divisions, holding companies, affiliated companies and benefit plans, and each of their respective present and former affiliates, directors, officers, fiduciaries, employees, agents, successors and assigns, from any and all liabilities, damages, causes of action and claims of any nature, kind or description whatsoever, whether accrued or to accrue, which Employee ever had, now has or hereafter may have against any of them, known or unknown, that are based on facts occurring up to the day Employee executes this Agreement, including, but not limited to, any claims under any state or federal law or statute, including, but not limited to, the Age Discrimination in Employment Act of 1967 (29 U.S.C. section 621 et seq.), the Americans with Disabilities Act of 1990, the Civil Rights Acts of 1964 and 1991, the Equal Pay Act, any claim based on tort, contract or otherwise, any claim for attorneys’ fees or costs, or any matter or action related to Employee employment and/or affiliation with, or termination and separation from the Bank and its affiliates.

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This Agreement recognizes the rights and responsibilities of the Equal Employment Opportunity Commission (“EEOC”) and the California Department of Fair Employment and Housing (“DFEH”) to enforce the statutes which come under their jurisdiction. This Agreement is not intended to prevent Employee from initiating or participating in any investigation or proceeding conducted by the EEOC or the DFEH; provided, however, that nothing in this section limits or affects the finality or the scope of the Release. Employee has waived and released any claim that she may have for damages based on any alleged discrimination, harassment or retaliation, that is based on facts occurring the day of and prior to the day the Employee executes this Agreement, and may not recover damages in any proceeding conducted by the EEOC or the DFEH.

Section 2.

No Release of Vested Benefits. Notwithstanding anything in Section 2 hereof, Employee does not by this Agreement waive any rights he may have to vested benefits or account balances in any retirement plan, which vested benefits or account balances, as the case may be, shall be paid over to Employee in accordance with the provisions of the respective plans, subject to any applicable forfeiture provisions set forth therein.

Section 3.

Release of Employee. The Bank, and its respective parents, predecessors, successors, assigns, subsidiaries, divisions, affiliated companies and benefit plans, and each of their respective present and former affiliates, directors, officers, fiduciaries, employees, agents, successors and assigns, does hereby release, acquit and forever discharge from any and all liabilities, damages, causes of action and claims of any nature, kind or description whatsoever, whether accrued or to accrue, which the Bank ever had, now has or hereafter may have against Employee, known or unknown, that are based on facts occurring up to the day Employee executes this Agreement, including, but not limited to, any claims under any state or federal law or statute, any claim based on tort, contract or otherwise, any claim for attorneys’ fees or costs, or any matter or action related to Employee employment and/or affiliation with the Bank and its affiliates.

Section 4.

Confidentiality of Agreement. As a material of inducement to the Bank to enter into this Agreement, Employee represents and agrees that he will keep all terms of this Agreement completely confidential, and that he will not disclose any information concerning this Agreement to any person, including, but not limited to, any past, present or prospective employee of the Bank, except for her spouse, attorney, tax account and financial advisor. Employee further agrees that disclosure by him/her of the terms and conditions of this Agreement in violation of this Section constitutes a material breach of the Agreement.

Section 5.

Confidentiality of Proprietary Information. Employee acknowledges and agrees that he has an obligation to continue to keep in confidence and not use for his/her own or any other person's or entity's benefit all proprietary and confidential information concerning the Bank, as defined in Part X of the Employment Agreement.

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Section 6.

Section 7.

Acknowledgments. Employee acknowledges, represents and agrees, in compliance with the Older Workers’ Benefit Protection Act, that:

(a)

(b)

Employee has carefully read and fully understands all of the provisions of this Agreement;

(c)

Employee has had up to and including a full twenty-one (21) days within which to consider this Agreement before executing it, unless by his/her own choice he has waived all or part of this period;

(d)

Employee has a full seven (7) days following the execution of this Agreement to revoke this Agreement, and has been and is hereby advised in writing that this Agreement shall not become effective or enforceable as to Employee’s rights under the federal Age Discrimination in Employment Act (29 U.S.C. section 621 et seq.) until the revocation period has expired (but shall be immediately effective as to all other claims). Any revocation shall be made in writing and delivered to Bank’s Chief Executive Officer on or before the seventh day following Employee execution of this Agreement; and

(e)

Employee accepts the terms of this Agreement as fair and equitable under all the circumstances and voluntarily executes this Agreement.

Section 8.

Non-Admission. Nothing in this Agreement shall be construed as an admission of liability by the Bank, its past and present affiliates, officers, directors, owners, employees or agents, and the Bank specifically disclaims liability to or wrongful treatment of Employee on the part of itself, its past and present affiliates, officers, directors, owners, employees and agents.

Section 9.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

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Section 10.

Section 11.

Integration Clause. This Agreement is intended by the parties to be their final agreement. The statements, promises and agreements in this Agreement may not be contradicted by any prior understandings, agreements, promises or statements. Employee states and promises that in signing this Agreement he has not relied on any statements or promises made by the Bank, other than the promises contained in this Agreement. Any changes to this Agreement must be in writing and signed by both Parties.

THIS IS A RELEASE OF ALL CLAIMS – READ THOROUGHLY BEFORE SIGNING

Date:

Employee:
	Deborah E. Skinner

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA and FARMERS & MERCHANTS BANCORP

Date:

By:

	Edward Corum, Jr.
	Chairman of the Personnel Committee

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EXHIBIT B

NON-COMPETITION AND NON-SOLICITATION AGREEMENT

This Non-Competition and Non-Solicitation Agreement (“Agreement”) is entered into by and between Deborah E. Skinner (“Employee”) and Farmers & Merchants Bank of Central California, a California banking corporation (the “Bank”).

WHEREAS, pursuant to Section 8.01 of the Parties’ Employment, Confidentiality and Non-Disclosure Agreement dated as of April 1, 2024 as may be amended or automatically renewed (“Employment Agreement”), the Parties wish to memorialize the covenants to which Employee will become subject upon a termination of employment in anticipation of, upon or following a Change of Control and the portion of Employee’s Change of Control Compensation Package that is intended to serve as compensation for compliance with such covenants;

NOW, THEREFORE, the Parties hereby agree as follows:

Section 1.

Change of Control Compensation Package. Subject to the terms of this Agreement, Employee shall receive the following compensation for compliance with the terms of the covenants described herein (the “Restrictive Covenants”), which compensation is part of (and not in addition to) the Change of Control Compensation Package described in Section 8.01 of the Employment Agreement to be paid or commence immediately prior to the earlier of the (i) termination of employment or (ii) Change of Control: In the event of a Change of Control of Employer or Farmers & Merchants Bancorp (“Bancorp”), (A) either a goodwill preservation payment equal to 0.25% of the Total Bancorp Shareholder Value in the event of a Change of Control as described in (i) or (ii) of Section 8.01.1 of the Employment Agreement, or a goodwill preservation payment of $125,000 in the event of a Change of Control as described in (iii) of Section 8.01.1 of the Employment Agreement, (B) two (2) times the Employee’s highest Annual Compensation (as defined in Section 7.01.1 of the Employment Agreement), (C) Employee’s monthly premium for continuation coverage under COBRA (as defined in Section 7.05 of the Employment Agreement), determined as of the closing or other occurrence of the Change of Control, multiplied by thirty-six (36) months, whether or not such continuation coverage is elected by Employee, (D) Employee’s Bank car valued for tax purposes using the vehicle’s Kelley Blue Book Trade-In Value in Good Condition, and (E) a gross-up payment as defined and set forth in Section 8.01.3 of the Employment Agreement.

The compensation set forth above is in consideration for the covenants of Employee as set forth in this Agreement.

Section 2.

Restrictive Covenants: Employee agrees that for a period of two (2) years after a termination of employment in anticipation of, upon or following the Change of Control (in the event of a Change of Control of Employer, the Bank or Bancorp under Section 8.01.1 of the Employment Agreement) (the “Restricted Period”), she shall not, as an individual, employee, consultant, independent contractor, partner, shareholder, or in association with any other person, business or enterprise, directly or indirectly, and regardless of the reason for him/her ceasing to be employed by Employer, engage in the following (which periods shall run concurrent with the periods of the restrictive covenants described in Section 9.02 of the Employment Agreement and not consecutively):

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Non-Competition. Employee recognizes that if he were to become employed by, or substantially involved in, the business of a competitor of Employer or any of its affiliates, it would be very difficult for Employee not to rely on or use Employer’s and its affiliates’ Trade and Business Secrets, Proprietary and Confidential information or Employer Materials. To protect Employer’s Trade and Business Secrets, Proprietary and Confidential information and Employer Materials and its affiliates’ relationships and goodwill with customers, Employee will not, directly or indirectly through any other Person, engage in, enter the employ of, render any services to, have any ownership interest in, or participate in the financing, operation, management or control of, any Competing Business (as defined below). For purposes of this Agreement, the phrase “directly or indirectly through any other Person” shall include, without limitation, any direct or indirect ownership or profit participation interest in such enterprise, whether as an owner, stockholder, member, partner, joint venturer or otherwise, and shall include any direct or indirect participation in such enterprise as an employee, independent contractor, consultant, director, officer, licensor of technology or otherwise. For purposes of this Agreement, “Competing Business” means a Person which has a branch office or conducts material business in any county in which the Bank has an office immediately prior to the Change of Control or opens a branch or office in the county in which the Bank, immediately prior to the change of control, has a branch office during the Restricted Period (the “Restricted Area”) that competes with Employer and its affiliates by soliciting, offering and/or selling any services or products substantially similar in function or capability to or competitive with the existing services and products sold, licensed, distributed, marketed, provided, being developed or otherwise offered, performed or provided by Employer and its affiliates as of the Change of Control, or the services or products of Employer and its affiliates being actively planned or developed as of the Change of Control, or any other business, product or service in which Employee has been engaged for more than a de minimis amount of time during the twelve (12)-month period immediately preceding the date of Change of Control. Nothing herein shall prohibit Employee from being a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as Employee has no active participation in the business of such corporation. In view of the nature of Employee’s employment with Employer and Employee’s contribution of equity in Employer to the Change of Control, Employee likewise agrees that Employer and its affiliates would be irreparably harmed by any such competition in violation of the terms of this paragraph and that Employer and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph and to any other relief, including financial compensation commensurate with damages caused, available to them.

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Solicitation of Employees. Employee recognizes that he possesses and will possess confidential information about other employees of Employer and its affiliates relating to their education, experience, skills, abilities, compensation and benefits, and inter-personal relationships with customer(s) of Employer and its affiliates. Employee recognizes that the information he possesses and will possess about these other employees is not generally known, is of substantial value to Employer and its affiliates in developing their business and in securing and retaining customers, and in managing general daily operations of Employer, and has been and will be acquired by Employee because of his/her business position with Employer and its affiliates. Employee agrees that Employee will not, directly or indirectly, solicit or recruit any employee of Employer or its affiliates for the purpose of being employed by, or serving as a consultant or information resource to, Employee, or any competitor of Employer or its affiliates on whose behalf Employee is acting as an agent, representative or employee, and that Employee will not convey such confidential information or trade secrets about other employees of Employer and its affiliates to any other Person or legal entity. In view of the nature of Employee’s employment with Employer, Employee likewise agrees that Employer and its affiliates would be irreparably harmed by any such solicitation or recruitment in violation of the terms of this paragraph and that Employer and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph and to any other relief, including financial compensation commensurate with damages caused, available to them.

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Section 3.

Confidentiality of Agreement. As a material inducement to the Bank to enter into this Agreement, Employee represents and agrees that he will keep all terms of this Agreement completely confidential, and that he will not disclose any information concerning this Agreement to any person, including, but not limited to, any past, present or prospective employee of the Bank, except for his/her spouse, attorney, tax account and financial advisor or with the consent of the Bank’s Board of Directors . Employee further agrees that disclosure by him/her of the terms and conditions of this Agreement in violation of this Section constitutes a material breach of the Agreement.

Section 4.

Confidentiality of Proprietary Information. Employee acknowledges and agrees that he has an obligation to continue to keep in confidence and not use for his/her own or any other person's or entity's benefit all proprietary and confidential information concerning the Bank, as defined in Part VIII of the Employment Agreement.

Section 5.

Section 6.

Acknowledgments. Employee acknowledges, represents and agrees that:

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(a)

(b)

Employee has carefully read and fully understands all of the provisions of this Agreement; and

(c)

Employee accepts the terms of this Agreement as fair and equitable under all the circumstances and voluntarily executes this Agreement.

Section 7.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

Section 8.

Section 9.

Capitalized Terms. Any capitalized term in this Agreement that is not defined herein shall have the meaning given to such term in the Employment Agreement.

Section 10.

Integration Clause. This Agreement is intended by the parties to be their final agreement. The statements, promises and agreements in this Agreement may not be contradicted by any prior understandings, agreements, promises or statements. Employee states and promises that in signing this Agreement he has not relied on any statements or promises made by the Bank, other than the promises contained in this Agreement. Any changes to this Agreement must be in writing and signed by both Parties.

Date:

Employee:
	Deborah E. Skinner

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA and FARMERS & MERCHANTS BANCORP

Date:

By:
	Edward Corum, Jr.
	Chairman of the Personnel Committee

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Exhibit 10.3

EXECUTIVE VICE PRESIDENT

EMPLOYMENT, CONFIDENTIALITY

AND NON-DISCLOSURE AGREEMENT

PART I

PARTIES TO AGREEMENT

Section 1.01 Parties: This Employment Agreement (hereinafter referred to as the “Agreement”) is entered into by and between Farmers & Merchants Bank of Central California, a California banking corporation (the “Bank” or the “Employer”), its successors and assigns, and Bart R. Olson (hereinafter referred to as “Employee”). The Bank and Employee are sometimes collectively referred to hereinafter as the “Parties” and individually as a “Party”.

PART II

EMPLOYMENT

Section 2.01 Employment: The Bank hereby agrees to employ Employee, and Employee hereby accepts such employment with the Bank, in accordance with the terms and conditions set forth herein.

Section 2.02 Term of Employment: This Agreement shall become effective on April 1, 2024. This Agreement shall terminate on March 31, 2026 unless earlier terminated pursuant to the provisions of Part VII herein. If this Agreement is not terminated pursuant to Part VII, and provided Employee enters into an effective general release of claims at the time of the expiration of this Agreement in the form attached hereto as Exhibit A, the Agreement shall renew automatically for an additional two year term, and upon reaffirmation of Exhibit A at each renewal date for successive additional two year terms thereafter, unless earlier terminated pursuant to the provisions of Part VII.

PART III

DUTIES OF EMPLOYEE

Section 3.01 General Duties: During the term of this Agreement, Employee shall be employed as Executive Vice President and Chief Financial Officer under the direction of the Chairman, President and Chief Executive Officer and shall perform and discharge well and faithfully the duties that may be assigned to Employee from time to time by the Chairman, President and Chief Executive Officer in connection with the conduct of the Bank’s business. Nothing herein shall preclude the Bank’s Board of Directors or Chief Executive Officer from changing Employee’s title or duties as long as the resulting title and duties are reasonably commensurate with the education, employment background and qualifications of the Employee and involve similar responsibilities and scope of duties and any such changes will not be deemed a cause of Termination for Good Reason under the terms of this Agreement.

Section 3.02 Outside Activities: Employee agrees that, while employed by the Bank, Employee will refrain from any outside activities which actually or potentially are in direct conflict with the essential enterprise-related or reputational interest of the Bank, that would cause disruption of the Bank’s operations, or that would be in direct competition with the Bank or assist competitors of the Bank. It shall not be a violation of this Agreement for Employee (A) to serve on corporate, civic or charitable boards or committees, or (B) to deliver lectures or fulfill speaking engagements, so long as such activities do not significantly interfere with the performance of Employee’s responsibilities as an employee of the Bank; provided, however, that Employee shall give the Bank’s Chief Executive Officer not less than fourteen (14) days’ notice of any actions contemplated by clauses (A) or (B), and will refrain from any such action to which the Chief Executive Officer in his/her sole discretion, objects. It shall not be a violation of this Agreement for Employee to manage personal investments, so long as such activities do not represent a conflict with the Bank, as described in the Bank’s Employee Code of Conduct, and other pertinent policies and agreements.

PART IV

COMPENSATION

Section 4.01 Salary: Employee shall be paid an annual base salary of no less than $550,000 per year. This base salary shall be paid to Employee in such intervals and at such times as other salaried executives of the Bank are paid. The Bank’s Board of Directors reserves the right to set the timing and level of salary adjustments for all employees and any particular employee at its sole discretion.

Section 4.02 Incentive and Retention Programs: Employee shall be eligible for an annual discretionary incentive bonus. The amount of any incentive bonus shall be determined from time to time by the Bank’s Board of Directors annually by January 31^st of each following year and shall be paid no later than February 28^th of each following year. Any incentive bonus is intended for retention purposes, and as a consequence, it will only be paid provided Employee is still employed by Employer on the payment date.

Employee shall be entitled to participate in (i) the “Farmers & Merchants Bank of Central California Executive Retirement Plan – Equity Component,” which is a totally discretionary contribution as determined by the Board of Directors; and (ii) the “Farmers & Merchants Bank of Central California Executive Retirement Plan – Performance Component,” with an initial “Bonus Factor” of .50%; the terms and conditions of which are set forth in separate agreements so titled.

Section 4.03 Relocation Expenses: N/A

PART V

BENEFITS

Section 5.01 Benefits: Employee shall be entitled to participate in whatever vacation, medical, dental, pension, sick leave, 401(k), profit sharing, disability insurance or other plans of general application, or other benefits which are in effect as to other officers of equivalent title of the Bank, or as may be in effect from time to time, in accordance with the rules established for individual participation in any such plan.

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Section 5.02 Automobile Allowance: The Bank shall provide Employee with an automobile allowance of $1,000 per month as per Bank policy. However, at the sole discretion of the Board of Directors and/or the Bank’s Chief Executive Officer, the Bank reserves the right to change or eliminate this benefit at any time.

Section 5.03 Membership Fees: The Bank shall reimburse Employee for all appropriate and reasonable expenses incurred in performing Employee’s duties, including providing and paying for the dues and fees of membership in local service and civic clubs and/or organizations as the Bank deems appropriate and necessary for enhancement of its presence within the local business community. In order to be eligible for reimbursement of these expenses, Employee must obtain pre-approval for such memberships from the Bank’s Chief Executive Officer and must provide the Bank with receipts and documented evidence as is required by federal and state laws and regulations.

Section 5.04 Directors and Officers Liability Insurance Coverage: To the extent commercially reasonable to do so under prevailing conditions in the insurance market, the Bank shall provide directors and officers liability insurance coverage for the protection of Employee on terms and conditions no less favorable to Employee than are in effect on the date that this Agreement shall become effective. Following any termination of Employee’s employment with the Bank, such coverage shall be continued under substantially the same terms and conditions as are in effect immediately prior to such termination of employment at no cost to Employee until all applicable statutes of limitation expire with respect to claims arising prior to such termination of employment. Employee expressly acknowledges, however, that the Bank cannot and shall not guarantee the performance of the insurance company issuing such directors and officers liability insurance coverage pursuant to this Section. In addition to the foregoing, the Bank shall also continue to make indemnification and advancement of litigation expense payments to Employee to the maximum extent and for the maximum period permitted by law; provided, however, that the obligation of the Bank to advance litigation expense payments shall be subject to Employee having executed and delivered to the Bank, in a form approved by the Bank, an undertaking to return such payments in the event that a court shall have determined that Employee is not entitled to indemnification under the applicable legal standards.

PART VI

EXPENSES

Travel and Entertainment Expenses: During the term of this Agreement, the Bank shall reimburse Employee for reasonable out of pocket expenses incurred in connection with the Bank’s business, including travel expenses, food and lodging while away from Employee’s home, subject to such policies as the Bank may from time to time establish for other officers of equivalent title. Employee shall keep records of Employee’s travel and entertainment expenses in a form suitable to the Internal Revenue Service and the Franchise Tax Board to qualify this reimbursement as a federal and state income tax deduction for the Bank. In addition, Employee shall provide the Bank with receipts for all expenses for which Employee seeks reimbursement.

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PART VII

TERMINATION OF EMPLOYMENT

Section 7.01 Termination without Cause or for Good Reason: The Bank may terminate this Agreement at any time and without “Cause” (as defined below) by giving Employee sixty (60) days written notice of the Bank’s intent to terminate this Agreement. The 60th day after Notice of Termination shall be deemed Employee’s Separation Date. This Agreement may also be terminated by Employee for “Good Reason” (as defined below) by giving written notice to Employer in reasonable detail of the basis for “Good Reason” within thirty (30) days of the first date on which Employer has knowledge of such conduct and providing Employer at least thirty (30) days following the date on which notice is provided to cure such conduct. Failing such cure, the end of the cure period shall be deemed Employee’s Separation Date. In the event Employee’s employment is terminated by the Bank or Employee pursuant to this Section, Employee shall be paid all accrued salary, accrued but unused vacation, and reimbursement expenses for which expense reports have been provided to the Bank, or which are provided to the Bank prior to the Separation Date, in accordance with the Bank’s policies and this Agreement. In addition to the foregoing amounts, if Employee is terminated by the Bank or Employee pursuant to this Section, and subject to (A) Employee’s continued employment through, and termination of employment on, the Separation Date; (B) Employee’s continued loyalty to the Bank, which includes, but is not limited to, Employee or any outside third party, operating under the direction of Employee, refraining from any announcements to anyone inside or outside the Bank that the Employee is leaving the Bank; and (C) Employee’s execution and non-revocation of a general release of all claims in the form attached hereto as Exhibit A (the “Release”), which Release becomes irrevocable within sixty (60) days following the Separation Date or such earlier deadline provided by the Bank, then Employee will be entitled to receipt of the following Severance Package:

A Severance Payment equivalent to one (1) times the Employee’s highest Annual Compensation for services (“Annual Compensation”, as defined as Total Compensation as reported in Employer’s previous years’ proxy statements), which Employee has earned during Employee’s employment with the Bank. The Severance Payment shall be paid out in equal increments on regularly scheduled pay days for a period of 12 months following the Separation Date, provided that any payments delayed pending the effectiveness of the Release shall be accumulated and paid in a lump sum on the next pay day following the effectiveness of the Release, with any remaining payments due paid in accordance with the schedule otherwise provided herein. Such payments will cease, however, if Employee fails to comply with the provisions of Part VIII of this Agreement.

Payment of all awards of benefit plans and incentive and retention programs in accordance with the terms of those plans and programs, including applicable vesting and forfeiture provisions. Any such payment or distribution from a nonqualified deferred compensation plan shall be governed by the terms of such plan relating to the timing of distributions.

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Section 7.02 Termination for Cause: The Bank may terminate Employee’s employment at any time for “Cause” upon written Notice of Termination to Employee, setting forth in reasonable detail the basis for the determination of “Cause.” Termination for Cause shall be effective immediately upon receipt of the Notice of Termination by Employee, and the date on which the Notice of Termination is received shall be deemed to be the Separation Date. If Employee is terminated pursuant to this Section 7.02, Employee shall be entitled only to accrued salary, vacation and reimbursement of expenses for which expense reports have been provided to the Bank, or which are provided to the Bank prior to the Separation Date, in accordance with the Bank’s policies and this Agreement. Employee shall be entitled to no further compensation or severance payment of any nature; provided however, that Employee will also be entitled to payment of all awards of benefit plans and incentive and retention programs in accordance with the terms of those plans, including any applicable vesting and forfeiture provisions. Any such payment or distribution from a nonqualified deferred compensation plan shall be governed by the terms of such plan relating to the timing of distributions.

“Cause” for purposes of this Agreement shall be defined as follows:

1.	The death of Employee;

2.	Conviction of a felony resulting in a material economic adverse effect on the Bank or its affiliates;

3.	Committing acts of dishonesty, theft, embezzlement or other acts of moral turpitude against the Bank or its affiliates;

5.	An unauthorized, willful, knowing or reckless disclosure of any confidential information concerning the Bank or its affiliates or any of its directors, shareholders, customers or employees; or

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Section 7.03 Termination by Employee without Good Reason: This Agreement may be terminated by Employee without Good Reason at Employee’s sole discretion by giving ninety (90) days written Notice of Resignation to the Bank. If Employee terminates his/her employment pursuant to this Section 7.03, and subject to Employee’s continued satisfactory performance of such tasks and duties that may be assigned to Employee through the Separation Date, and Employee’s continued loyalty to the Bank through the Separation Date (which includes, but is not limited to, refraining from any announcements by Employee or any outside third party, operating under the direction of Employee, to anyone inside or outside the Bank that the Employee is leaving the Bank), Employee shall receive accrued salary and payment for accrued but unused vacation through the Separation Date. Employee shall also be entitled to payment of all awards of benefit plans and incentive and retention programs, in accordance with the terms of those plans, including applicable vesting and forfeiture provisions. Any such payment or distribution from a nonqualified deferred compensation plan shall be governed by the terms of such plan relating to the timing of distributions. Alternatively, the Bank may, at its option, at any time after Employee gives written Notice of Resignation as herein provided, pay Employee’s accrued salary up to and including the effective Separation Date set forth in Employee’s Notice of Resignation, and thereupon immediately release and terminate Employee’s employment. Notwithstanding the foregoing, if the Bank determines at any time during the 90-day notice period that Employee materially breaches the obligations imposed by the provisions of this Section 7.03 and Part VIII of this Agreement, the Bank may shorten the notice period and accelerate the Separation Date, thereby reducing the compensation otherwise payable to Employee pursuant to this Section.

Section 7.04 Option to Terminate on Permanent Disability: Employer may terminate this Agreement if, during the term of this Agreement, Employee shall become “Permanently Disabled”, as that term in defined herein. A termination pursuant to this Section 7.04 shall be deemed a termination upon Permanent Disability and upon such termination Employee shall only be entitled to their benefits governed by such non-qualified retirement plan and/or components thereof in which the Employee is a participant. For purposes of this Agreement, Employee shall be deemed to have become Permanently Disabled if Employee is unable to perform his/her current duties, with or without accommodation, for an aggregate of 120 working days over a six month period, by reason of any medically determinable physical or mental impairment. Employer shall issue its Notice of Termination to Employee on or after 90 working days of Permanent Disability, as defined herein.

Section 7.05 Change of Control:

If a Change of Control of the Bank or Farmers & Merchants Bancorp (the “Bancorp”) closes during the term of this Agreement, while Employee is still employed by the Bank, the Bank will provide the Employee with the following Change of Control Compensation Package to be paid and commence immediately prior to the closing of the Change of Control:

(a) a cash payment in consideration of Employee’s assistance, support and cooperation in the Change of Control of the Bancorp or the Bank and the retention and preservation of Bank and Bancorp goodwill equal to either 0.25% of the Total Bancorp Shareholder Value, in the event of a Change of Control as described in (i) or (ii) of Section 7.05.2 below, or $125,000, in the event of a Change of Control as described in (iii) of Section 7.05.2 below.

(b) Two (2) times Employee’s highest Annual Compensation (defined as Total Compensation as reported in Employer’s previous years’ proxy statements or as would have been reported if the Employee had been a named executive officer, provided that to the extent that the Employee’s salary or annual bonus for a prior year was prorated because the Employee’s employment did not commence until after the first day of the year, then the annual base salary and target bonus, to the extent greater than actual bonus paid, shall be used).

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(c) Employee’s monthly premium for continuation coverage under COBRA (as defined in Section 7.07), determined as of immediately prior to the Change of Control, multiplied by twelve (12) months, whether or not such continuation coverage is elected by Employee.

(d) A gross-up payment as defined and set forth herein in Section 7.05.3. In addition, Employee will be entitled to payment of all awards of benefit plans and incentive and retention programs in accordance with the terms of those plans and programs, including applicable vesting and forfeiture provisions.

Payment of the Change of Control Compensation Package shall be contingent upon the execution by Employee and non-revocation of (A) a general Release of all claims provided by Employer in the form attached hereto as Exhibit A and (B) a non-competition and non-solicitation agreement in the form attached hereto as Exhibit B. Employee shall receive disbursement of payments due Employee under this Section (except for payments or distributions from or pursuant to any nonqualified deferred compensation plan), in one lump sum payment immediately prior to the closing of the Change of Control, subject to Section 10.02 below, less any withholding required by state, federal or local law. Any payment or distribution from or pursuant to any nonqualified deferred compensation plan shall be governed by the terms of such plan. If Employee becomes entitled to payment under this Section 7.05, Employee shall not be entitled to the Severance Package under Section 7.01, notwithstanding Employee’s subsequent termination of employment pursuant to that Section.

Change of Control means a change of control of Bancorp. Such a Change of Control will be deemed to have occurred immediately before any of the following occur: (i) a merger, consolidation or acquisition, directly or indirectly, of more than 30% of the voting power or outstanding shares of any class of voting securities of Bancorp by any Person; (ii) a sale of all, or substantially all, of the assets of Bancorp or the Bank; or (iii) there is a change, during any period of one year or less, of a majority of the Board of Directors of Bancorp as constituted as of the beginning of such period, unless the election of each director who is not a director at the beginning of such period was approved by a vote of at least a majority of the directors then in office who were directors at the beginning of such period. If the events or circumstances described in (i)-(iii), above, shall occur to or be applicable to the Bank, then such Change of Control shall be deemed for all purposes of this Agreement to also be a “Change of Control” of Bancorp. For purposes of this Agreement, the term “Person” shall mean and include any individual, corporation, partnership, group, association or other “person”, as such term is used in Section 14(d) of the Securities Exchange Act of 1934, other than Bancorp, the Bank, any other wholly owned subsidiary of Bancorp or any employee benefit plan(s) sponsored by Bancorp, Bank or other subsidiary of Bancorp. Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred unless the change also constitutes the occurrence of a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5), with respect to the Employee.

Gross-Up Payment: Employee shall be entitled to a “Gross-Up Payment” under the terms and conditions set forth herein, and such payment shall include the Excise Tax reimbursement due pursuant to Section 7.05.3.a and any federal and state tax reimbursements due pursuant to Section 7.05.3.b.

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In the event that any payment or benefit (as those terms are defined within the meaning of Internal Revenue Code Section 280G(b)(2)) paid, payable, distributed or distributable to the Employee (hereinafter referred to as “Payments”) pursuant to the terms of this Agreement or otherwise in connection with or arising out of Employee’s employment with the Bank or a change of control would be subject to the Excise Tax imposed by Section 4999 of the Internal Revenue code or any interest or penalties are incurred by Employee with respect to such Excise Tax, then Employee will be entitled to receive an additional payment (“Gross-Up Payment”) in an amount equal to the total Excise Tax, interest and penalties imposed on Employee as a result of the payment and the Excise Taxes on any federal and state tax reimbursements as set forth in Section 7.05.3.b.

If the Bank is obligated to pay Employee pursuant to Section 7.05.3.a, the Bank shall also pay Employee an amount equal to the “total presumed federal and state taxes” that could be imposed on Employee with respect to the Excise Tax reimbursements due to Employee pursuant to Section 7.05.3.a and the federal and state tax reimbursements due to Employee pursuant to this section. For purposes of the preceding sentence, the “total presumed federal and state taxes” that could be imposed on Employee shall be conclusively calculated using a combined tax rate equal to the sum of the (a) the highest individual income tax rate in effect under Federal tax law applicable to Employee and (ii) the tax laws of the state in which Employee will be subject to tax on the payment and (b) the hospital insurance portion of FICA.

It is further intended that in the event that any payments would be subject to other “penalty” taxes (in addition to the Excise Tax in section 7.05.3.a) imposed applicable federal tax law, that these taxes would also be included in the calculation of the Gross-Up Payment, including any federal and state tax reimbursements pursuant to section 7.05.3.b.

Determination of Eligibility for and Amount of Gross-Up Payment: An initial determination as to whether a Gross-Up Payment is required pursuant to this Agreement and the amount of such Gross-Up Payment shall be made at the Bank’s expense by an accounting firm appointed by the Bank prior to any Change of Control. The accounting firm shall provide its determination, together with detailed supporting calculations and documentation to the Bank and Employee prior to submission of the proposed Change of Control to the Bank’s or Bancorp’s shareholders, Board of Directors or appropriate regulators for approval. If the accounting firm determines that no Excise Tax is payable by Employee with respect to a Payment or Payments, it shall furnish Employee with an opinion reasonably acceptable to Employee that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the determination to Employee, Employee shall have the right to dispute the determination. The existence of the dispute shall not in any way affect Employee’s right to receive the Gross-Up Payment in accordance with the determination. Upon the final resolution of a dispute, the Bank or its successor shall promptly pay to Employee any additional amount required by such resolution. If there is no dispute, the determination shall be binding, final and conclusive upon the Bank and Employee, except to the extent that any taxing authority subsequently makes a determination that the Excise Tax or additional Excise Tax is due and owing on the payments made to Employee. If any taxing authority determines that the Excise Tax or additional Excise Tax is due and owing, the Bank or the entity acquiring control of the Bank shall pay the Excise Tax and any penalties assessed by such taxing authority.

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Excise Tax Withholding: Notwithstanding anything contained in this Agreement to the contrary, in the event that according to the determination, an Excise Tax will be imposed on any Payment or Payments, the Bank or its successor shall pay to the applicable government taxing authorities as Excise Tax withholding, the amount of the Excise Tax that the Bank has actually withheld from the Payment or Payments.

Section 7.06 Non-Renewal of Agreement. For the avoidance of doubt, if this Agreement is not renewed automatically by reason of Employee’s failure to execute an effective general Release pursuant to Section 2.02, Employee will not be entitled to the Severance Package specified in Section 7.01.

Section 7.07 Continuation of Medical Benefits: In the event Employee’s employment is terminated Employee shall be afforded the right to continue his/her medical benefits to the extent provided in the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), at his/her expense. The Bank shall provide Employee with the appropriate COBRA notification within the time required by the law from the Separation Date.

Section 7.08 Merger or Acquisition Without a Change of Control: In the event of a merger or acquisition involving Bancorp that falls short of the numerical thresholds for a “change of control” set forth in Section 7.05, Employee shall be credited with a payment in consideration of Employee’s assistance, support and cooperation in the merger or acquisition and the retention and preservation of Bank and Bancorp goodwill equal to 0.25% of the Target Company Shareholder Value, subject to a minimum of $125,000, which payment shall be made by the Bank or Bancorp immediately prior to closing of the merger or acquisition in the form of a contribution to the Non-Qualified Executive Retirement Plan – Equity Component.

PART VIII

COVENANTS

Section 8.01 Confidential Nature of Relationship. Employee acknowledges (i) the highly competitive nature of the business and the industry in which the Bank competes; (ii) that as a key executive of the Bank he/she has participated in and will continue to participate in the service of current customers and/or the solicitation of prospective customers, through which, among other things, Employee has obtained and will continue to obtain knowledge of the “know-how” and business practices of the Bank, in which matters the Bank has a substantial proprietary interest;(iii) that his/her employment hereunder renders the performance of services which are special, unique, extraordinary and intellectual in character, and his/her position with the Bank placed and places him/her in a position of confidence and trust with the customers and employees of the Bank; and (iv) that his/her rendering of services to the customers of the Bank necessarily requires the disclosure to Employee of Trade and Business Secrets, Proprietary and Confidential Information, and Bank Materials (as defined in Section 8.03 below) of the Bank. In the course of Employee’s employment with the Bank, Employee has and will continue to develop a personal relationship with the customers and prospective customers (defined for purposes of this Agreement as customers that the Bank is either actively soliciting or in the process of making a proposal for services to as of Employee’s Separation Date) of the Bank and a knowledge of those customers’ and prospective customers’ affairs and requirements, and the relationship of the Bank with its established clientele has been, and will continue to be, placed in Employee’s hands in confidence and trust. Employee consequently agrees that it is a legitimate interest of the Bank, and reasonable and necessary for the protection of the confidential information, goodwill and business of the Bank, which is valuable to the Bank, that Employee make the covenants contained herein.

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Employee Initials_____

Section 8.02 Restrictions: Accordingly, Employee agrees that during the period that he/she is employed by the Bank, unless in the normal course of business, he/she shall not, as an individual, employee, consultant, independent contractor, partner, shareholder, or in association with any other person, business or enterprise, directly or indirectly, and regardless of the reason for him/her ceasing to be employed by the Bank, engage in the following:

Disclosure of Proprietary Information or Materials. Employee agrees that he/she will not directly or indirectly reveal, report, publish or disclose to any person, firm, or corporation not expressly authorized in writing by the Bank’s Board of Directors to receive any Trade and Business Secret, Proprietary and Confidential Information or Bank Materials (as defined in Section 8.03 below). Employee further agrees that he/she will not use any Trade and Business Secret, Proprietary and Confidential Information and/or Bank Materials for any purpose except to perform his/her employment duties for the Bank and such Trade and Business Secret, Proprietary and Confidential Information and/or Bank Materials may not be used or disclosed by Employee for his/her own benefit or purpose or for the benefit or purpose of a subsequent employer. These agreements will continue to apply after Employee is no longer employed by the Bank so long as such Trade and Business Secrets, Proprietary and Confidential Information and Bank Materials are not nor have become, by legitimate means, generally known to the public.

Solicitation of Employees. Employee recognizes that he/she possesses and will possess confidential information about other employees of the Bank and its affiliates relating to their education, experience, skills, abilities, compensation and benefits, and inter-personal relationships with customer(s) of the Bank and its affiliates. Employee recognizes that the information he/she possesses and will possess about these other employees is not generally known, is of substantial value to the Bank and its affiliates in developing their business and in securing and retaining customers, and in managing general daily operations of the Bank, and has been and will be acquired by Employee because of his/her business position with the Bank and its affiliates. Employee agrees that at all times during his/her employment with the Bank and for a period of twelve (12) months thereafter, Employee will not, directly or indirectly, solicit or recruit any employee of the Bank or its affiliates for the purpose of being employed by, or serving as a consultant or information resource to, the Employee, or any competitor of the Bank or its affiliates on whose behalf Employee is acting as an agent, representative or employee, and that Employee will not convey such confidential information or trade secrets about other employees of the Bank and its affiliates to any other Person or legal entity. In view of the nature of Employee’s employment with the Bank, Employee likewise agrees that the Bank and its affiliates would be irreparably harmed by any such solicitation or recruitment in violation of the terms of this paragraph and that the Bank and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting the Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph and to any other relief, including financial compensation commensurate with damages caused, available to them.

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Solicitation of Customers. During the Employee’s employment by the Bank and its affiliates and for a period of twelve (12) months after such employment ceases, the Employee shall not, directly or indirectly (whether as an officer, director, owner, employee, partner, consultant or other participant), use any Trade and Business Secret, Proprietary and Confidential information, or Bank Materials to identify, solicit or entice any Customer or Prospective Customer of the Bank or its affiliates to make any changes whatsoever in their current or prospective relationships with the Bank or its affiliates, and will not assist any other Person or entity to interfere with or dispute such current or prospective relationships. If Employee leaves the Bank and goes to work for a new employer that is a competitor of the Bank, and if that new employer already has an existing relationship with a Customer or Prospective Customer of the Bank or its affiliates, this paragraph does not preclude Employee from making contact with such Customer or Prospective Customer on the new employer’s behalf, so long as such contact otherwise complies with the provisions of this paragraph. In view of the nature of the Employee’s employment with the Bank, the Employee likewise agrees that the Bank and its affiliates would be irreparably harmed by any such interference or competitive actions in violation of the terms of this paragraph and that the Bank and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting the Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph, in addition to any other relief, including financial compensation commensurate with damages caused, available to them.

Employee initials______

Section 8.03 Definitions:

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(ii) Customers, including but not limited to: information about the Bank’s customers or prospective customers, such as the customer’s or prospect’s key decision-makers; customer preferences; customer strategies; terms of any contractual arrangements with the Bank; business considerations; loan, deposit and other product and service pricing, terms and conditions, repayment structures, fee arrangements, structure of guarantees from other entities; and any similar information to which Employee has access by virtue of performing his/her duties for the Bank.

(iii) Employees, including but not limited to: names of and contact information for the Bank’s employees; their compensation, incentive plans, retirement plans, terms of employment, areas of expertise, projects, and experience; and any similar information to which Employee has access by virtue of performing his/her duties for the Bank.

“Proprietary and Confidential Information” includes any information, in whatever form or format, including that which has not been memorialized in writing.

C. BANK MATERIALS means documents or other media or tangible items that contain or embody PROPRIETARY AND CONFIDENTIAL INFORMATION or any other information concerning the business, operations or plans of the Bank and its customers and prospective customers, whether such documents have been prepared by Employee or by others. BANK MATERIALS include, but are not limited to blueprints, drawings, photographs, charts, graphs, notebooks, customer lists, computer disks, photographs of proprietary information or documents on cell phones, iPads or other electronic devices, photocopies of proprietary information or documents, emails, text messages, tapes or printouts, sound recordings and other printed, typewritten, handwritten or computer generated documents, as well as samples, prototypes, product collateral materials, advertising materials, models, products and the like.

D. TOTAL BANCORP SHAREHOLDER VALUE means the sum of any cash and the fair market value of any securities or other assets or property available for distribution to the holders of any and all classes of Bancorp’s equity securities in connection with a Change of Control, including any net amounts distributed after the closing of the Change of Control pursuant to any escrow, earn-out or other similar arrangement, after deduction of any items subtracted from proceeds to be distributed to holders of Bancorp’s equity securities, such as costs and fees associated with the ultimate disposition of such arrangements. The fair market value of any securities or other assets or property available for distribution to the holders of Bancorp’s equity securities in connection with a Change of Control will be determined on the same basis on which such securities were valued in such Change of Control for purposes of distributing such securities or property to the holders of Bancorp’s equity securities.

Employee Initials______

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Employee Initials ____

Section 8.04 Return of the Bank’s Property: Upon termination of his/her employment with the Bank for any reason, Employee will promptly deliver to the Bank, without copying or summarizing, all Trade and Business Secrets, Proprietary and Confidential Information, and Bank Materials that are in Employee’s possession or under Employee’s control, including, without limitation, all physical property, keys, documents, lists, electronic storage media, cell phones, iPads, manuals, letters, notes, reports, including all originals, reproductions, recordings, disks, or other media.

Employee acknowledges that Employee has been apprised of the provisions of Labor Code Section 2860 which provides: “Everything which an Employee acquires by virtue of his employment, except the compensation which is due him from his Employer, belongs to the Employer, whether acquired lawfully or unlawfully, or during or after the expiration of the term of his employment.” Employee understands that any work that Employee created or helped create at the request of the Bank, including user manuals, training materials, sales materials, customer and prospective customer information and business data, process manuals, and other written and visual works, are works made for hire in which the Bank owns the copyright. Employee may not reproduce or publish these copyrighted works, except in the pursuit of his/her employment duties with the Bank.

Employee Initials_____

Section 8.05 Separate Covenants: The covenants of Part VIII of this Agreement shall be construed as separate covenants covering their particular subject matter. In the event that any covenant shall be found to be judicially unenforceable, said covenant shall not affect the enforceability or validity of any other part of this Agreement.

Employee Initials_____

Section 8.06 Continuing Obligation: Employee’s obligations set forth in Part VIII of this Agreement shall expressly continue in effect beyond Employee’s employment period in accordance with their terms and such obligations shall be binding on Employee’s assigns, executors, administrators and other legal representatives.

Employee Initials_____

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PART IX

TAXES

Section 9.01 Withholding: All payments to be made to Employee under this Agreement will be subject to required withholding of federal, state and local income and employment taxes as applicable.

Section 9.02 Section 409A:

A. Notwithstanding any provision to the contrary in this Agreement, the Bank shall delay the commencement of payments or benefits coverage to which Employee would otherwise become entitled under the Agreement in connection with Employee’s termination of employment until the earlier of (i) the expiration of the six-month period measured from the date of Employee’s “separation from service” with the Bank (as such term is defined in Treasury Regulations issued under Section 409A of the Code (defined below)) or (ii) the date of Employee’s death, if the Bank in good faith determines that Employee is a “specified employee” within the meaning of that term under Code Section 409A at the time of such separation from service and that such delayed commencement is otherwise required in order to avoid a prohibited distribution under Section 409A(a)(2) of the Code. Upon the expiration of the applicable Code Section 409A(a)(2) deferral period, all payments and benefits deferred pursuant to this Section10.02 (whether they would have otherwise been payable in a single sum or in installments in the absence of such deferral) shall be paid or reimbursed to Employee in a lump sum, and any remaining payments and benefits due under the Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

B. In addition, to the extent the Bank is required pursuant to this Agreement to reimburse expenses incurred by Employee, and such reimbursement obligation is subject to Section 409A of the Code, the Bank shall reimburse any such eligible expenses by the end of the calendar year next following the calendar year in which the expense was incurred, subject to any earlier required deadline for payment otherwise applicable under this Agreement; provided, however, that the following sentence shall apply to any tax gross-up payment and related expense reimbursement obligation, including any payment obligations described in Section 7.04, to the extent subject to Section 409A. Any such tax gross-up payment will be made by the end of the calendar year next following the calendar year in which Employee remits the related taxes.

C. For purposes of the provisions of this Agreement which require commencement of payments or benefits subject to Section 409A upon a termination of employment, the terms “termination of employment” and “Separation Date” shall mean a “separation from service” with the Bank (as such term is defined in Treasury Regulations issued under Code Section 409A), notwithstanding anything in this Agreement to the contrary.

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F. The provisions of this Part X are intended to comply with Code Section 409A and shall be interpreted consistent with such section.

PART X

GENERAL PROVISIONS

Section 10.01 Notices: Any notice to be given to the Bank under the terms of this Agreement, and any notice to be given to Employee, shall be addressed to such Party at the mailing address the Party may hereafter designate in writing to the other. Any such notice shall be deemed to have been duly given four days after the same shall be enclosed in a properly sealed and addressed envelope, registered or certified, and deposited (postage or registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government or upon actual delivery to the Party by messenger or delivery service, with receipt acknowledged in writing by the Party to whom such notice is addressed.

Section 10.02 Entire Agreement: This Agreement and the agreement(s) incorporated by reference herein (“Farmers & Merchants Bank of Central California Executive Retirement Plan”) supersede any and all other agreements or understandings, whether oral, implied, or in writing, between the parties hereto with respect to the subject matter hereof and contain all of the covenants and agreements between the Parties with respect to such matters in their entirety. Each Party to this Agreement acknowledges that no representations, inducements, promises or agreements, orally or otherwise, have been made by any Party, or anyone acting on behalf of any Party, which is not embodied herein, and that no other agreement, statement or promise not contained in this Agreement shall be valid or binding. Any modification(s) to this Agreement will be effective only if in writing and signed by the Parties hereto.

Section 10.03 Notwithstanding any other provision of this Agreement, this Agreement and all rights and obligations of the Parties hereunder shall be subject to the provisions of the Federal Deposit Insurance Act and the regulations adopted thereunder, including without limitation 12 Code of Federal Regulations, Part 359.

Section 10.04 Partial Invalidity: If any provisions in this Agreement are held by a court of competent jurisdiction or an arbitrator to be invalid, void or unenforceable, the remaining provisions shall nevertheless continue in full force and effect without being impaired or invalidated in any way.

Section 10.05 Continuing Obligations: The obligations of the covenants contained in this Agreement shall survive the termination of the Agreement and any employment relationship between the Bank and Employee. Accordingly, neither the Bank nor Employee shall be relieved of the continuing obligations of the covenants contained in this Agreement.

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Section 10.06 Employee’s Representations: Employee represents and warrants that Employee is free to enter into this Agreement and to perform each of the terms and covenants in it. Employee represents and warrants that Employee is not restricted or prohibited, contractually or otherwise, from entering into and performing this Agreement, and that Employee’s execution and performance of this Agreement is not a violation or breach of any other agreement or other legal obligation between Employee and any other person or entity.

Section 10.07 Governing Law: This Agreement (not including any plans or agreements incorporated by reference) shall be construed and enforced in accordance with, and the rights of the Parties shall be governed by, the laws of the State of California.

Section 10.08 Full Settlement: The Bank’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set off, counterclaim, recoupment, defense or other claim, right or action which the Bank may have against Employee or others. In no event shall Employee be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Employee under any of the provisions of this Agreement and such amount shall not be reduced whether or not Employee obtains other employment.

Section 10.09 No Waiver: The failure of any of the Parties hereto to insist on strict compliance with any provision of this Agreement, or the failure to assert any right of any Party hereto may have hereunder, shall not be deemed to be a waiver of such provision or right or of any other provision or right contained in this Agreement.

Section 10.10 Advice of Counsel: Employee warrants that he/she has consulted with legal counsel of his/her choice to advise him/her with respect to the terms and conditions of this Agreement.

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA

By:

/s/ Edward Corum Jr.

Date:

4/9/2024

	Edward Corum Jr.
	Chairman of the Personnel Committee

EMPLOYEE:

/s/ Bart R. Olson

Date:

4/9/2024

Bart R. Olson

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EXHIBIT A

AGREEMENT AND GENERAL RELEASE

This Agreement and General Release (“Agreement”) is entered into by and between Bart R. Olson (“Employee”) and Farmers & Merchants Bank of Central California, California banking corporation (the “Bank” and together with the Employee, the “Parties”).

WHEREAS, pursuant to Section 7.01 and 7.05 of the Parties’ Employment, Confidentiality and Non-Disclosure Agreement dated as of April 1, 2024, as may be amended or automatically renewed (“Employment Agreement”), Employee is required to enter into a release of claims in the Bank’s favor in exchange for the payment of certain benefits or the automatic renewal of the Employment Agreement pursuant to Section 2.02; and

WHEREAS, the Parties wish to memorialize either the terms of Employee’s departure under Section 7.01 of the Employment Agreement or the payment of the Change of Control Compensation Package (as defined in Section 7.05 of the Employment Agreement) or the automatic renewal of the Employment Agreement under Section 2.02, and to resolve all issues or disputes arising out of or related to (i) the employment relationship and the termination thereof under Section 7.01 of the Employment Agreement or (ii) the employment relationship prior to a Change of Control (as defined in the Employment Agreement) or the automatic renewal of the Employment Agreement, as the case may be.

NOW, THEREFORE, the Parties hereby agree as follows:

Section 1.

Release of the Bank. In consideration of receipt by Employee of the Severance Package or the Change of Control Compensation Package, as applicable, which Employee acknowledges is in addition to anything of value to which he/she is otherwise entitled, Employee, on behalf of himself/herself and his/her heirs, attorneys, executors, successors, administrators and assigns, does hereby release, acquit and forever discharge the Bank and its respective predecessors, successors, assigns, subsidiaries, divisions, holding companies, affiliated companies and benefit plans, and each of their respective present and former affiliates, directors, officers, fiduciaries, employees, agents, successors and assigns, from any and all liabilities, damages, causes of action and claims of any nature, kind or description whatsoever, whether accrued or to accrue, which Employee ever had, now has or hereafter may have against any of them, known or unknown, that are based on facts occurring the day of and prior to the day Employee executes this Agreement, including, but not limited to, any claims under any state or federal law or statute, including, but not limited to, the Age Discrimination in Employment Act of 1967 (29 U.S.C. section 621 et seq.), the Americans with Disabilities Act of 1990, the Civil Rights Acts of 1964 and 1991, the Equal Pay Act, any claim based on tort, contract or otherwise, any claim for attorneys’ fees or costs, or any matter or action related to Employee employment and/or affiliation with, or termination and separation from the Bank and its affiliates.

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This Agreement recognizes the rights and responsibilities of the Equal Employment Opportunity Commission (“EEOC”) and the California Department of Fair Employment and Housing (“DFEH”) to enforce the statutes which come under their jurisdiction. This Agreement is not intended to prevent Employee from initiating or participating in any investigation or proceeding conducted by the EEOC or the DFEH; provided, however, that nothing in this section limits or affects the finality or the scope of the Release. Employee has waived and released any claim that he/she may have for damages based on any alleged discrimination, harassment or retaliation, that is based on facts occurring the day of and prior to the day the Employee executes this Agreement, and may not recover damages in any proceeding conducted by the EEOC or the DFEH.

Section 2.

No Release of Vested Benefits. Notwithstanding anything in Section 1 hereof, Employee does not by this Agreement waive any rights he/she may have to vested benefits or account balances in any retirement plan, which vested benefits or account balances, as the case may be, shall be paid over to Employee in accordance with the provisions of the respective plans, subject to any applicable forfeiture provisions set forth therein.

Section 3.

Confidentiality of Agreement. As a material of inducement to the Bank to enter into this Agreement, Employee represents and agrees that he/she will keep all terms of this Agreement completely confidential, and that he/she will not disclose any information concerning this Agreement to any person, including, but not limited to, any past, present or prospective employee of the Bank, except for his/her spouse, attorney, tax account and financial advisor. Employee further agrees that disclosure by him/her of the terms and conditions of this Agreement in violation of this Section constitutes a material breach of the Agreement.

Section 4.

Confidentiality of Proprietary Information. Employee acknowledges and agrees that he/she has an obligation to continue to keep in confidence and not use for his/her own or any other person’s or entity’s benefit all proprietary and confidential information concerning the Bank, as defined in Part VIII of the Employment Agreement.

Section 5.

Section 6.

Acknowledgments. Employee acknowledges, represents and agrees, in compliance with the Older Workers’ Benefit Protection Act, that:

(a)

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(b)

Employee has carefully read and fully understands all of the provisions of this Agreement;

(c)

Employee has had up to and including a full twenty-one (21) days within which to consider this Agreement before executing it, unless by his/her own choice he/she has waived all or part of this period;

(d)

Employee has a full seven (7) days following the execution of this Agreement to revoke this Agreement, and has been and is hereby advised in writing that this Agreement shall not become effective or enforceable as to Employee rights under the federal Age Discrimination in Employment Act (29 U.S.C. section 621 et seq.) until the revocation period has expired (but shall be immediately effective as to all other claims). Any revocation shall be made in writing and delivered to Bank’s Chief Executive Officer on or before the seventh day following Employee execution of this Agreement; and

(e)

Employee accepts the terms of this Agreement as fair and equitable under all the circumstances and voluntarily executes this Agreement.

Section 7.

Section 8.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

Section 9.

Section 10.

Integration Clause. This Agreement is intended by the parties to be their final agreement. The statements, promises and agreements in this Agreement may not be contradicted by any prior understandings, agreements, promises or statements. Employee states and promises that in signing this Agreement he/she has not relied on any statements or promises made by the Bank, other than the promises contained in this Agreement. Any changes to this Agreement must be in writing and signed by both Parties.

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THIS IS A RELEASE OF ALL CLAIMS – READ THOROUGHLY BEFORE SIGNING

Date:

Employee:
	Bart R. Olson

Date:

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA

By:

	Edward Corum, Jr.
	Chairman of the Personnel Committee

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EXHIBIT B

NON-COMPETITION AND NON-SOLICITATION AGREEMENT

This Non-Competition and Non-Solicitation Agreement (“Agreement”) is entered into by and between Bart R. Olson (“Employee”) and Farmers & Merchants Bank of Central California, a California banking corporation (the “Bank”).

WHEREAS, pursuant to Section 7.05 of the Parties’ Employment, Confidentiality and Non-Disclosure Agreement dated as of April 1, 2024, as may be amended or automatically renewed (“Employment Agreement”), the Parties wish to memorialize the covenants to which Employee will become subject upon a Change of Control and the portion of Employee’s Change of Control Compensation Package that is intended to serve as compensation for compliance with such covenants;

NOW, THEREFORE, the Parties hereby agree as follows:

Section 1.

Change of Control Compensation Package. Subject to the terms of this Agreement, Employee shall receive the following compensation for compliance with the terms of the covenants described herein (the “Restrictive Covenants”), which compensation is part of (and not in addition to) the Change of Control Compensation Package described in Section 7.05 of the Employment Agreement to be paid or commence immediately prior to a Change of Control: In the event of a Change of Control of Employer or Farmers & Merchants Bancorp (“Bancorp”), (A) either a goodwill preservation payment equal to 0.25% of the Total Bancorp Shareholder Value, in the event of a Change of Control as described in (i) or (ii) of Section 7.05.2 of the Employment Agreement, or a goodwill preservation payment of $125,000, in the event of a Change of Control as described in (iii) of Section 7.05.2 of the Employment Agreement, (B) two (2) times the Employee’s highest Annual Compensation (as defined in Section 7.05.1 of the Employment Agreement), (C) Employee’s monthly premium for continuation coverage under COBRA (as defined in Section 7.05 of the Employment Agreement), determined as of the closing or other occurrence of the Change of Control, multiplied by twelve (12) months, whether or not such continuation coverage is elected by Employee, and (D) a gross-up payment as defined and set forth in Section 7.05.3 of the Employment Agreement.

The compensation set forth above is in consideration for the covenants of Employee as set forth in this Agreement.

Section 2.

Restrictive Covenants: Employee agrees that for a period of two (2) years following the Change of Control (in the event of a Change of Control of Employer, the Bank or Bancorp under Section 7.05.2 of the Employment Agreement) (the “Restricted Period”), he shall not, as an individual, employee, consultant, independent contractor, partner, shareholder, or in association with any other person, business or enterprise, directly or indirectly, and regardless of the reason for him/her ceasing to be employed by Employer, engage in the following (which periods shall run concurrent with the periods of the restrictive covenants described in Section 8.02 of the Employment Agreement and not consecutively):

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Non-Competition. Employee recognizes that if he were to become employed by, or substantially involved in, the business of a competitor of Employer or any of its affiliates, it would be very difficult for Employee not to rely on or use Employer’s and its affiliates’ Trade and Business Secrets, Proprietary and Confidential information or Employer Materials. To protect Employer’s Trade and Business Secrets, Proprietary and Confidential information and Employer Materials and its affiliates’ relationships and goodwill with customers, Employee will not, directly or indirectly through any other Person, engage in, enter the employ of, render any services to, have any ownership interest in, or participate in the financing, operation, management or control of, any Competing Business (as defined below). For purposes of this Agreement, the phrase “directly or indirectly through any other Person” shall include, without limitation, any direct or indirect ownership or profit participation interest in such enterprise, whether as an owner, stockholder, member, partner, joint venturer or otherwise, and shall include any direct or indirect participation in such enterprise as an employee, independent contractor, consultant, director, officer, licensor of technology or otherwise. For purposes of this Agreement, “Competing Business” means a Person which has a branch office or conducts material business in any county in which the Bank has an office immediately prior to the Change of Control or opens a branch or office in any county in which the Bank, immediately prior to the Change of Control, has a branch office during the Restricted Period (the “Restricted Area”) that competes with Employer and its affiliates by soliciting, offering and/or selling any services or products substantially similar in function or capability to or competitive with the existing services and products sold, licensed, distributed, marketed, provided, being developed or otherwise offered, performed or provided by Employer and its affiliates as of the Change of Control, or the services or products of Employer and its affiliates being actively planned or developed as of the Change of Control, or any other business, product or service in which Employee has been engaged for more than a de minimis amount of time during the twelve (12)-month period immediately preceding the date of Change of Control. Nothing herein shall prohibit Employee from being a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as Employee has no active participation in the business of such corporation. In view of the nature of Employee’s employment with Employer and Employee’s contribution of equity in Employer to the Change of Control, Employee likewise agrees that Employer and its affiliates would be irreparably harmed by any such competition in violation of the terms of this paragraph and that Employer and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph and to any other relief, including financial compensation commensurate with damages caused, available to them.

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Solicitation of Employees. Employee recognizes that he possesses and will possess confidential information about other employees of Employer and its affiliates relating to their education, experience, skills, abilities, compensation and benefits, and inter-personal relationships with customer(s) of Employer and its affiliates. Employee recognizes that the information he possesses and will possess about these other employees is not generally known, is of substantial value to Employer and its affiliates in developing their business and in securing and retaining customers, and in managing general daily operations of Employer, and has been and will be acquired by Employee because of his/her business position with Employer and its affiliates. Employee agrees that Employee will not, directly or indirectly, solicit or recruit any employee of Employer or its affiliates for the purpose of being employed by, or serving as a consultant or information resource to, Employee, or any competitor of Employer or its affiliates on whose behalf Employee is acting as an agent, representative or employee, and that Employee will not convey such confidential information or trade secrets about other employees of Employer and its affiliates to any other Person or legal entity. In view of the nature of Employee’s employment with Employer, Employee likewise agrees that Employer and its affiliates would be irreparably harmed by any such solicitation or recruitment in violation of the terms of this paragraph and that Employer and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph and to any other relief, including financial compensation commensurate with damages caused, available to them.

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Section 3.

Confidentiality of Agreement. As a material inducement to the Bank to enter into this Agreement, Employee represents and agrees that he will keep all terms of this Agreement completely confidential, and that he will not disclose any information concerning this Agreement to any person, including, but not limited to, any past, present or prospective employee of the Bank, except for his/her spouse, attorney, tax account and financial advisor. Employee further agrees that disclosure by him/her of the terms and conditions of this Agreement in violation of this Section constitutes a material breach of the Agreement.

Section 4.

Confidentiality of Proprietary Information. Employee acknowledges and agrees that he has an obligation to continue to keep in confidence and not use for his/her own or any other person's or entity's benefit all proprietary and confidential information concerning the Bank, as defined in Part VIII of the Employment Agreement.

Section 5.

Section 6.

Acknowledgments. Employee acknowledges, represents and agrees that:

(a)

(b)

Employee has carefully read and fully understands all of the provisions of this Agreement; and

(c)

Employee accepts the terms of this Agreement as fair and equitable under all the circumstances and voluntarily executes this Agreement.

Section 7.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

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Section 8.

Section 9.

Capitalized Terms. Any capitalized term in this Agreement that is not defined herein shall have the meaning given to such term in the Employment Agreement.

Section 10.

Integration Clause. This Agreement is intended by the parties to be their final agreement. The statements, promises and agreements in this Agreement may not be contradicted by any prior understandings, agreements, promises or statements. Employee states and promises that in signing this Agreement he has not relied on any statements or promises made by the Bank, other than the promises contained in this Agreement. Any changes to this Agreement must be in writing and signed by both Parties.

Date:

Employee:

	Bart R. Olson

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA

By:

	Edward Corum, Jr.
	Chairman of the Personnel Committee

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Exhibit 10.4

EXECUTIVE VICE PRESIDENT

EMPLOYMENT, CONFIDENTIALITY

AND NON-DISCLOSURE AGREEMENT

PART I

PARTIES TO AGREEMENT

Section 1.01 Parties: This Employment Agreement (hereinafter referred to as the “Agreement”) is entered into by and between Farmers & Merchants Bank of Central California, a California banking corporation (the “Bank” or the “Employer”), its successors and assigns, and Ryan J. Misasi (hereinafter referred to as “Employee”). The Bank and Employee are sometimes collectively referred to hereinafter as the “Parties” and individually as a “Party”.

PART II

EMPLOYMENT

Section 2.01 Employment: The Bank hereby agrees to employ Employee, and Employee hereby accepts such employment with the Bank, in accordance with the terms and conditions set forth herein.

Section 2.02 Term of Employment: This Agreement shall become effective on April 1, 2024. This Agreement shall terminate on March 31, 2026 unless earlier terminated pursuant to the provisions of Part VII herein. If this Agreement is not terminated pursuant to Part VII, and provided Employee enters into an effective general release of claims at the time of the expiration of this Agreement in the form attached hereto as Exhibit A, the Agreement shall renew automatically for an additional two year term, and upon affirmation of Exhibit A at each renewal date for successive additional two year terms thereafter, unless earlier terminated pursuant to the provisions of Part VII.

PART III

DUTIES OF EMPLOYEE

Section 3.01 General Duties: During the term of this Agreement, Employee shall be employed as Executive Vice President and Retail Banking Division Manager under the direction of the Chairman, President and Chief Executive Officer and shall perform and discharge well and faithfully the duties that may be assigned to Employee from time to time by the Chairman, President and Chief Executive Officer in connection with the conduct of the Bank’s business. Nothing herein shall preclude the Bank’s Board of Directors or Chief Executive Officer from changing Employee’s title or duties as long as the resulting title and duties are reasonably commensurate with the education, employment background and qualifications of the Employee and involve similar responsibilities and scope of duties and any such changes will not be deemed a cause of Termination for Good Reason under the terms of this Agreement.

PART IV

COMPENSATION

Section 4.01 Salary: Employee shall be paid an annual base salary of no less than $400,000 per year. This base salary shall be paid to Employee in such intervals and at such times as other salaried executives of the Bank are paid. The Bank’s Board of Directors reserves the right to set the timing and level of salary adjustments for all employees and any particular employee at its sole discretion.

Employee shall be entitled to participate in (i) the “Farmers & Merchants Bank of Central California Executive Retirement Plan – Equity Component,” which is a totally discretionary contribution as determined by the Board of Directors; and (ii) the “Farmers & Merchants Bank of Central California Executive Retirement Plan – Performance Component,”; the terms and conditions of which are set forth in separate agreements so titled.

Section 4.03 Relocation Expenses: N/A

PART V

BENEFITS

Section 5.01 Benefits: Employee shall be entitled to participate in whatever vacation, medical, dental, pension, sick leave, 401(k), profit sharing, disability insurance or other plans of general application, or other benefits which are in effect as to other officers of equivalent title of the Bank, or as may be in effect from time to time, in accordance with the rules established for individual participation in any such plan.

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Section 5.02 Automobile: The Bank shall provide Employee with an automobile for business and incidental personal use. However, at the sole discretion of the Board of Directors and/or the Bank’s Chief Executive Officer, the Bank reserves the right to change or eliminate this benefit at any time.

PART VI

EXPENSES

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PART VII

TERMINATION OF EMPLOYMENT

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“Cause” for purposes of this Agreement shall be defined as follows:

1.	The death of Employee;

2.	Conviction of a felony resulting in a material economic adverse effect on the Bank or its affiliates;

3.	Committing acts of dishonesty, theft, embezzlement or other acts of moral turpitude against the Bank or its affiliates;

5.	An unauthorized, willful, knowing or reckless disclosure of any confidential information concerning the Bank or its affiliates or any of its directors, shareholders, customers or employees; or

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Section 7.04 Option to Terminate on Permanent Disability of Employee: Employer may terminate this Agreement if, during the term of this Agreement, Employee shall become “Permanently Disabled”, as that term is defined herein. A termination pursuant to this Section 7.04 shall be deemed a termination without “Cause,” and shall be governed by the procedures, and shall entitle Employee to the Severance Package specified in Section 7.01. For purposes of this Agreement, Employee shall be deemed to have become Permanently Disabled if Employee is unable to perform his/her current duties, with or without reasonable accommodation, for an aggregate of 120 working days over a six month period, by reason of any medically determinable physical or mental impairment. Employer may issue its Notice of Termination to Employee on or after the 90^th working day of Permanent Disability, as defined herein.

The Notice of Termination shall be deemed withdrawn and the Agreement shall remain in effect after a Notice of Termination has been given to Employee under the following circumstances.

A.	Within thirty (30) days of the Notice of Termination being given to Employee, Employee returns to the full performance of Employee’s duties and provides medical certification that Employee can perform the essential functions of Employee’s duties with or without reasonable accommodation.

Within thirty (30) days of the Notice of Termination being given to Employee, Employee requests a reasonable accommodation from the Bank which would permit Employee to perform the essential functions of Employee’s duties and such reasonable accommodation can be provided by the Bank without an undue hardship.

Section 7.05 Change of Control:

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(c) Employee’s monthly premium for continuation coverage under COBRA (as defined in Section 7.07), determined as of immediately prior to the Change of Control, multiplied by thirty-six (36) months, whether or not such continuation coverage is elected by Employee.

(d) Employee’s company car valued for tax purposes using the vehicle’s Kelley Blue Book Trade-In Value in Good Condition.

(e) A gross-up payment as defined and set forth herein in Section 7.05.3. In addition, Employee will be entitled to payment of all awards of benefit plans and incentive and retention programs in accordance with the terms of those plans and programs, including applicable vesting and forfeiture provisions.

Change of Control means a change of control of Bancorp. Such a Change of Control will be deemed to have occurred immediately before any of the following occur: (i) a merger, consolidation or acquisition, directly or indirectly, of more than 30% of the voting power or outstanding shares of any class of voting securities of Bancorp by any Person; (ii) a sale of all, or substantially all, of the assets of Bancorp or the Bank; or (iii) there is a change, during any period of one year or less, of a majority of the Board of Directors of Bancorp as constituted as of the beginning of such period, unless the election of each director who is not a director at the beginning of such period was approved by a vote of at least a majority of the directors then in office who were directors at the beginning of such period. If the events or circumstances described in (i)-(iii), above, shall occur to or be applicable to the Bank, then such Change of Control shall be deemed for all purposes of this Agreement to also be a “Change of Control” of Bancorp. For purposes of this Agreement, the term “Person” shall mean and include any individual, corporation, partnership, group, association or other “person”, as such term is used in Section 14(d) of the Securities Exchange Act of 1934, other than Bancorp, the Bank, any other wholly owned subsidiary of Bancorp or any employee benefit plan(s) sponsored by Bancorp, Bank or other subsidiary of Bancorp. Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred unless the change also constitutes the occurrence of a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5), with respect to the Employee.

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3.	Gross-Up Payment: Employee shall be entitled to a “Gross-Up Payment” under the terms and conditions set forth herein, and such payment shall include the Excise Tax reimbursement due pursuant to Section 7.05.3.a and any federal and state tax reimbursements due pursuant to Section 7.05.3.b.

In the event that any payment or benefit (as those terms are defined within the meaning of Internal Revenue Code Section 280G(b)(2)) paid, payable, distributed or distributable to the Employee (hereinafter referred to as “Payments”) pursuant to the terms of this Agreement or otherwise in connection with or arising out of Employee’s employment with the Bank or a change of control would be subject to the Excise Tax imposed by Section 4999 of the Internal Revenue code or any interest or penalties are incurred by Employee with respect to such Excise Tax, then Employee will be entitled to receive an additional payment (“Gross-Up Payment”) in an amount equal to the total Excise Tax, interest and penalties imposed on Employee as a result of the payment and the Excise Taxes on any federal and state tax reimbursements as set forth in Section 7.05.3.b.

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Determination of Eligibility for and Amount of Gross-Up Payment: An initial determination as to whether a Gross-Up Payment is required pursuant to this Agreement and the amount of such Gross-Up Payment shall be made at the Bank’s expense by an accounting firm appointed by the Bank prior to any Change of Control. The accounting firm shall provide its determination, together with detailed supporting calculations and documentation to the Bank and Employee prior to submission of the proposed Change of Control to the Bank’s or Bancorp’s shareholders, Board of Directors or appropriate regulators for approval. If the accounting firm determines that no Excise Tax is payable by Employee with respect to a Payment or Payments, it shall furnish Employee with an opinion reasonably acceptable to Employee that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the determination to Employee, Employee shall have the right to dispute the determination. The existence of the dispute shall not in any way affect Employee’s right to receive the Gross-Up Payment in accordance with the determination. Upon the final resolution of a dispute, the Bank or its successor shall promptly pay to Employee any additional amount required by such resolution. If there is no dispute, the determination shall be binding, final and conclusive upon the Bank and Employee, except to the extent that any taxing authority subsequently makes a determination that the Excise Tax or additional Excise Tax is due and owing on the payments made to Employee. If any taxing authority determines that the Excise Tax or additional Excise Tax is due and owing, the Bank or the entity acquiring control of the Bank shall pay the Excise Tax and any penalties assessed by such taxing authority.

Excise Tax Withholding: Notwithstanding anything contained in this Agreement to the contrary, in the event that according to the determination, an Excise Tax will be imposed on any Payment or Payments, the Bank or its successor shall pay to the applicable government taxing authorities as Excise Tax withholding, the amount of the Excise Tax that the Bank has actually withheld from the Payment or Payments.

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PART VIII

COVENANTS

Employee Initials_____

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Employee initials_____

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Section 8.03 Definitions:

“Proprietary and Confidential Information” includes any information, in whatever form or format, including that which has not been memorialized in writing.

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D. TOTAL BANCORP SHAREHOLDER VALUE means the sum of any cash and the fair market value of any securities or other assets or property available for distribution to the holders of any and all classes of Bancorp’s equity securities in connection with a Change of Control, including any net amounts distributed after the closing of the Change of Control pursuant to any escrow, earn-out or other similar arrangement, after deduction of any items subtracted from proceeds to be distributed to holders of Bancorp’s equity securities, such as costs and fees associated with the ultimate disposition of such arrangements. The fair market value of any securities or other assets or property available for distribution to the holders of Bancorp’s equity securities in connection with a Change of Control will be determined on the same basis on which such securities were valued in such Change of Control for purposes of distributing such securities or property to the holders of Bancorp’s equity securities.

Employee Initials____

Employee Initials ____

Employee acknowledges that Employee has been apprised of the provisions of Labor Code Section 2860 which provides: “Everything which an Employee acquires by virtue of his employment, except the compensation which is due him from his Employer, belongs to the Employer, whether acquired lawfully or unlawfully, or during or after the expiration of the term of his employment.” Employee understands that any work that Employee created or helped create at the request of the Bank, including user manuals, training materials, sales materials, customer and prospective customer information and business data, process manuals, and other written and visual works, are works made for hire in which the Bank owns the copyright. Employee may not reproduce or publish these copyrighted works, except in the pursuit of his/her employment duties with the Bank.

Employee Initials_____

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Employee Initials_____

PART IX

TAXES

Section 9.01 Withholding: All payments to be made to Employee under this Agreement will be subject to required withholding of federal, state and local income and employment taxes as applicable.

Section 9.02 Section 409A:

B. In addition, to the extent the Bank is required pursuant to this Agreement to reimburse expenses incurred by Employee, and such reimbursement obligation is subject to Section 409A of the Code, the Bank shall reimburse any such eligible expenses by the end of the calendar year next following the calendar year in which the expense was incurred, subject to any earlier required deadline for payment otherwise applicable under this Agreement; provided, however, that the following sentence shall apply to any tax gross-up payment and related expense reimbursement obligation, including any payment obligations described in Section 7.05, to the extent subject to Section 409A. Any such tax gross-up payment will be made by the end of the calendar year next following the calendar year in which Employee remits the related taxes.

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C. For purposes of the provisions of this Agreement which require commencement of payments or benefits subject to Section 409A upon a termination of employment, the terms “termination of employment” and “Separation Date” shall mean a “separation from service” with the Bank (as such term is defined in Treasury Regulations issued under Code Section 409A), notwithstanding anything in this Agreement to the contrary.

F. The provisions of this Part X are intended to comply with Code Section 409A and shall be interpreted consistent with such section.

PART X

GENERAL PROVISIONS

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Section 10.10 Advice of Counsel: Employee warrants that he/she has consulted with legal counsel of his/her choice to advise him/her with respect to the terms and conditions of this Agreement.

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA

BY:

/s/ Edward Corum Jr.

Date:

4/9/2024

	Edward Corum Jr.
	Chairman of the Personnel Committee

EMPLOYEE:

/s/ Ryan J. Misasi

Date:

4/9/2024

Ryan J. Misasi

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EXHIBIT A

AGREEMENT AND GENERAL RELEASE

This Agreement and General Release (“Agreement”) is entered into by and between Ryan J. Misasi (“Employee”) and Farmers & Merchants Bank of Central California, California banking corporation (the “Bank” and together with the Employee, the “Parties”).

WHEREAS, the Parties wish to memorialize either the terms of Employee’s departure under Section 7.01 of the Employment Agreement or the payment of the Change of Control Compensation Package (as defined in Section 7.05 of the Employment Agreement) or the automatic renewal of the Employment Agreement under Section 2.02, and to resolve all issues or disputes arising out of or related to (i) the employment relationship and the termination thereof under Section 7.01 of the Employment Agreement or (ii) the employment relationship prior to a Change of Control (as defined in the Employment Agreement) or the automatic renewal of the Employment Agreement, as the case may be.

NOW, THEREFORE, the Parties hereby agree as follows:

Section 1.

Release of the Bank. In consideration of receipt by Employee of the Severance Package or the Change of Control Compensation Package, as applicable, which Employee acknowledges is in addition to anything of value to which he/she is otherwise entitled, Employee, on behalf of himself/herself and his/her heirs, attorneys, executors, successors, administrators and assigns, does hereby release, acquit and forever discharge the Bank and its respective predecessors, successors, assigns, subsidiaries, divisions, holding companies, affiliated companies and benefit plans, and each of their respective present and former affiliates, directors, officers, fiduciaries, employees, agents, successors and assigns, from any and all liabilities, damages, causes of action and claims of any nature, kind or description whatsoever, whether accrued or to accrue, which Employee ever had, now has or hereafter may have against any of them, known or unknown, that are based on facts occurring the day of and prior to the day Employee executes this Agreement, including, but not limited to, any claims under any state or federal law or statute, including, but not limited to, the Age Discrimination in Employment Act of 1967 (29 U.S.C. section 621 et seq.), the Americans with Disabilities Act of 1990, the Civil Rights Acts of 1964 and 1991, the Equal Pay Act, any claim based on tort, contract or otherwise, any claim for attorneys’ fees or costs, or any matter or action related to Employee employment and/or affiliation with, or termination and separation from the Bank and its affiliates.

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This Agreement recognizes the rights and responsibilities of the Equal Employment Opportunity Commission (“EEOC”) and the California Department of Fair Employment and Housing (“DFEH”) to enforce the statutes which come under their jurisdiction. This Agreement is not intended to prevent Employee from initiating or participating in any investigation or proceeding conducted by the EEOC or the DFEH; provided, however, that nothing in this section limits or affects the finality or the scope of the Release. Employee has waived and released any claim that he/she may have for damages based on any alleged discrimination, harassment or retaliation, that is based on facts occurring the day of and prior to the day the Employee executes this Agreement, and may not recover damages in any proceeding conducted by the EEOC or the DFEH.

Section 2.

No Release of Vested Benefits. Notwithstanding anything in Section 2 hereof, Employee does not by this Agreement waive any rights he/she may have to vested benefits or account balances in any retirement plan, which vested benefits or account balances, as the case may be, shall be paid over to Employee in accordance with the provisions of the respective plans, subject to any applicable forfeiture provisions set forth therein.

Section 3.

Section 4.

Section 5.

Section 6.

Acknowledgments. Employee acknowledges, represents and agrees, in compliance with the Older Workers’ Benefit Protection Act, that:

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(a)

(b)

Employee has carefully read and fully understands all of the provisions of this Agreement;

(c)

(d)

Employee has a full seven (7) days following the execution of this Agreement to revoke this Agreement, and has been and is hereby advised in writing that this Agreement shall not become effective or enforceable as to Employee rights under the federal Age Discrimination in Employment Act (29 U.S.C. section 621 et seq.) until the revocation period has expired (but shall be immediately effective as to all other claims). Any revocation shall be made in writing and delivered to Bank’s Chief Executive Officer on or before the seventh day following Employee execution of this Agreement; and

(e)

Employee accepts the terms of this Agreement as fair and equitable under all the circumstances and voluntarily executes this Agreement.

Section 7.

Section 8.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

Section 9.

Section 10.

Integration Clause. This Agreement is intended by the parties to be their final agreement. The statements, promises and agreements in this Agreement may not be contradicted by any prior understandings, agreements, promises or statements. Employee states and promises that in signing this Agreement he/she has not relied on any statements or promises made by the Bank, other than the promises contained in this Agreement. Any changes to this Agreement must be in writing and signed by both Parties.

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THIS IS A RELEASE OF ALL CLAIMS – READ THOROUGHLY BEFORE SIGNING

Date:

Employee:
	Ryan J. Misasi

Date:

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA

By:

	Edward Corum, Jr.
	Chairman of the Personnel Committee

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EXHIBIT B

NON-COMPETITION AND NON-SOLICITATION AGREEMENT

This Non-Competition and Non-Solicitation Agreement (“Agreement”) is entered into by and between Ryan J. Misasi (“Employee”) and Farmers & Merchants Bank of Central California, a California banking corporation (the “Bank”).

NOW, THEREFORE, the Parties hereby agree as follows:

Section 1.

Change of Control Compensation Package. Subject to the terms of this Agreement, Employee shall receive the following compensation for compliance with the terms of the covenants described herein (the “Restrictive Covenants”), which compensation is part of (and not in addition to) the Change of Control Compensation Package described in Section 7.05 of the Employment Agreement to be paid or commence immediately prior to a Change of Control: In the event of a Change of Control of Employer or Farmers & Merchants Bancorp (“Bancorp”), (A) either a goodwill preservation payment equal to 0.25% of the Total Bancorp Shareholder Value, in the event of a Change of Control as described in (i) or (ii) of Section 7.05.2 of the Employment Agreement, or a goodwill preservation payment of $125,000, in the event of a Change of Control as described in (iii) of Section 7.05.2 of the Employment Agreement, (B) two (2) times the Employee’s highest Annual Compensation (as defined in Section 7.05.1 of the Employment Agreement), (C) Employee’s monthly premium for continuation coverage under COBRA (as defined in Section 7.04 of the Employment Agreement), determined as of the closing or other occurrence of the Change of Control, multiplied by thirty-six (36) months, whether or not such continuation coverage is elected by Employee, (D) Employee’s Bank car valued for tax purposes using the vehicle’s Kelley Blue Book Trade-In Value in Good Condition, and (E) a gross-up payment as defined and set forth in Section 7.04.3 of the Employment Agreement.

The compensation set forth above is in consideration for the covenants of Employee as set forth in this Agreement.

Section 2.

Restrictive Covenants: Employee agrees that for a period of two (2) years after following the Change of Control (in the event of a Change of Control of Employer, the Bank or Bancorp under Section 7.05.2 of the Employment Agreement) (the “Restricted Period”), he shall not, as an individual, employee, consultant, independent contractor, partner, shareholder, or in association with any other person, business or enterprise, directly or indirectly, and regardless of the reason for him/her ceasing to be employed by Employer, engage in the following (which periods shall run concurrent with the periods of the restrictive covenants described in Section 8.02 of the Employment Agreement and not consecutively):

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Non-Competition. Employee recognizes that if he were to become employed by, or substantially involved in, the business of a competitor of Employer or any of its affiliates, it would be very difficult for Employee not to rely on or use Employer’s and its affiliates’ Trade and Business Secrets, Proprietary and Confidential information or Employer Materials. To protect Employer’s Trade and Business Secrets, Proprietary and Confidential information and Employer Materials and its affiliates’ relationships and goodwill with customers, Employee will not, directly or indirectly through any other Person, engage in, enter the employ of, render any services to, have any ownership interest in, or participate in the financing, operation, management or control of, any Competing Business (as defined below). For purposes of this Agreement, the phrase “directly or indirectly through any other Person” shall include, without limitation, any direct or indirect ownership or profit participation interest in such enterprise, whether as an owner, stockholder, member, partner, joint venturer or otherwise, and shall include any direct or indirect participation in such enterprise as an employee, independent contractor, consultant, director, officer, licensor of technology or otherwise. For purposes of this Agreement, “Competing Business” means a Person which has a branch office or conducts material business in any county in which the Bank has an office immediately prior to the Change of Control or opens a branch or office in any county in which the Bank, immediately prior to the Change of Control, has a branch office during the Restricted Period (the “Restricted Area”) that competes with Employer and its affiliates by soliciting, offering and/or selling any services or products substantially similar in function or capability to or competitive with the existing services and products sold, licensed, distributed, marketed, provided, being developed or otherwise offered, performed or provided by Employer and its affiliates as of the Change of Control, or the services or products of Employer and its affiliates being actively planned or developed as of the Change of Control, or any other business, product or service in which Employee has been engaged for more than a de minimis amount of time during the twelve (12)-month period immediately preceding the date of Change of Control. Nothing herein shall prohibit Employee from being a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as Employee has no active participation in the business of such corporation. In view of the nature of Employee’s employment with Employer and Employee’s contribution of equity in Employer to the Change of Control, Employee likewise agrees that Employer and its affiliates would be irreparably harmed by any such competition in violation of the terms of this paragraph and that Employer and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph and to any other relief, including financial compensation commensurate with damages caused, available to them.

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Solicitation of Employees. Employee recognizes that he possesses and will possess confidential information about other employees of Employer and its affiliates relating to their education, experience, skills, abilities, compensation and benefits, and inter-personal relationships with customer(s) of Employer and its affiliates. Employee recognizes that the information he possesses and will possess about these other employees is not generally known, is of substantial value to Employer and its affiliates in developing their business and in securing and retaining customers, and in managing general daily operations of Employer, and has been and will be acquired by Employee because of his/her business position with Employer and its affiliates. Employee agrees that Employee will not, directly or indirectly, solicit or recruit any employee of Employer or its affiliates for the purpose of being employed by, or serving as a consultant or information resource to, Employee, or any competitor of Employer or its affiliates on whose behalf Employee is acting as an agent, representative or employee, and that Employee will not convey such confidential information or trade secrets about other employees of Employer and its affiliates to any other Person or legal entity. In view of the nature of Employee’s employment with Employer, Employee likewise agrees that Employer and its affiliates would be irreparably harmed by any such solicitation or recruitment in violation of the terms of this paragraph and that Employer and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph and to any other relief, including financial compensation commensurate with damages caused, available to them.

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Section 3.

Confidentiality of Agreement. As a material inducement to the Bank to enter into this Agreement, Employee represents and agrees that he will keep all terms of this Agreement completely confidential, and that he will not disclose any information concerning this Agreement to any person, including, but not limited to, any past, present or prospective employee of the Bank, except for his/her spouse, attorney, tax account and financial advisor. Employee further agrees that disclosure by him/her of the terms and conditions of this Agreement in violation of this Section constitutes a material breach of the Agreement.

Section 4.

Confidentiality of Proprietary Information. Employee acknowledges and agrees that he has an obligation to continue to keep in confidence and not use for his/her own or any other person's or entity's benefit all proprietary and confidential information concerning the Bank, as defined in Part VIII of the Employment Agreement.

Section 5.

Section 6.

Acknowledgments. Employee acknowledges, represents and agrees that:

(a)

(b)

Employee has carefully read and fully understands all of the provisions of this Agreement; and

(c)

Employee accepts the terms of this Agreement as fair and equitable under all the circumstances and voluntarily executes this Agreement.

Section 7.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

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Section 8.

Section 9.

Capitalized Terms. Any capitalized term in this Agreement that is not defined herein shall have the meaning given to such term in the Employment Agreement.

Section 10.

Integration Clause. This Agreement is intended by the parties to be their final agreement. The statements, promises and agreements in this Agreement may not be contradicted by any prior understandings, agreements, promises or statements. Employee states and promises that in signing this Agreement he has not relied on any statements or promises made by the Bank, other than the promises contained in this Agreement. Any changes to this Agreement must be in writing and signed by both Parties.

Date:

Employee:
	Ryan J. Misasi

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA

By:

	Edward Corum, Jr.
	Chairman of the Personnel Committee

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Exhibit 10.5

EXECUTIVE VICE PRESIDENT

EMPLOYMENT, CONFIDENTIALITY

AND NON-DISCLOSURE AGREEMENT

PART I

PARTIES TO AGREEMENT

Section 1.01 Parties: This Employment Agreement (hereinafter referred to as the “Agreement”) is entered into by and between Farmers & Merchants Bank of Central California, a California banking corporation (the “Bank” or the “Employer”), its successors and assigns, and David M. Zitterow (hereinafter referred to as “Employee”). The Bank and Employee are sometimes collectively referred to hereinafter as the “Parties” and individually as a “Party”.

PART II

EMPLOYMENT

Section 2.01 Employment: The Bank hereby agrees to employ Employee, and Employee hereby accepts such employment with the Bank, in accordance with the terms and conditions set forth herein.

PART III

DUTIES OF EMPLOYEE

Section 3.01 General Duties: During the term of this Agreement, Employee shall be employed as Executive Vice President and Wholesale Banking Division Manager under the direction of the Chairman, President and Chief Executive Officer and shall perform and discharge well and faithfully the duties that may be assigned to Employee from time to time by the Chairman, President and Chief Executive Officer in connection with the conduct of the Bank’s business. Nothing herein shall preclude the Bank’s Board of Directors or Chief Executive Officer from changing Employee’s title or duties as long as the resulting title and duties are reasonably commensurate with the education, employment background and qualifications of the Employee and involve similar responsibilities and scope of duties and any such changes will not be deemed a cause of Termination for Good Reason under the terms of this Agreement.

PART IV

COMPENSATION

Section 4.01 Salary: Employee shall be paid an annual base salary of no less than $375,000 per year. This base salary shall be paid to Employee in such intervals and at such times as other salaried executives of the Bank are paid. The Bank’s Board of Directors reserves the right to set the timing and level of salary adjustments for all employees and any particular employee at its sole discretion.

Employee shall be entitled to participate in (i) the “Farmers & Merchants Bank of Central California Executive Retirement Plan – Equity Component,” which is a totally discretionary contribution as determined by the Board of Directors; and (ii) the “Farmers & Merchants Bank of Central California Executive Retirement Plan – Performance Component,”; the terms and conditions of which are set forth in separate agreements so titled.

Section 4.03 Relocation Expenses: N/A

PART V

BENEFITS

Section 5.01 Benefits: Employee shall be entitled to participate in whatever vacation, medical, dental, pension, sick leave, 401(k), profit sharing, disability insurance or other plans of general application, or other benefits which are in effect as to other officers of equivalent title of the Bank, or as may be in effect from time to time, in accordance with the rules established for individual participation in any such plan.

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PART VI

EXPENSES

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PART VII

TERMINATION OF EMPLOYMENT

A Severance Payment equivalent to twelve (12) times the Employee’s highest monthly base salary, which Employee has earned during Employee’s employment with the Bank. The Severance Payment shall be paid out in equal increments on regularly scheduled pay days for a period of 12 months following the Separation Date, provided that any payments delayed pending the effectiveness of the Release shall be accumulated and paid in a lump sum on the next pay day following the effectiveness of the Release, with any remaining payments due paid in accordance with the schedule otherwise provided herein. Such payments will cease, however, if Employee fails to comply with the provisions of Part VIII of this Agreement.

A Severance Bonus in an amount equal to the average of the Employee’s annual discretionary incentive bonus for the previous two years, prorated for the number of months between the Separation Date and the end of the Bank’s last fiscal year. The Severance Bonus shall be paid in a lump sum on the Employee’s Separation Date.

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“Cause” for purposes of this Agreement shall be defined as follows:

1.	The death of Employee;

2.	Conviction of a felony resulting in a material economic adverse effect on the Bank or its affiliates;

3.	Committing acts of dishonesty, theft, embezzlement or other acts of moral turpitude against the Bank or its affiliates;

5.	An unauthorized, willful, knowing or reckless disclosure of any confidential information concerning the Bank or its affiliates or any of its directors, shareholders, customers or employees; or

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Section 7.03 Termination by Employee without Good Reason: This Agreement may be terminated by Employee without Good Reason at Employee’s sole discretion by giving one hundred and twenty (120) days written Notice of Resignation to the Bank. If Employee terminates his/her employment pursuant to this Section 7.03, and subject to Employee’s continued satisfactory performance of such tasks and duties that may be assigned to Employee through the Separation Date, and Employee’s continued loyalty to the Bank through the Separation Date (which includes, but is not limited to, refraining from any announcements by Employee or any outside third party, operating under the direction of Employee, to anyone inside or outside the Bank that the Employee is leaving the Bank), Employee shall receive accrued salary and payment for accrued but unused vacation through the Separation Date. Employee shall also be entitled to payment of all awards of benefit plans and incentive and retention programs, in accordance with the terms of those plans, including applicable vesting and forfeiture provisions. Any such payment or distribution from a nonqualified deferred compensation plan shall be governed by the terms of such plan relating to the timing of distributions. Alternatively, the Bank may, at its option, at any time after Employee gives written Notice of Resignation as herein provided, pay Employee’s accrued salary up to and including the effective Separation Date set forth in Employee’s Notice of Resignation, and thereupon immediately release and terminate Employee’s employment. Notwithstanding the foregoing, if the Bank determines at any time during the 90-day notice period that Employee materially breaches the obligations imposed by the provisions of this Section 7.03 and Part VIII of this Agreement, the Bank may shorten the notice period and accelerate the Separation Date, thereby reducing the compensation otherwise payable to Employee pursuant to this Section.

Section 7.05 Change of Control:

(a) One (1) times Employee’s highest Annual Compensation (defined as Total Compensation as reported in Employer’s previous years’ proxy statements or as would have been reported if the Employee had been a named executive officer, provided that to the extent that the Employee’s salary or annual bonus for a prior year was prorated because the Employee’s employment did not commence until after the first day of the year, then the annual base salary and target bonus, to the extent greater than actual bonus paid, shall be used.

(b) Employee’s monthly premium for continuation coverage under COBRA (as defined in Section 7.07), determined as of immediately prior to the Change of Control, multiplied by twelve (12) months, whether or not such continuation coverage is elected by Employee.

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(c) A gross-up payment as defined and set forth herein in Section 7.05.3. In addition, Employee will be entitled to payment of all awards of benefit plans and incentive and retention programs in accordance with the terms of those plans and programs, including applicable vesting and forfeiture provisions.

Change of Control means a change of control of Bancorp. Such a Change of Control will be deemed to have occurred immediately before any of the following occur: (i) a merger, consolidation or acquisition, directly or indirectly, of more than 30% of the voting power or outstanding shares of any class of voting securities of Bancorp by any Person; (ii) a sale of all, or substantially all, of the assets of Bancorp or the Bank; or (iii) there is a change, during any period of one year or less, of a majority of the Board of Directors of Bancorp as constituted as of the beginning of such period, unless the election of each director who is not a director at the beginning of such period was approved by a vote of at least a majority of the directors then in office who were directors at the beginning of such period. If the events or circumstances described in (i)-(iii), above, shall occur to or be applicable to the Bank, then such Change of Control shall be deemed for all purposes of this Agreement to also be a “Change of Control” of Bancorp. For purposes of this Agreement, the term “Person” shall mean and include any individual, corporation, partnership, group, association or other “person”, as such term is used in Section 14(d) of the Securities Exchange Act of 1934, other than Bancorp, the Bank, any other wholly owned subsidiary of Bancorp or any employee benefit plan(s) sponsored by Bancorp, Bank or other subsidiary of Bancorp. Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred unless the change also constitutes the occurrence of a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5), with respect to the Employee.

3.	Gross-Up Payment: Employee shall be entitled to a “Gross-Up Payment” under the terms and conditions set forth herein, and such payment shall include the Excise Tax reimbursement due pursuant to Section 7.05.3.a and any federal and state tax reimbursements due pursuant to Section 7.05.3.b.

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In the event that any payment or benefit (as those terms are defined within the meaning of Internal Revenue Code Section 280G(b)(2)) paid, payable, distributed or distributable to the Employee (hereinafter referred to as “Payments”) pursuant to the terms of this Agreement or otherwise in connection with or arising out of Employee’s employment with the Bank or a change of control would be subject to the Excise Tax imposed by Section 4999 of the Internal Revenue code or any interest or penalties are incurred by Employee with respect to such Excise Tax, then Employee will be entitled to receive an additional payment (“Gross-Up Payment”) in an amount equal to the total Excise Tax, interest and penalties imposed on Employee as a result of the payment and the Excise Taxes on any federal and state tax reimbursements as set forth in Section 7.05.3.b.

Determination of Eligibility for and Amount of Gross-Up Payment: An initial determination as to whether a Gross-Up Payment is required pursuant to this Agreement and the amount of such Gross-Up Payment shall be made at the Bank’s expense by an accounting firm appointed by the Bank prior to any Change of Control. The accounting firm shall provide its determination, together with detailed supporting calculations and documentation to the Bank and Employee prior to submission of the proposed Change of Control to the Bank’s or Bancorp’s shareholders, Board of Directors or appropriate regulators for approval. If the accounting firm determines that no Excise Tax is payable by Employee with respect to a Payment or Payments, it shall furnish Employee with an opinion reasonably acceptable to Employee that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the determination to Employee, Employee shall have the right to dispute the determination. The existence of the dispute shall not in any way affect Employee’s right to receive the Gross-Up Payment in accordance with the determination. Upon the final resolution of a dispute, the Bank or its successor shall promptly pay to Employee any additional amount required by such resolution. If there is no dispute, the determination shall be binding, final and conclusive upon the Bank and Employee, except to the extent that any taxing authority subsequently makes a determination that the Excise Tax or additional Excise Tax is due and owing on the payments made to Employee. If any taxing authority determines that the Excise Tax or additional Excise Tax is due and owing, the Bank or the entity acquiring control of the Bank shall pay the Excise Tax and any penalties assessed by such taxing authority.

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Excise Tax Withholding: Notwithstanding anything contained in this Agreement to the contrary, in the event that according to the determination, an Excise Tax will be imposed on any Payment or Payments, the Bank or its successor shall pay to the applicable government taxing authorities as Excise Tax withholding, the amount of the Excise Tax that the Bank has actually withheld from the Payment or Payments.

PART VIII

COVENANTS

Employee Initials_____

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Employee initials____

Section 8.03 Definitions:

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“Proprietary and Confidential Information” includes any information, in whatever form or format, including that which has not been memorialized in writing.

Employee acknowledges that Employee has been apprised of the provisions of Labor Code Section 2860 which provides: “Everything which an Employee acquires by virtue of his employment, except the compensation which is due him from his Employer, belongs to the Employer, whether acquired lawfully or unlawfully, or during or after the expiration of the term of his employment.” Employee understands that any work that Employee created or helped create at the request of the Bank, including user manuals, training materials, sales materials, customer and prospective customer information and business data, process manuals, and other written and visual works, are works made for hire in which the Bank owns the copyright. Employee may not reproduce or publish these copyrighted works, except in the pursuit of his/her employment duties with the Bank.

Employee Initials____

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PART IX

TAXES

Section 9.01 Withholding: All payments to be made to Employee under this Agreement will be subject to required withholding of federal, state and local income and employment taxes as applicable.

Section 9.02 Section 409A:

C. For purposes of the provisions of this Agreement which require commencement of payments or benefits subject to Section 409A upon a termination of employment, the terms “termination of employment” and “Separation Date” shall mean a “separation from service” with the Bank (as such term is defined in Treasury Regulations issued under Code Section 409A), notwithstanding anything in this Agreement to the contrary.

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F. The provisions of this Part X are intended to comply with Code Section 409A and shall be interpreted consistent with such section.

PART X

GENERAL PROVISIONS

Section 10.01 - Notices: Any notice to be given to the Bank under the terms of this Agreement, and any notice to be given to Employee, shall be addressed to such Party at the mailing address the Party may hereafter designate in writing to the other. Any such notice shall be deemed to have been duly given four days after the same shall be enclosed in a properly sealed and addressed envelope, registered or certified, and deposited (postage or registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government or upon actual delivery to the Party by messenger or delivery service, with receipt acknowledged in writing by the Party to whom such notice is addressed.

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Section 10.10 Advice of Counsel: Employee warrants that he/she has consulted with legal counsel of his/her choice to advise him/her with respect to the terms and conditions of this Agreement.

FARMERS & MERCHANTS BANK OF
CENTRAL CALIFORNIA

BY:	/s/ Edward Corum Jr.	Date:	4/9/2024
	Edward Corum Jr.
	Chairman of the Personnel Committee

EMPLOYEE:	/s/ David M. Zitterow		Date:	4/9/2024
	David M. Zitterow

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EXHIBIT A

AGREEMENT AND GENERAL RELEASE

This Agreement and General Release (“Agreement”) is entered into by and between David M. Zitterow (“Employee”) and Farmers & Merchants Bank of Central California, California banking corporation (the “Bank” and together with the Employee, the “Parties”).

WHEREAS, the Parties wish to memorialize either the terms of Employee’s departure under Section 7.01 of the Employment Agreement or the payment of the Change of Control Compensation Package (as defined in Section 7.05 of the Employment Agreement) or the automatic renewal of the Employment Agreement under Section 2.02, and to resolve all issues or disputes arising out of or related to (i) the employment relationship and the termination thereof under Section 7.01 of the Employment Agreement or (ii) the employment relationship prior to a Change of Control (as defined in the Employment Agreement) or the automatic renewal of the Employment Agreement, as the case may be.

NOW, THEREFORE, the Parties hereby agree as follows:

Section 1.

Release of the Bank. In consideration of receipt by Employee of the Severance Package or the Change of Control Compensation Package, as applicable, which Employee acknowledges is in addition to anything of value to which he/she is otherwise entitled, Employee, on behalf of himself/herself and his/her heirs, attorneys, executors, successors, administrators and assigns, does hereby release, acquit and forever discharge the Bank and its respective predecessors, successors, assigns, subsidiaries, divisions, holding companies, affiliated companies and benefit plans, and each of their respective present and former affiliates, directors, officers, fiduciaries, employees, agents, successors and assigns, from any and all liabilities, damages, causes of action and claims of any nature, kind or description whatsoever, whether accrued or to accrue, which Employee ever had, now has or hereafter may have against any of them, known or unknown, that are based on facts occurring the day of and prior to the day Employee executes this Agreement, including, but not limited to, any claims under any state or federal law or statute, including, but not limited to, the Age Discrimination in Employment Act of 1967 (29 U.S.C. section 621 et seq.), the Americans with Disabilities Act of 1990, the Civil Rights Acts of 1964 and 1991, the Equal Pay Act, any claim based on tort, contract or otherwise, any claim for attorneys’ fees or costs, or any matter or action related to Employee employment and/or affiliation with, or termination and separation from the Bank and its affiliates.

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This Agreement recognizes the rights and responsibilities of the Equal Employment Opportunity Commission (“EEOC”) and the California Department of Fair Employment and Housing (“DFEH”) to enforce the statutes which come under their jurisdiction. This Agreement is not intended to prevent Employee from initiating or participating in any investigation or proceeding conducted by the EEOC or the DFEH; provided, however, that nothing in this section limits or affects the finality or the scope of the Release. Employee has waived and released any claim that he/she may have for damages based on any alleged discrimination, harassment or retaliation, that is based on facts occurring the day of and prior to the day the Employee executes this Agreement, and may not recover damages in any proceeding conducted by the EEOC or the DFEH.

Section 2.

Section 3.

Section 4.

Section 5.

Section 6.

Acknowledgments. Employee acknowledges, represents and agrees, in compliance with the Older Workers’ Benefit Protection Act, that:

(a)

(b)

Employee has carefully read and fully understands all of the provisions of this Agreement;

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(c)

(d)

Employee has a full seven (7) days following the execution of this Agreement to revoke this Agreement, and has been and is hereby advised in writing that this Agreement shall not become effective or enforceable as to Employee rights under the federal Age Discrimination in Employment Act (29 U.S.C. section 621 et seq.) until the revocation period has expired (but shall be immediately effective as to all other claims). Any revocation shall be made in writing and delivered to Bank’s Chief Executive Officer on or before the seventh day following Employee execution of this Agreement; and

(e)

Employee accepts the terms of this Agreement as fair and equitable under all the circumstances and voluntarily executes this Agreement.

Section 7.

Section 8.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

Section 9.

Section 10.

Integration Clause. This Agreement is intended by the parties to be their final agreement. The statements, promises and agreements in this Agreement may not be contradicted by any prior understandings, agreements, promises or statements. Employee states and promises that in signing this Agreement he/she has not relied on any statements or promises made by the Bank, other than the promises contained in this Agreement. Any changes to this Agreement must be in writing and signed by both Parties.

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THIS IS A RELEASE OF ALL CLAIMS – READ THOROUGHLY BEFORE SIGNING

Date:

Employee:
David M. Zitterow

Date:

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA

By:

		Edward Corum, Jr.
		Chairman of the Personnel Committee

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EXHIBIT B

NON-COMPETITION AND NON-SOLICITATION AGREEMENT

This Non-Competition and Non-Solicitation Agreement (“Agreement”) is entered into by and between David M. Zitterow (“Employee”) and Farmers & Merchants Bank of Central California, a California banking corporation (the “Bank”).

NOW, THEREFORE, the Parties hereby agree as follows:

Section 1.

The compensation set forth above is in consideration for the covenants of Employee as set forth in this Agreement.

Section 2.

Restrictive Covenants: Employee agrees that during the period that for a period of one (1) year following the Change of Control (in the event of a Change of Control of Employer, the Bank or Bancorp under Section 7.05.2 of the Employment Agreement) (the “Restricted Period”), he shall not, as an individual, employee, consultant, independent contractor, partner, shareholder, or in association with any other person, business or enterprise, directly or indirectly, and regardless of the reason for him/her ceasing to be employed by Employer, engage in the following (which periods shall run concurrent with the periods of the restrictive covenants described in Section 8.02 of the Employment Agreement and not consecutively):

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Non-Competition. Employee recognizes that if he were to become employed by, or substantially involved in, the business of a competitor of Employer or any of its affiliates, it would be very difficult for Employee not to rely on or use Employer’s and its affiliates’ Trade and Business Secrets, Proprietary and Confidential information or Employer Materials. To protect Employer’s Trade and Business Secrets, Proprietary and Confidential information and Employer Materials and its affiliates’ relationships and goodwill with customers, Employee will not, directly or indirectly through any other Person, engage in, enter the employ of, render any services to, have any ownership interest in, or participate in the financing, operation, management or control of, any Competing Business (as defined below). For purposes of this Agreement, the phrase “directly or indirectly through any other Person” shall include, without limitation, any direct or indirect ownership or profit participation interest in such enterprise, whether as an owner, stockholder, member, partner, joint venturer or otherwise, and shall include any direct or indirect participation in such enterprise as an employee, independent contractor, consultant, director, officer, licensor of technology or otherwise. For purposes of this Agreement, “Competing Business” means a Person which has a branch office or conducts material business in any county in which the Bank has an office immediately prior to the Change of Control or opens a branch or office in any county in which the Bank, immediately prior to the Change of Control, has a branch office during the Restricted Period (the “Restricted Area”) that competes with Employer and its affiliates by soliciting, offering and/or selling any services or products substantially similar in function or capability to or competitive with the existing services and products sold, licensed, distributed, marketed, provided, being developed or otherwise offered, performed or provided by Employer and its affiliates as of the Change of Control, or the services or products of Employer and its affiliates being actively planned or developed as of the Change of Control, or any other business, product or service in which Employee has been engaged for more than a de minimis amount of time during the twelve (12)-month period immediately preceding the date of Change of Control. Nothing herein shall prohibit Employee from being a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as Employee has no active participation in the business of such corporation. In view of the nature of Employee’s employment with Employer and Employee’s contribution of equity in Employer to the Change of Control, Employee likewise agrees that Employer and its affiliates would be irreparably harmed by any such competition in violation of the terms of this paragraph and that Employer and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph and to any other relief, including financial compensation commensurate with damages caused, available to them.

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Solicitation of Employees. Employee recognizes that he possesses and will possess confidential information about other employees of Employer and its affiliates relating to their education, experience, skills, abilities, compensation and benefits, and inter-personal relationships with customer(s) of Employer and its affiliates. Employee recognizes that the information he possesses and will possess about these other employees is not generally known, is of substantial value to Employer and its affiliates in developing their business and in securing and retaining customers, and in managing general daily operations of Employer, and has been and will be acquired by Employee because of his/her business position with Employer and its affiliates. Employee agrees that Employee will not, directly or indirectly, solicit or recruit any employee of Employer or its affiliates for the purpose of being employed by, or serving as a consultant or information resource to, Employee, or any competitor of Employer or its affiliates on whose behalf Employee is acting as an agent, representative or employee, and that Employee will not convey such confidential information or trade secrets about other employees of Employer and its affiliates to any other Person or legal entity. In view of the nature of Employee’s employment with Employer, Employee likewise agrees that Employer and its affiliates would be irreparably harmed by any such solicitation or recruitment in violation of the terms of this paragraph and that Employer and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph and to any other relief, including financial compensation commensurate with damages caused, available to them.

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Section 3.

Confidentiality of Agreement. As a material inducement to the Bank to enter into this Agreement, Employee represents and agrees that he will keep all terms of this Agreement completely confidential, and that he will not disclose any information concerning this Agreement to any person, including, but not limited to, any past, present or prospective employee of the Bank, except for his/her spouse, attorney, tax account and financial advisor. Employee further agrees that disclosure by him/her of the terms and conditions of this Agreement in violation of this Section constitutes a material breach of the Agreement.

Section 4.

Confidentiality of Proprietary Information. Employee acknowledges and agrees that he has an obligation to continue to keep in confidence and not use for his/her own or any other person's or entity's benefit all proprietary and confidential information concerning the Bank, as defined in Part VIII of the Employment Agreement.

Section 5.

Section 6.

Acknowledgments. Employee acknowledges, represents and agrees that:

(a)

(b)

Employee has carefully read and fully understands all of the provisions of this Agreement; and

(c)

Employee accepts the terms of this Agreement as fair and equitable under all the circumstances and voluntarily executes this Agreement.

Section 7.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

Section 8.

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Section 9.

Capitalized Terms. Any capitalized term in this Agreement that is not defined herein shall have the meaning given to such term in the Employment Agreement.

Section 10.

Integration Clause. This Agreement is intended by the parties to be their final agreement. The statements, promises and agreements in this Agreement may not be contradicted by any prior understandings, agreements, promises or statements. Employee states and promises that in signing this Agreement he has not relied on any statements or promises made by the Bank, other than the promises contained in this Agreement. Any changes to this Agreement must be in writing and signed by both Parties.

Date:

Employee:

	David M. Zitterow

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA

By:

		Edward Corum, Jr.
		Chairman of the Personnel Committee

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Exhibit 10.6

EXECUTIVE VICE PRESIDENT

EMPLOYMENT, CONFIDENTIALITY

AND NON-DISCLOSURE AGREEMENT

PART I

PARTIES TO AGREEMENT

Section 1.01 Parties: This Employment Agreement (hereinafter referred to as the “Agreement”) is entered into by and between Farmers & Merchants Bank of Central California, a California banking corporation (the “Bank” or the “Employer”), its successors and assigns, and John W. Weubbe (hereinafter referred to as “Employee”). The Bank and Employee are sometimes collectively referred to hereinafter as the “Parties” and individually as a “Party”.

PART II

EMPLOYMENT

Section 2.01 Employment: The Bank hereby agrees to employ Employee, and Employee hereby accepts such employment with the Bank, in accordance with the terms and conditions set forth herein.

PART III

DUTIES OF EMPLOYEE

Section 3.01 General Duties: During the term of this Agreement, Employee shall be employed as Executive Vice President and Chief Credit Officer under the direction of the Chairman, President and Chief Executive Officer and shall perform and discharge well and faithfully the duties that may be assigned to Employee from time to time by the Chairman, President and Chief Executive Officer in connection with the conduct of the Bank’s business. Nothing herein shall preclude the Bank’s Board of Directors or Chief Executive Officer from changing Employee’s title or duties as long as the resulting title and duties are reasonably commensurate with the education, employment background and qualifications of the Employee and involve similar responsibilities and scope of duties and any such changes will not be deemed a cause of Termination for Good Reason under the terms of this Agreement.

PART IV

COMPENSATION

Section 4.01 Salary: Employee shall be paid an annual base salary of no less than $340,000 per year. This base salary shall be paid to Employee in such intervals and at such times as other salaried executives of the Bank are paid. The Bank’s Board of Directors reserves the right to set the timing and level of salary adjustments for all employees and any particular employee at its sole discretion.

Employee shall be entitled to participate in the “Farmers & Merchants Bank of Central California Executive Retirement Plan – Equity Component,” which is a totally discretionary contribution as determined by the Board of Directors, the terms and conditions of which are set forth in separate agreement so titled.

Section 4.03 Relocation Expenses: N/A

PART V

BENEFITS

Section 5.01 Benefits: Employee shall be entitled to participate in whatever vacation, medical, dental, pension, sick leave, 401(k), profit sharing, disability insurance or other plans of general application, or other benefits which are in effect as to other officers of equivalent title of the Bank, or as may be in effect from time to time, in accordance with the rules established for individual participation in any such plan.

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PART VI

EXPENSES

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PART VII

TERMINATION OF EMPLOYMENT

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“Cause” for purposes of this Agreement shall be defined as follows:

1.	The death of Employee;

2.	Conviction of a felony resulting in a material economic adverse effect on the Bank or its affiliates;

3.	Committing acts of dishonesty, theft, embezzlement or other acts of moral turpitude against the Bank or its affiliates;

5.	An unauthorized, willful, knowing or reckless disclosure of any confidential information concerning the Bank or its affiliates or any of its directors, shareholders, customers or employees; or

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Section 7.05 Change of Control:

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Change of Control means a change of control of Bancorp. Such a Change of Control will be deemed to have occurred immediately before any of the following occur: (i) a merger, consolidation or acquisition, directly or indirectly, of more than 30% of the voting power or outstanding shares of any class of voting securities of Bancorp by any Person; (ii) a sale of all, or substantially all, of the assets of Bancorp or the Bank; or (iii) there is a change, during any period of one year or less, of a majority of the Board of Directors of Bancorp as constituted as of the beginning of such period, unless the election of each director who is not a director at the beginning of such period was approved by a vote of at least a majority of the directors then in office who were directors at the beginning of such period. If the events or circumstances described in (i)-(iii), above, shall occur to or be applicable to the Bank, then such Change of Control shall be deemed for all purposes of this Agreement to also be a “Change of Control” of Bancorp. For purposes of this Agreement, the term “Person” shall mean and include any individual, corporation, partnership, group, association or other “person”, as such term is used in Section 14(d) of the Securities Exchange Act of 1934, other than Bancorp, the Bank, any other wholly owned subsidiary of Bancorp or any employee benefit plan(s) sponsored by Bancorp, Bank or other subsidiary of Bancorp. Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred unless the change also constitutes the occurrence of a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5), with respect to the Employee.

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In the event that any payment or benefit (as those terms are defined within the meaning of Internal Revenue Code Section 280G(b)(2)) paid, payable, distributed or distributable to the Employee (hereinafter referred to as “Payments”) pursuant to the terms of this Agreement or otherwise in connection with or arising out of Employee’s employment with the Bank or a change of control would be subject to the Excise Tax imposed by Section 4999 of the Internal Revenue code or any interest or penalties are incurred by Employee with respect to such Excise Tax, then Employee will be entitled to receive an additional payment (“Gross-Up Payment”) in an amount equal to the total Excise Tax, interest and penalties imposed on Employee as a result of the payment and the Excise Taxes on any federal and state tax reimbursements as set forth in Section 7.05.3.b.

Determination of Eligibility for and Amount of Gross-Up Payment: An initial determination as to whether a Gross-Up Payment is required pursuant to this Agreement and the amount of such Gross-Up Payment shall be made at the Bank’s expense by an accounting firm appointed by the Bank prior to any Change of Control. The accounting firm shall provide its determination, together with detailed supporting calculations and documentation to the Bank and Employee prior to submission of the proposed Change of Control to the Bank’s or Bancorp’s shareholders, Board of Directors or appropriate regulators for approval. If the accounting firm determines that no Excise Tax is payable by Employee with respect to a Payment or Payments, it shall furnish Employee with an opinion reasonably acceptable to Employee that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the determination to Employee, Employee shall have the right to dispute the determination. The existence of the dispute shall not in any way affect Employee’s right to receive the Gross-Up Payment in accordance with the determination. Upon the final resolution of a dispute, the Bank or its successor shall promptly pay to Employee any additional amount required by such resolution. If there is no dispute, the determination shall be binding, final and conclusive upon the Bank and Employee, except to the extent that any taxing authority subsequently makes a determination that the Excise Tax or additional Excise Tax is due and owing on the payments made to Employee. If any taxing authority determines that the Excise Tax or additional Excise Tax is due and owing, the Bank or the entity acquiring control of the Bank shall pay the Excise Tax and any penalties assessed by such taxing authority.

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Excise Tax Withholding: Notwithstanding anything contained in this Agreement to the contrary, in the event that according to the determination, an Excise Tax will be imposed on any Payment or Payments, the Bank or its successor shall pay to the applicable government taxing authorities as Excise Tax withholding, the amount of the Excise Tax that the Bank has actually withheld from the Payment or Payments.

PART VIII

COVENANTS

Employee Initials ____

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Employee Initials ____

Section 8.03 Definitions:

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“Proprietary and Confidential Information” includes any information, in whatever form or format, including that which has not been memorialized in writing.

Employee acknowledges that Employee has been apprised of the provisions of Labor Code Section 2860 which provides: “Everything which an Employee acquires by virtue of his employment, except the compensation which is due him from his Employer, belongs to the Employer, whether acquired lawfully or unlawfully, or during or after the expiration of the term of his employment.” Employee understands that any work that Employee created or helped create at the request of the Bank, including user manuals, training materials, sales materials, customer and prospective customer information and business data, process manuals, and other written and visual works, are works made for hire in which the Bank owns the copyright. Employee may not reproduce or publish these copyrighted works, except in the pursuit of his/her employment duties with the Bank.

Employee Initials ____

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PART IX

TAXES

Section 9.01 Withholding: All payments to be made to Employee under this Agreement will be subject to required withholding of federal, state and local income and employment taxes as applicable.

Section 9.02 Section 409A:

C. For purposes of the provisions of this Agreement which require commencement of payments or benefits subject to Section 409A upon a termination of employment, the terms “termination of employment” and “Separation Date” shall mean a “separation from service” with the Bank (as such term is defined in Treasury Regulations issued under Code Section 409A), notwithstanding anything in this Agreement to the contrary.

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F. The provisions of this Part X are intended to comply with Code Section 409A and shall be interpreted consistent with such section.

PART X

GENERAL PROVISIONS

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Section 10.10 Advice of Counsel: Employee warrants that he/she has consulted with legal counsel of his/her choice to advise him/her with respect to the terms and conditions of this Agreement.

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA

BY:

/s/ Edward Corum Jr.

Date:

4/9/2024

	Edward Corum Jr.
	Chairman of the Personnel Committee

EMPLOYEE:	/s/ John W. Weubbe		Date:	4/9/2024
	John W. Weubbe

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EXHIBIT A

AGREEMENT AND GENERAL RELEASE

This Agreement and General Release (“Agreement”) is entered into by and between John W. Weubbe (“Employee”) and Farmers & Merchants Bank of Central California, California banking corporation (the “Bank” and together with the Employee, the “Parties”).

WHEREAS, pursuant to Section 7.01 and 7.05 of the Parties’ Employment, Confidentiality and Non-Disclosure Agreement dated April 1, 2024, as may be amended or automatically renewed (“Employment Agreement”), Employee is required to enter into a release of claims in the Bank’s favor in exchange for the payment of certain benefits or the automatic renewal of the Employment Agreement pursuant to Section 2.02; and

WHEREAS, the Parties wish to memorialize either the terms of Employee’s departure under Section 7.01 of the Employment Agreement or the payment of the Change of Control Compensation Package (as defined in Section 7.05 of the Employment Agreement), or the automatic renewal of the Employment Agreement under Section 2.02 and to resolve all issues or disputes arising out of or related to (i) the employment relationship and the termination thereof under Section 7.01 of the Employment Agreement or (ii) the employment relationship prior to a Change of Control (as defined in the Employment Agreement) or the automatic renewal of the Employment Agreement, as the case may be.

NOW, THEREFORE, the Parties hereby agree as follows:

Section 1.

Release of the Bank. In consideration of receipt by Employee of the Severance Package or the Change of Control Compensation Package, as applicable, which Employee acknowledges is in addition to anything of value to which he/she is otherwise entitled, Employee, on behalf of himself/herself and his/her heirs, attorneys, executors, successors, administrators and assigns, does hereby release, acquit and forever discharge the Bank and its respective predecessors, successors, assigns, subsidiaries, divisions, holding companies, affiliated companies and benefit plans, and each of their respective present and former affiliates, directors, officers, fiduciaries, employees, agents, successors and assigns, from any and all liabilities, damages, causes of action and claims of any nature, kind or description whatsoever, whether accrued or to accrue, which Employee ever had, now has or hereafter may have against any of them, known or unknown, that are based on facts occurring the day of and prior to the day Employee executes this Agreement, including, but not limited to, any claims under any state or federal law or statute, including, but not limited to, the Age Discrimination in Employment Act of 1967 (29 U.S.C. section 621 et seq.), the Americans with Disabilities Act of 1990, the Civil Rights Acts of 1964 and 1991, the Equal Pay Act, any claim based on tort, contract or otherwise, any claim for attorneys’ fees or costs, or any matter or action related to Employee employment and/or affiliation with, or termination and separation from the Bank and its affiliates.

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This Agreement recognizes the rights and responsibilities of the Equal Employment Opportunity Commission (“EEOC”) and the California Department of Fair Employment and Housing (“DFEH”) to enforce the statutes which come under their jurisdiction. This Agreement is not intended to prevent Employee from initiating or participating in any investigation or proceeding conducted by the EEOC or the DFEH; provided, however, that nothing in this section limits or affects the finality or the scope of the Release. Employee has waived and released any claim that he/she may have for damages based on any alleged discrimination, harassment or retaliation that is based on facts occurring the day of and prior to the day the Employee executes this Agreement, and may not recover damages in any proceeding conducted by the EEOC or the DFEH.

Section 2.

Section 3.

Section 4.

Section 5.

Section 6.

Acknowledgments. Employee acknowledges, represents and agrees, in compliance with the Older Workers’ Benefit Protection Act, that:

(a)

(b)

Employee has carefully read and fully understands all of the provisions of this Agreement;

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(c)

(d)

Employee has a full seven (7) days following the execution of this Agreement to revoke this Agreement, and has been and is hereby advised in writing that this Agreement shall not become effective or enforceable as to Employee rights under the federal Age Discrimination in Employment Act (29 U.S.C. section 621 et seq.) until the revocation period has expired (but shall be immediately effective as to all other claims). Any revocation shall be made in writing and delivered to Bank’s Chief Executive Officer on or before the seventh day following Employee execution of this Agreement; and

(e)

Employee accepts the terms of this Agreement as fair and equitable under all the circumstances and voluntarily executes this Agreement.

Section 7.

Section 8.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

Section 9.

Section 10.

Integration Clause. This Agreement is intended by the parties to be their final agreement. The statements, promises and agreements in this Agreement may not be contradicted by any prior understandings, agreements, promises or statements. Employee states and promises that in signing this Agreement he/she has not relied on any statements or promises made by the Bank, other than the promises contained in this Agreement. Any changes to this Agreement must be in writing and signed by both Parties.

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THIS IS A RELEASE OF ALL CLAIMS – READ THOROUGHLY BEFORE SIGNING

Date:

Employee:
	John W. Weubbe

Date:

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA

By:

	Edward Corum, Jr.
	Chairman of the Personnel Committee

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EXHIBIT B

NON-COMPETITION AND NON-SOLICITATION AGREEMENT

This Non-Competition and Non-Solicitation Agreement (“Agreement”) is entered into by and between John W. Weubbe (“Employee”) and Farmers & Merchants Bank of Central California, a California banking corporation (the “Bank”).

NOW, THEREFORE, the Parties hereby agree as follows:

Section 1.

The compensation set forth above is in consideration for the covenants of Employee as set forth in this Agreement.

Section 2.

Restrictive Covenants: Employee agrees that for a period of one (1) year following the Change of Control (in the event of a Change of Control of Employer, the Bank or Bancorp under Section 7.05.2 of the Employment Agreement) (the “Restricted Period”), he shall not, as an individual, employee, consultant, independent contractor, partner, shareholder, or in association with any other person, business or enterprise, directly or indirectly, and regardless of the reason for him/her ceasing to be employed by Employer, engage in the following (which periods shall run concurrent with the periods of the restrictive covenants described in Section 8.02 of the Employment Agreement and not consecutively):

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Non-Competition. Employee recognizes that if he were to become employed by, or substantially involved in, the business of a competitor of Employer or any of its affiliates, it would be very difficult for Employee not to rely on or use Employer’s and its affiliates’ Trade and Business Secrets, Proprietary and Confidential information or Employer Materials. To protect Employer’s Trade and Business Secrets, Proprietary and Confidential information and Employer Materials and its affiliates’ relationships and goodwill with customers, Employee will not, directly or indirectly through any other Person, engage in, enter the employ of, render any services to, have any ownership interest in, or participate in the financing, operation, management or control of, any Competing Business (as defined below). For purposes of this Agreement, the phrase “directly or indirectly through any other Person” shall include, without limitation, any direct or indirect ownership or profit participation interest in such enterprise, whether as an owner, stockholder, member, partner, joint venturer or otherwise, and shall include any direct or indirect participation in such enterprise as an employee, independent contractor, consultant, director, officer, licensor of technology or otherwise. For purposes of this Agreement, “Competing Business” means a Person which has a branch office or conducts material business in any county in which the Bank has an office immediately prior to the Change of Control or opens a branch or office in any county in which the Bank, immediately prior to the Change of Control, has a branch office during the Restricted Period (the “Restricted Area”) that competes with Employer and its affiliates by soliciting, offering and/or selling any services or products substantially similar in function or capability to or competitive with the existing services and products sold, licensed, distributed, marketed, provided, being developed or otherwise offered, performed or provided by Employer and its affiliates as of the Change of Control, or the services or products of Employer and its affiliates being actively planned or developed as of the Change of Control, or any other business, product or service in which Employee has been engaged for more than a de minimis amount of time during the twelve (12)-month period immediately preceding the date of Change of Control. Nothing herein shall prohibit Employee from being a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as Employee has no active participation in the business of such corporation. In view of the nature of Employee’s employment with Employer and Employee’s contribution of equity in Employer to the Change of Control, Employee likewise agrees that Employer and its affiliates would be irreparably harmed by any such competition in violation of the terms of this paragraph and that Employer and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph and to any other relief, including financial compensation commensurate with damages caused, available to them.

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Solicitation of Employees. Employee recognizes that he possesses and will possess confidential information about other employees of Employer and its affiliates relating to their education, experience, skills, abilities, compensation and benefits, and inter-personal relationships with customer(s) of Employer and its affiliates. Employee recognizes that the information he possesses and will possess about these other employees is not generally known, is of substantial value to Employer and its affiliates in developing their business and in securing and retaining customers, and in managing general daily operations of Employer, and has been and will be acquired by Employee because of his/her business position with Employer and its affiliates. Employee agrees that Employee will not, directly or indirectly, solicit or recruit any employee of Employer or its affiliates for the purpose of being employed by, or serving as a consultant or information resource to, Employee, or any competitor of Employer or its affiliates on whose behalf Employee is acting as an agent, representative or employee, and that Employee will not convey such confidential information or trade secrets about other employees of Employer and its affiliates to any other Person or legal entity. In view of the nature of Employee’s employment with Employer, Employee likewise agrees that Employer and its affiliates would be irreparably harmed by any such solicitation or recruitment in violation of the terms of this paragraph and that Employer and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph and to any other relief, including financial compensation commensurate with damages caused, available to them.

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Section 3.

Confidentiality of Agreement. As a material inducement to the Bank to enter into this Agreement, Employee represents and agrees that he will keep all terms of this Agreement completely confidential, and that he will not disclose any information concerning this Agreement to any person, including, but not limited to, any past, present or prospective employee of the Bank, except for his/her spouse, attorney, tax account and financial advisor. Employee further agrees that disclosure by him/her of the terms and conditions of this Agreement in violation of this Section constitutes a material breach of the Agreement.

Section 4.

Confidentiality of Proprietary Information. Employee acknowledges and agrees that he has an obligation to continue to keep in confidence and not use for his/her own or any other person's or entity's benefit all proprietary and confidential information concerning the Bank, as defined in Part VIII of the Employment Agreement.

Section 5.

Section 6.

Acknowledgments. Employee acknowledges, represents and agrees that:

(a)

(b)

Employee has carefully read and fully understands all of the provisions of this Agreement; and

(c)

Employee accepts the terms of this Agreement as fair and equitable under all the circumstances and voluntarily executes this Agreement.

Section 7.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

Section 8.

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Section 9.

Capitalized Terms. Any capitalized term in this Agreement that is not defined herein shall have the meaning given to such term in the Employment Agreement.

Section 10.

Integration Clause. This Agreement is intended by the parties to be their final agreement. The statements, promises and agreements in this Agreement may not be contradicted by any prior understandings, agreements, promises or statements. Employee states and promises that in signing this Agreement he has not relied on any statements or promises made by the Bank, other than the promises contained in this Agreement. Any changes to this Agreement must be in writing and signed by both Parties.

Date:

Employee:

	John W. Weubbe

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA

By:

	Edward Corum, Jr.
	Chairman of the Personnel Committee

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Exhibit 10.7

EXECUTIVE VICE PRESIDENT

EMPLOYMENT, CONFIDENTIALITY

AND NON-DISCLOSURE AGREEMENT

PART I

PARTIES TO AGREEMENT

Section 1.01 Parties: This Employment Agreement (hereinafter referred to as the “Agreement”) is entered into by and between Farmers & Merchants Bank of Central California, a California banking corporation (the “Bank” or the “Employer”), its successors and assigns, and Thomas Bennett (hereinafter referred to as “Employee”). The Bank and Employee are sometimes collectively referred to hereinafter as the “Parties” and individually as a “Party”.

PART II

EMPLOYMENT

Section 2.01 Employment: The Bank hereby agrees to employ Employee, and Employee hereby accepts such employment with the Bank, in accordance with the terms and conditions set forth herein.

Section 2.02 Term of Employment: This Agreement shall become effective on April 22, 2024. This Agreement shall terminate on March 31, 2026 unless earlier terminated pursuant to the provisions of Part VII herein. If this Agreement is not terminated pursuant to Part VII, and provided Employee enters into an effective general release of claims at the time of the expiration of this Agreement in the form attached hereto as Exhibit A, the Agreement shall renew automatically for an additional two year term, and upon reaffirmation of Exhibit A at each renewal date for successive additional two year terms thereafter, unless earlier terminated pursuant to the provisions of Part VII.

PART III

DUTIES OF EMPLOYEE

Section 3.01 General Duties: During the term of this Agreement, Employee shall be employed as Executive Vice President and Enterprise Risk Officer under the direction of the Chairman, President and Chief Executive Officer and shall perform and discharge well and faithfully the duties that may be assigned to Employee from time to time by the Chairman, President and Chief Executive Officer in connection with the conduct of the Bank’s business. Nothing herein shall preclude the Bank’s Board of Directors or Chief Executive Officer from changing Employee’s title or duties as long as the resulting title and duties are reasonably commensurate with the education, employment background and qualifications of the Employee and involve similar responsibilities and scope of duties and any such changes will not be deemed a case of Termination for Good Reason under the terms of this Agreement.

PART IV

COMPENSATION

Section 4.01 Salary: Employee shall be paid an annual base salary of no less than $270,000 per year. This base salary shall be paid to Employee in such intervals and at such times as other salaried executives of the Bank are paid. The Bank’s Board of Directors reserves the right to set the timing and level of salary adjustments for all employees and any particular employee at its sole discretion.

Employee shall be entitled beginning in the 3^rd quarter of 2024 to participate in the “Farmers & Merchants Bank of Central California Executive Retirement Plan – Equity Component,” which is a totally discretionary contribution as determined by the Board of Directors, the terms and conditions of which are set forth in separate agreement so titled.

Section 4.03 Relocation Expenses: N/A

PART V

BENEFITS

Section 5.01 Benefits: Employee shall be entitled to participate in whatever vacation, medical, dental, pension, sick leave, 401(k), profit sharing, disability insurance or other plans of general application, or other benefits which are in effect as to other officers of equivalent title of the Bank, or as may be in effect from time to time, in accordance with the rules established for individual participation in any such plan.

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PART VI

EXPENSES

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PART VII

TERMINATION OF EMPLOYMENT

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“Cause” for purposes of this Agreement shall be defined as follows:

1.	The death of Employee;

2.	Conviction of a felony resulting in a material economic adverse effect on the Bank or its affiliates;

3.	Committing acts of dishonesty, theft, embezzlement or other acts of moral turpitude against the Bank or its affiliates;

5.	An unauthorized, willful, knowing or reckless disclosure of any confidential information concerning the Bank or its affiliates or any of its directors, shareholders, customers or employees; or

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Section 7.05 Change of Control:

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Change of Control means a change of control of Bancorp. Such a Change of Control will be deemed to have occurred immediately before any of the following occur: (i) a merger, consolidation or acquisition, directly or indirectly, of more than 30% of the voting power or outstanding shares of any class of voting securities of Bancorp by any Person; (ii) a sale of all, or substantially all, of the assets of Bancorp or the Bank; or (iii) there is a change, during any period of one year or less, of a majority of the Board of Directors of Bancorp as constituted as of the beginning of such period, unless the election of each director who is not a director at the beginning of such period was approved by a vote of at least a majority of the directors then in office who were directors at the beginning of such period. If the events or circumstances described in (i)-(iii), above, shall occur to or be applicable to the Bank, then such Change of Control shall be deemed for all purposes of this Agreement to also be a “Change of Control” of Bancorp. For purposes of this Agreement, the term “Person” shall mean and include any individual, corporation, partnership, group, association or other “person”, as such term is used in Section 14(d) of the Securities Exchange Act of 1934, other than Bancorp, the Bank, any other wholly owned subsidiary of Bancorp or any employee benefit plan(s) sponsored by Bancorp, Bank or other subsidiary of Bancorp. Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred unless the change also constitutes the occurrence of a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5), with respect to the Employee.

-7-

In the event that any payment or benefit (as those terms are defined within the meaning of Internal Revenue Code Section 280G(b)(2)) paid, payable, distributed or distributable to the Employee (hereinafter referred to as “Payments”) pursuant to the terms of this Agreement or otherwise in connection with or arising out of Employee’s employment with the Bank or a change of control would be subject to the Excise Tax imposed by Section 4999 of the Internal Revenue code or any interest or penalties are incurred by Employee with respect to such Excise Tax, then Employee will be entitled to receive an additional payment (“Gross-Up Payment”) in an amount equal to the total Excise Tax, interest and penalties imposed on Employee as a result of the payment and the Excise Taxes on any federal and state tax reimbursements as set forth in Section 7.05.3.b.

Determination of Eligibility for and Amount of Gross-Up Payment: An initial determination as to whether a Gross-Up Payment is required pursuant to this Agreement and the amount of such Gross-Up Payment shall be made at the Bank’s expense by an accounting firm appointed by the Bank prior to any Change of Control. The accounting firm shall provide its determination, together with detailed supporting calculations and documentation to the Bank and Employee prior to submission of the proposed Change of Control to the Bank’s or Bancorp’s shareholders, Board of Directors or appropriate regulators for approval. If the accounting firm determines that no Excise Tax is payable by Employee with respect to a Payment or Payments, it shall furnish Employee with an opinion reasonably acceptable to Employee that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten (10) days of the delivery of the determination to Employee, Employee shall have the right to dispute the determination. The existence of the dispute shall not in any way affect Employee’s right to receive the Gross-Up Payment in accordance with the determination. Upon the final resolution of a dispute, the Bank or its successor shall promptly pay to Employee any additional amount required by such resolution. If there is no dispute, the determination shall be binding, final and conclusive upon the Bank and Employee, except to the extent that any taxing authority subsequently makes a determination that the Excise Tax or additional Excise Tax is due and owing on the payments made to Employee. If any taxing authority determines that the Excise Tax or additional Excise Tax is due and owing, the Bank or the entity acquiring control of the Bank shall pay the Excise Tax and any penalties assessed by such taxing authority.

-8-

Excise Tax Withholding: Notwithstanding anything contained in this Agreement to the contrary, in the event that according to the determination, an Excise Tax will be imposed on any Payment or Payments, the Bank or its successor shall pay to the applicable government taxing authorities as Excise Tax withholding, the amount of the Excise Tax that the Bank has actually withheld from the Payment or Payments.

PART VIII

COVENANTS

Employee Initials ____

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Employee Initials ____

Section 8.03 Definitions:

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“Proprietary and Confidential Information” includes any information, in whatever form or format, including that which has not been memorialized in writing.

Employee acknowledges that Employee has been apprised of the provisions of Labor Code Section 2860 which provides: “Everything which an Employee acquires by virtue of his employment, except the compensation which is due him from his Employer, belongs to the Employer, whether acquired lawfully or unlawfully, or during or after the expiration of the term of his employment.” Employee understands that any work that Employee created or helped create at the request of the Bank, including user manuals, training materials, sales materials, customer and prospective customer information and business data, process manuals, and other written and visual works, are works made for hire in which the Bank owns the copyright. Employee may not reproduce or publish these copyrighted works, except in the pursuit of his/her employment duties with the Bank.

Employee Initials ____

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PART IX

TAXES

Section 9.01 Withholding: All payments to be made to Employee under this Agreement will be subject to required withholding of federal, state and local income and employment taxes as applicable.

Section 9.02 Section 409A:

C. For purposes of the provisions of this Agreement which require commencement of payments or benefits subject to Section 409A upon a termination of employment, the terms “termination of employment” and “Separation Date” shall mean a “separation from service” with the Bank (as such term is defined in Treasury Regulations issued under Code Section 409A), notwithstanding anything in this Agreement to the contrary.

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F. The provisions of this Part X are intended to comply with Code Section 409A and shall be interpreted consistent with such section.

PART X

GENERAL PROVISIONS

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Section 10.08 - Full Settlement: The Bank’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set off, counterclaim, recoupment, defense or other claim, right or action which the Bank may have against Employee or others. In no event shall Employee be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Employee under any of the provisions of this Agreement and such amount shall not be reduced whether or not Employee obtains other employment.

Section 10.10 Advice of Counsel: Employee warrants that he/she has consulted with legal counsel of his/her choice to advise him/her with respect to the terms and conditions of this Agreement.

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA

By:

/s/ Edward Corum Jr.

Date:

5/8/2024

	Edward Corum Jr.
	Chairman of the Personnel Committee

EMPLOYEE:	/s/ Thomas Bennett		Date:	5/2/2024
	Thomas Bennett

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EXHIBIT A

AGREEMENT AND GENERAL RELEASE

This Agreement and General Release (“Agreement”) is entered into by and between Thomas Bennett (“Employee”) and Farmers & Merchants Bank of Central California, California banking corporation (the “Bank” and together with the Employee, the “Parties”).

WHEREAS, pursuant to Section 7.01 and 7.05 of the Parties’ Employment, Confidentiality and Non-Disclosure Agreement dated as of April 22, 2024, as may be amended or automatically renewed (“Employment Agreement”), Employee is required to enter into a release of claims in the Bank’s favor in exchange for the payment of certain benefits or the automatic renewal of the Employment Agreement pursuant to Section 2.02; and

WHEREAS, the Parties wish to memorialize either the terms of Employee’s departure under Section 7.01 of the Employment Agreement or the payment of the Change of Control Compensation Package (as defined in Section 7.05 of the Employment Agreement) or the automatic renewal of the Employment Agreement under section 2.02, and to resolve all issues or disputes arising out of or related to (i) the employment relationship and the termination thereof under Section 7.01 of the Employment Agreement or (ii) the employment relationship prior to a Change of Control (as defined in the Employment Agreement) or the automatic renewal of the Employment Agreement, as the case may be.

NOW, THEREFORE, the Parties hereby agree as follows:

Section 1.

Release of the Bank. In consideration of receipt by Employee of the Severance Package or the Change of Control Compensation Package, as applicable, which Employee acknowledges is in addition to anything of value to which he/she is otherwise entitled, Employee, on behalf of himself/herself and his/her heirs, attorneys, executors, successors, administrators and assigns, does hereby release, acquit and forever discharge the Bank and its respective predecessors, successors, assigns, subsidiaries, divisions, holding companies, affiliated companies and benefit plans, and each of their respective present and former affiliates, directors, officers, fiduciaries, employees, agents, successors and assigns, from any and all liabilities, damages, causes of action and claims of any nature, kind or description whatsoever, whether accrued or to accrue, which Employee ever had, now has or hereafter may have against any of them, known or unknown, that are based on facts occurring the day of and prior to the day Employee executes this Agreement, including, but not limited to, any claims under any state or federal law or statute, including, but not limited to, the Age Discrimination in Employment Act of 1967 (29 U.S.C. section 621 et seq.), the Americans with Disabilities Act of 1990, the Civil Rights Acts of 1964 and 1991, the Equal Pay Act, any claim based on tort, contract or otherwise, any claim for attorneys’ fees or costs, or any matter or action related to Employee employment and/or affiliation with, or termination and separation from the Bank and its affiliates.

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This Agreement recognizes the rights and responsibilities of the Equal Employment Opportunity Commission (“EEOC”) and the California Department of Fair Employment and Housing (“DFEH”) to enforce the statutes which come under their jurisdiction. This Agreement is not intended to prevent Employee from initiating or participating in any investigation or proceeding conducted by the EEOC or the DFEH; provided, however, that nothing in this section limits or affects the finality or the scope of the Release. Employee has waived and released any claim that he/she may have for damages based on any alleged discrimination, harassment or retaliation, that are based on facts occurring the day of and prior to the day the Employee executes this Agreement, and may not recover damages in any proceeding conducted by the EEOC or the DFEH.

Section 2.

Section 3.

Section 4.

Section 5.

Section 6.

Acknowledgments. Employee acknowledges, represents and agrees, in compliance with the Older Workers’ Benefit Protection Act, that:

(a)

(b)

Employee has carefully read and fully understands all of the provisions of this Agreement;

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(c)

(d)

Employee has a full seven (7) days following the execution of this Agreement to revoke this Agreement, and has been and is hereby advised in writing that this Agreement shall not become effective or enforceable as to Employee rights under the federal Age Discrimination in Employment Act (29 U.S.C. section 621 et seq.) until the revocation period has expired (but shall be immediately effective as to all other claims). Any revocation shall be made in writing and delivered to Bank’s Chief Executive Officer on or before the seventh day following Employee execution of this Agreement; and

(e)

Employee accepts the terms of this Agreement as fair and equitable under all the circumstances and voluntarily executes this Agreement.

Section 7.

Section 8.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

Section 9.

Section 10.

Integration Clause. This Agreement is intended by the parties to be their final agreement. The statements, promises and agreements in this Agreement may not be contradicted by any prior understandings, agreements, promises or statements. Employee states and promises that in signing this Agreement he/she has not relied on any statements or promises made by the Bank, other than the promises contained in this Agreement. Any changes to this Agreement must be in writing and signed by both Parties.

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THIS IS A RELEASE OF ALL CLAIMS – READ THOROUGHLY BEFORE SIGNING

Date:

Employee:
	Thomas Bennett

Date:

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA

By:

	Edward Corum, Jr.
	Chairman of the Personnel Committee

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EXHIBIT B

NON-COMPETITION AND NON-SOLICITATION AGREEMENT

This Non-Competition and Non-Solicitation Agreement (“Agreement”) is entered into by and between Thomas Bennett (“Employee”) and Farmers & Merchants Bank of Central California, a California banking corporation (the “Bank”).

WHEREAS, pursuant to Section 7.05 of the Parties’ Employment, Confidentiality and Non-Disclosure Agreement dated as of April 22, 2024, as may be amended or automatically renewed (“Employment Agreement”), the Parties wish to memorialize the covenants to which Employee will become subject upon a Change of Control and the portion of Employee’s Change of Control Compensation Package that is intended to serve as compensation for compliance with such covenants;

NOW, THEREFORE, the Parties hereby agree as follows:

Section 1.

The compensation set forth above is in consideration for the covenants of Employee as set forth in this Agreement.

Section 2.

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Non-Competition. Employee recognizes that if he were to become employed by, or substantially involved in, the business of a competitor of Employer or any of its affiliates, it would be very difficult for Employee not to rely on or use Employer’s and its affiliates’ Trade and Business Secrets, Proprietary and Confidential information or Employer Materials. To protect Employer’s Trade and Business Secrets, Proprietary and Confidential information and Employer Materials and its affiliates’ relationships and goodwill with customers, Employee will not, directly or indirectly through any other Person, engage in, enter the employ of, render any services to, have any ownership interest in, or participate in the financing, operation, management or control of, any Competing Business (as defined below). For purposes of this Agreement, the phrase “directly or indirectly through any other Person” shall include, without limitation, any direct or indirect ownership or profit participation interest in such enterprise, whether as an owner, stockholder, member, partner, joint venturer or otherwise, and shall include any direct or indirect participation in such enterprise as an employee, independent contractor, consultant, director, officer, licensor of technology or otherwise. For purposes of this Agreement, “Competing Business” means a Person which has a branch office or conducts material business in any county in which the Bank has an office immediately prior to the Change of Control or opens a branch or office in any county in which the Bank, immediately prior to the Change of Control, has a branch office during the Restricted Period (the “Restricted Area”) that competes with Employer and its affiliates by soliciting, offering and/or selling any services or products substantially similar in function or capability to or competitive with the existing services and products sold, licensed, distributed, marketed, provided, being developed or otherwise offered, performed or provided by Employer and its affiliates as of the Change of Control, or the services or products of Employer and its affiliates being actively planned or developed as of the Change of Control, or any other business, product or service in which Employee has been engaged for more than a de minimis amount of time during the twelve (12)-month period immediately preceding the date of Change of Control. Nothing herein shall prohibit Employee from being a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as Employee has no active participation in the business of such corporation. In view of the nature of Employee’s employment with Employer and Employee’s contribution of equity in Employer to the Change of Control, Employee likewise agrees that Employer and its affiliates would be irreparably harmed by any such competition in violation of the terms of this paragraph and that Employer and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph and to any other relief, including financial compensation commensurate with damages caused, available to them.

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Solicitation of Employees. Employee recognizes that he possesses and will possess confidential information about other employees of Employer and its affiliates relating to their education, experience, skills, abilities, compensation and benefits, and inter-personal relationships with customer(s) of Employer and its affiliates. Employee recognizes that the information he possesses and will possess about these other employees is not generally known, is of substantial value to Employer and its affiliates in developing their business and in securing and retaining customers, and in managing general daily operations of Employer, and has been and will be acquired by Employee because of his/her business position with Employer and its affiliates. Employee agrees that Employee will not, directly or indirectly, solicit or recruit any employee of Employer or its affiliates for the purpose of being employed by, or serving as a consultant or information resource to, Employee, or any competitor of Employer or its affiliates on whose behalf Employee is acting as an agent, representative or employee, and that Employee will not convey such confidential information or trade secrets about other employees of Employer and its affiliates to any other Person or legal entity. In view of the nature of Employee’s employment with Employer, Employee likewise agrees that Employer and its affiliates would be irreparably harmed by any such solicitation or recruitment in violation of the terms of this paragraph and that Employer and its affiliates shall therefore be entitled to preliminary and/or permanent injunctive relief prohibiting Employee from engaging in any activity or threatened activity in violation of the terms of this paragraph and to any other relief, including financial compensation commensurate with damages caused, available to them.

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Section 3.

Confidentiality of Agreement. As a material inducement to the Bank to enter into this Agreement, Employee represents and agrees that he will keep all terms of this Agreement completely confidential, and that he will not disclose any information concerning this Agreement to any person, including, but not limited to, any past, present or prospective employee of the Bank, except for his/her spouse, attorney, tax account and financial advisor. Employee further agrees that disclosure by him/her of the terms and conditions of this Agreement in violation of this Section constitutes a material breach of the Agreement.

Section 4.

Confidentiality of Proprietary Information. Employee acknowledges and agrees that he has an obligation to continue to keep in confidence and not use for his/her own or any other person's or entity's benefit all proprietary and confidential information concerning the Bank, as defined in Part VIII of the Employment Agreement.

Section 5.

Section 6.

Acknowledgments. Employee acknowledges, represents and agrees that:

(a)

(b)

Employee has carefully read and fully understands all of the provisions of this Agreement; and

(c)

Employee accepts the terms of this Agreement as fair and equitable under all the circumstances and voluntarily executes this Agreement.

Section 7.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

Section 8.

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Section 9.

Capitalized Terms. Any capitalized term in this Agreement that is not defined herein shall have the meaning given to such term in the Employment Agreement.

Section 10.

Integration Clause. This Agreement is intended by the parties to be their final agreement. The statements, promises and agreements in this Agreement may not be contradicted by any prior understandings, agreements, promises or statements. Employee states and promises that in signing this Agreement he has not relied on any statements or promises made by the Bank, other than the promises contained in this Agreement. Any changes to this Agreement must be in writing and signed by both Parties.

Date:

Employee:

	Thomas Bennett

FARMERS & MERCHANTS BANK OF CENTRAL CALIFORNIA

By:

	Edward Corum, Jr.
	Chairman of the Personnel Committee

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May 9, 2024

/s/ Kent A. Steinwert

Kent A. Steinwert
Chairman, President
& Chief Executive Officer

/s/ Bart R. Olson

Bart R. Olson
Executive Vice President & Chief Financial Officer