DEF 14A of Farmers & Merchants Bancorp Inc, Mar 15, 2024

DEF 14A of Farmers & Merchants Bancorp Inc

Filed Mar 15, 2024 · FY20230001193125-24-068965

Open on EDGAR

  1. How many shares are owned by Directors and Executive Officers?

    How many shares are owned by Directors and Executive Officers? All directors and named executive officers of the Company as a group (comprised of 16 individuals), beneficially held 1,077,896 shares of the Company’s common stock as of January 1, 2024, representing 7.89% of the outstanding common stock of the Company.

  2. PROPOSAL ONE

    PROPOSAL ONE

  3. Election of Directors and Information Concerning Directors and Officers

    Election of Directors and Information Concerning Directors and Officers Pursuant to the Code of Regulations of Farmers & Merchants Bancorp, Inc. the number of directors is currently set at thirteen. Set forth below, as of the record date, is information concerning the nominees for election to the Board of Directors. The following persons have been nominated as directors by the Board of Directors upon the recommendation of the Company’s Corporate Governance and Nominating Committee to serve until the Annual Meeting of Shareholders in 2025: There are no family relationships among any of the directors, nominees for election as directors and executive officers of the Company. In addition, no member of the Board of Directors serves on the Board of any other company which has a class of securities registered with the Securities and Exchange Commission. While it is contemplated that all nominees will stand for election, and the nominees have confirmed this with the Company, if one or more of the nominees at the time of the Annual Meeting should be unavailable or unable to serve as a candidate for election as a director of the Company, the proxies reserve full discretion to vote the common shares represented by the proxies for the election of the remaining nominees and any substitute nominee(s) designated by the Board of Directors. The Board of Directors knows of no reason why any of the aforementioned persons will be unavailable or unable to serve if elected to the Board. The attached form of proxy grants to the persons listed in such proxy the right to vote shares cumulatively in the election of directors if a shareholder properly implements cumulative voting.

  4. Election of Directors and Information Concerning Directors and Officers

    | Name | Age | Principal Occupation or Employment for Past Five Years | Year First Became Director | | Ian D. Boyce | 56 | Founding Member and Managing Partner Dickmeyer Boyce Financial Management | 2024 | | Andrew J. Briggs | 69 | Retired and former Chairman of Limberlost Bancshares, Inc. and President of its wholly-owned subsidiary Bank of Geneva | 2019 | | Eugene N. Burkholder | 71 | President, Falor Farm Center, Inc. | 2012 | | Lars B. Eller | 57 | President and CEO of the Company and The Farmers & Merchants State Bank | 2018 | | Jo Ellen Hornish | 70 | CEO, Hornish Bros, Inc. / Fountain City Leasing, Inc. / Advantage Powder Coating, Inc. | 2013 | | Jack C. Johnson | 71 | President, Hawk’s Clothing, Inc. | 1991 | | Lori A. Johnston | 62 | President, ProMedica Insurance Corporation | 2020 | | Dr. Marcia S. Latta | 62 | Vice President of University Advancement, The University of Findlay | 2009 | | Steven J. Planson | 64 | President, Planson Farms, Inc. | 2008 | | Kevin J. Sauder | 63 | President, Chief Executive Officer, Sauder Woodworking Co. | 2004 | | Frank R. Simon | 54 | Founder & Managing Member / Attorney Simon PLC Attorneys & Counselors | 2021 | | Dr. K. Brad Stamm | 71 | President and Educational Consultant of Stamm Management Group | 2016 | | David P. Vernon | 57 | Owner, Licensed Funeral Director & Embalmer Vernon Family Funeral Homes | 2021 |

  5. Compensation Discussion and Analysis

    | ● | Provide competitive compensation opportunities critical to the Company’s long-term success. |

  6. Compensation Discussion and Analysis

    The Committee uses comparisons of competitive executive pay practices taken from banking industry compensation surveys and, from time-to-time, consultation with independent executive compensation advisors. Peer groups and competitive compensation practices are determined using executive compensation packages at bank holding companies and subsidiaries of comparable size to the Company and the Bank. In evaluating peer group companies, the base salary and incentive compensation paid to the chief executive officer of each of the following nineteen peer bank holding companies, as well as the respective ROA (Return on Assets) of each are taken into consideration. The Committee reviews this information at least once a year in conjunction with events in the industry and marketplace to determine if any changes or revisions are deemed necessary. For 2023 compensation considerations, the peer group companies consisted of nineteen bank holding companies: ChoiceOne Financial Services, Inc. (COFS), Civista Bancshares, Inc. (CIVB), Farmers National Banc Corp. (FMNB), First Financial Corporation (THFF), First Internet Bancorp (INBK), First Savings Financial Group, Inc. (FSFG). Independent Bank Corporation (IBCP), Isabella Bank Corporation (ISBA), LCNB Corp. (LCNB), Macatawa Bank Corporation (MCBC), Middlefield Bank Corporation (MBCN), Mercantile Bank Corporation (WBWM), Richmond Mutual Bancorporation, Inc. (RMBI), SB Financial Group, Inc. (SBFG), Arbor Bancorp, Inc. (Privately held), Star financial Group (SFIGA), Finward Bancorp (FNWD), Waterford (Privately held), and First Berne Financial Corp. (Privately held). The financial performance of the selected peer group bank holding companies is also evaluated relative to the performance of peers located outside of the Midwest. This information is made available by the FDIC as part of its Uniform Bank Performance Report. The Company may periodically review and adjust the selected peer group companies in conjunction with a regular review of executive compensation pay and practices in connection with future compensation decisions. In making its decisions regarding annual salary adjustments, the Committee reviews quantitative and qualitative performance factors as part of an annual performance appraisal. These are established for each executive position and the performance of the incumbent executive is evaluated annually against these standards. This appraisal is then integrated with market-based adjustments to salary ranges to determine if a base salary increase is merited. The Committee administers the cash-based annual incentive compensation program and the Long-Term Stock Incentive Plan. Cash-based incentives and equity awards are at-risk compensation. Awards under these programs are recommended by the Committee to the Board of Directors when, in the judgment of Committee members, such awards are deemed to provide executive officers a reasonable reward for the achievement of the Company’s mid and long-term strategic objectives and are otherwise justified by the performance of executive officers in relation to the performance of the Company. The accounting and tax treatment of particular forms of compensation do not materially affect the Committee’s compensation decisions. However, the Committee evaluates the effect of such accounting and tax treatment on an ongoing basis and will make appropriate modifications to its compensation policies where appropriate. Components of Compensation. The elements of total compensation paid by the Company to its senior officers, including the President and Chief Executive Officer (the “CEO”) and the other executive officers identified in the Summary Compensation Table which appears following this Compensation Discussion and Analysis (the CEO and the other executive officers identified in that Table are sometimes referred to collectively as the “Named Executive Officers”), include the following:

  7. Compensation Discussion and Analysis

    | ● | Awards under our Long-Term Stock Incentive Plan; |

  8. Compensation Discussion and Analysis

    Base Salary. The base salaries of the Named Executive Officers are reviewed by the Committee annually as well as at the time of any promotion or significant change in job responsibilities. The committee reviews peer group data to establish a market-competitive executive base salary program, in conjunction with a formal performance appraisal system that focuses on awards that are integrated with strategic corporate objectives. Salary income for each Named Executive Officer for calendar year 2023 is reported in the “Salary” column 1 of the Summary Compensation Table, which appears following this Compensation Discussion and Analysis. In making its decisions regarding annual salary adjustments for 2023, the Compensation Committee reviewed quantitative and qualitative performance factors, peer compensation comparisons, market-based salary ranges, and overall performance of the Company to determine base salary adjustments. Cash-Based Incentive Compensation Program. The Company has established a cash-based incentive compensation program. The cash incentive for executive officers under this plan is based on two criteria. The first is return on average assets (“ROA”) of the Bank. If the ROA of the Bank equals the target ROA of 1.10%, executive officers receive the full cash incentive established. The targeted goal of ROA is based on reviewing the projected budget, the five- and ten-year history and average of the Bank along with peer, industry, and other information requested by the Compensation Committee. The calculated ROA is inclusive of the cost of the incentive and is net of the captive insurance expense and acquisition costs at the Bank level. The full cash incentive under this criterion is equivalent to 30% of base salary for the CEO and 20% of base salary for the remaining executive officers. If the ROA of the Bank is equal to 0.85%, fifty percent of the incentive is paid. If the ROA is between 0.85% and 1.10%, the incentive is paid on a prorated basis. Should the ROA exceed 1.10%, the incentive paid would be increased accordingly. Should the ROA be below .60%, no cash incentive is paid under the computation. For any amount between 0.60-0.85% the incentive is paid at 2% for each basis point. Incentive compensation would then be paid under the same terms to all employees of the Bank. The percentage of base salary for this incentive is paid in the first quarter of the subsequent year. The target percentage along with budget and base may be adjusted for 2024. The second criterion used in determining the cash incentive to be paid to executive officers is earnings per share (“EPS”) of the Company. The target EPS goal is based on reviewing past performance and history and the projected EPS from the budget. The EPS final incentive target ranges were set as follows: a 5% incentive would be paid for an EPS of $2.46, a 10% incentive would be paid for an EPS of $2.51, and a 15% incentive would be paid for an EPS of $2.66. If the EPS is below $2.46, an incentive would not be paid for this criterion. An EPS between the stated targets or exceeding $2.66 would be adjusted accordingly. The percentage of base salary for the incentive is paid in the first quarter of the subsequent year. The target EPS and corresponding percentages may be adjusted for 2024. The forecast ROA and EPS used for the 2023 incentives were set equivalent to the expected performance of normal operations. In establishing dual incentives for the executive officers of the Bank, the objective of the Company is to limit the risk exposure to compensating for short term gains while still recognizing the importance of return to its shareholders each year. Thus, more emphasis is placed on rewarding for stable, long-term performance through the use of ROA criterion along with a higher percentage of pay at risk. The EPS criterion recognizes a yearly target and focuses on the importance of earning performance and its impact on maintaining a healthy profitable corporation from which to pay dividends to shareholders and to maintain and improve the value of their stock. Each year, the Committee sets goals for each incentive which it believes are attainable, but still require executives’ performance at a consistently high level to achieve target award levels. As such, the Company believes it has established an equitable and reasonable balance in the incentives for executive management. Given that the target ROA and EPS may be adjusted each year at the Board’s discretion, the Company feels it has established a plan that is beneficial to both its executives and shareholders by placing overall emphasis on corporate performance and return to shareholders. Further discussion of the Bank’s overall incentive plan may be found in the 2023 financial report and the Form 10-K. Incentive Stock Compensation. The Bank uses the grant of stock awards under our Long-Term Incentive Plan as the primary vehicle for providing long-term incentive compensation opportunities to its officers, including the Named Executive Officers. The grant of stock awards is intended to serve as an officer retention and recruitment tool and to reward performance, and as such requires a three-year cliff vesting period prior to issuance without restrictions. Officers’ and Named Executive Officers’ past and future services are considered for grants of stock awards. The Bank has not adopted any specific policy regarding the amount or timing of any stock-based compensation under the plan. The number of shares underlying the award granted to each Named Executive Officer in 2023 is set forth in the Grants of Plan Based Awards Table and the fair value dollar amount, determined on the grant date, for calendar years 2021, 2022 and 2023 with respect to each such award is set forth in the column titled Stock Awards of the Summary Compensation Table, each of which follows. Information concerning the number of stock awards held by each Named Executive Officer as of December 31, 2023 is set forth in the Outstanding Equity Awards at Fiscal Year-end Table, which also follows. Profit Sharing Plan. The Bank has established a 401(k) profit sharing plan that allows eligible employees to save at a minimum one percent of eligible compensation on a pre-tax or post-tax basis, subject to certain Internal Revenue Service limitations. The Bank will match 50% of employee 401(k) contributions up to six percent of total eligible compensation. In addition, the Bank may make a discretionary contribution from time to time as is deemed advisable. A participant is 100% vested in the participant’s deferral contributions. Employer matching contributions are funded each pay cycle and are immediately vested. Employer discretionary contributions are immediately vested. Employees are immediately eligible upon hire to contribute to the plan and receive matching contributions. In order to be eligible for discretionary contributions, employees must work 1,000 hours in the plan year and be employed on the last day of the year. The Company’s contribution to the plan made on behalf of the Named Executive Officers is included under the “All Other Compensation” column in the Summary Compensation Table. Health and Welfare Benefits. The Company provides healthcare, life and disability insurance and other employee welfare benefits programs to its employees, including its executive officers. The committee provides guidance for the administration of these programs and believes that its employee benefits programs should be comparable to those maintained by other members of the relevant peer groups so as to assure that the Company is able to maintain a competitive position in terms of attracting and retaining officers and other employees. Except for our Executive Survivor Income Agreement, our employee benefits plans are provided on a non-discriminatory basis to all employees.

  9. Compensation Discussion and Analysis

    The Company has entered into Executive Survivor Income Agreements with some of the Named Executive Officers that provide certain death benefits to the executive’s beneficiaries upon his or her death. The agreements provide a pre-retirement and post-retirement death benefit payable to the beneficiaries of the executive in the event of the executive’s death. The Company had originally purchased life insurance policies on the lives of all participants covered by these agreements in amounts sufficient to provide the sums necessary to pay the beneficiaries. As the employees age and their pay changes, the Company is made whole on its investment before beneficiaries receive any proceeds. Therefore, over time, the death benefit payable to the beneficiary may be smaller than the previously anticipated value. Two former and two active executives have been impacted. The actual gross death benefit amounts payable under this plan are disclosed under Payments and Benefits in Connection with Termination or Change-in-Control. Consideration of Advisory Vote on Executive Compensation. The Company conducted an advisory vote on executive compensation at the 2023 annual Meeting of Shareholders. Votes cast on that advisory proposal indicated a significant level of support in favor of the Company’s compensation policies and practices as disclosed in the proxy statement for the 2023 Annual Meeting. As a result of this strong shareholder support, the board of directors and the Committee did not believe that any significant changes to the Company’s compensation policies and practices were needed to address shareholder concerns. At the 2023 Annual Meeting of Shareholders, the Company also conducted its last advisory vote on the frequency with which shareholders of the company would be asked to endorse the executive compensation program. A majority of votes cast on this advisory proposal were in favor of holding future advisory votes on the Company’s executive compensation program at a frequency of every year. Based on the advisory vote results regarding the frequency with which shareholders would be asked to endorse the executive compensation program, the Board of Directors and Committee elected to hold the advisory vote on executive compensation annually. Shareholders again have an opportunity to express their opinion and cast their advisory votes in consideration of the Company’s executive compensation program at this year’s Annual Meeting. The Board of Directors and Committee will evaluate the results of this year’s advisory vote to determine whether changes to such policies and practices may be necessary or appropriate to address shareholder concerns. 2023 Executive Officer Compensation Program. For 2023, the Named Executive Officers in the Summary Compensation Table received salaries that were intended to maintain their compensation at a competitive level and acknowledge the competitive market conditions in which the Bank’s business continues to be conducted. To aid in determining chief executive officer compensation for 2023, the Company used compensation data from peer bank holding companies which are similar in size ($1.045 billion to $4.998 billion in assets), and geographic locations (in Ohio, Indiana, Michigan, and Pennsylvania) of which the majority are publicly held and performing similarly to the Company as one piece of information. Data is obtained from the proxy statements filed by those companies as of the previous year end and through consultation with an independent executive compensation advisor. This provided a regional comparison in addition to compensation data obtained from other state or national peer comparisons. For 2023 executive officer compensation, the President and CEO of the Bank, the Chief People Officer (CPO) and the CFO, participated in the presentation portion of the Committee meeting at which compensation information was presented and reviewed. The Committee then met in executive session and made its own determinations regarding compensation for the President and CEO and all other executive officers. Adjustments in 2023 base salary were based upon each Named Executive Officer’s annual performance review, an annual review of peer compensation, and the overall performance of the Company. These adjustments are consistent with the Company’s salary budget which is approved by the Compensation Committee and becomes part of the overall budget approved annually by the Board of Directors. As part of its compensation program the Company has entered into agreements with some of the Named Executive Officers pursuant to which they will be entitled to receive severance benefits upon the occurrence of certain enumerated events following a change in control. The events that trigger payment are generally those related to termination of employment without cause or detrimental changes in the executive’s terms and conditions of employment. See the section captioned “Post-Employment Compensation/Change in Control Agreements” that follows for a more detailed description of these events. The Company believes that this structure will help: (i) assure the executives’ full attention and dedication to the Company, free from distractions caused by personal uncertainties and risks related to a pending or threatened change in control, (ii) assure the executives’ objectivity for shareholders’ interests, (iii) assure the executives of fair treatment in case of involuntary termination following a change in control, and (iv) attract and retain key talent during uncertain times. Risk Management and Compensation. The compensation policies and practices of the Company are not believed to create risks that are reasonably likely to have a material adverse effect on operations or financial results. The compensation policies and practices of the Company are not designed to provide enormous bonuses and do not encourage employees to take undue amounts of risk. The incentives provided to employees are designed to encourage sound performance over time rather than the pursuit of immediate high-risk profits. The policies and practices of the Company include controls that mitigate the potential impact of compensation policies that might otherwise create unacceptable levels of risk.

  10. Summary Compensation Table

    Summary Compensation Table

  11. Summary Compensation Table

    | Name and Principal Position | Year | Salary ($) | Non-Equity Incentive Compensation ($) (1) | Stock Awards ($) (2) | Option Awards ($) | All Other Compensation ($) (3) | Total ($) | | Lars B. Eller | 2023 | 490,000 | 52,920 | 124,320 | 0 | 34,635 | 701,875 | | President and Chief Executive | 2022 | 410,573 | 209,448 | 122,560 | 0 | 39,398 | 781,979 | | Officer (PEO) (4) | 2021 | 389,481 | 223,094 | 68,100 | 0 | 37,116 | 717,791 | | Barbara J. Britenriker | 2023 | 260,183 | 18,734 | 54,390 | 0 | 28,600 | 361,907 | | Executive Vice President (PFO) | 2022 | 245,932 | 96,158 | 61,280 | 0 | 26,212 | 429,582 | | | 2021 | 235,215 | 107,283 | 45,400 | 0 | 31,048 | 418,946 | | Rex D. Rice | 2023 | 235,960 | 16,989 | 49,210 | 0 | 25,632 | 327,791 | | Executive Vice President | 2022 | 219,833 | 85,953 | 36,768 | 0 | 27,981 | 370,535 | | | 2021 | 209,500 | 95,595 | 27,240 | 0 | 27,716 | 360,051 | | Benét S. Rupp | 2023 | 235,786 | 16,977 | 49,210 | 0 | 21,447 | 323,420 | | Executive Vice President | 2022 | 200,500 | 73,989 | 45,960 | 0 | 23,973 | 344,422 | | | 2021 | 193,070 | 45,036 | 27,180 | 0 | 35,958 | 301,244 |

  12. Summary Compensation Table

    Summary Compensation Table Footnotes:

  13. Summary Compensation Table

    | (1) Reflects payments made pursuant to the Company’s cash-based incentive compensation program discussed more thoroughly under the section of this Proxy Statement captioned “Compensation Discussion and Analysis”. |

  14. Summary Compensation Table

    | (2) Reflects the dollar amount at the market value on the grant date of each year in which restricted stock awards were granted under the Long-Term Incentive Plan, as discussed more thoroughly under the section of this Proxy Statement captioned “Compensation Discussion and Analysis”. Each award vests three years following the date of grant. |

  15. Summary Compensation Table

    | (3) Includes contributions by the Company to the Company’s defined contribution Health Savings Account (HSA), profit sharing, 401(k) plan, and certain life insurance premiums paid by the Company for the benefit of the Named Executive Officer, and with respect to Mr. Eller and Ms. Rupp, amounts paid pursuant to a monthly automobile allowance, as follows: |

  16. Summary Compensation Table

    | Name | HSA and Retirement Contributions ($) | Life Insurance Premiums ($) | Automobile Allowance ($) | Total ($) | | Lars B. Eller | 19,758 | 7,677 | 7,200 | 34,635 | | Barbara J. Britenriker | 24,871 | 3,729 | 0 | 28,600 | | Rex D. Rice | 22,284 | 3,348 | 0 | 25,632 | | Benét S. Rupp | 12,068 | 2,179 | 7,200 | 21,447 |

  17. Summary Compensation Table

    | (4) Mr. Eller’s director fees are included in his base pay, and he received a stock award equivalent to $14,915. |

  18. Summary Compensation Table

    Narrative Explanation to the Summary Compensation table Named Executive Officers participate in an annual cash-based incentive compensation program that provides for awards tied to the profit performance of the Company during the fiscal year. The amounts set forth in the “Non-Equity Incentive Compensation” column represent the awards made under the terms of the Plan for 2023 which were paid to the respective Named Executive Officer during the first quarter of 2024. The awards under the plan in 2022 and 2023 were also paid out to officers in the first quarter of the following year. Refer to the compensation discussion and analysis for a complete explanation of the Plan.

  19. Summary Compensation Table

    | ● | Based on 2023 results, an adjusted ROA of 0.78% at the Bank level is below the target ROA of 1.12% which is equivalent to a 36% payout of the incentive. Based on a 36% payout, 10.80% of base salary was paid to the CEO and 7.2% of base salary was paid to the remaining executive officers. The percentage of base salary for this 2023 incentive was paid in the first quarter 2024. |

  20. Summary Compensation Table

    | ● | For 2023, there was no payout paid to all executive officers based on EPS. |

  21. Summary Compensation Table

    The stock awards reported in the Summary Compensation Table represent the dollar amount valued as of the grant date of restricted stock awards to Named Executive Officers. The vesting of awards of restricted stock made to date under the terms of the Long-Term Incentive Plan occurs three years following the grant, unless otherwise specified. As of September 1, 2021, Mr. Eller entered into a new employment agreement (the “2021 Employment Agreement”) with Farmers & Merchants Bancorp, Inc. and The Farmers & Merchants State Bank, the wholly-owned subsidiary of Farmers & Merchants Bancorp, Inc. Mr. Eller’s 2021 Employment Agreement is for an additional three-year term ending on August 31, 2024, whereby his services will continue in the capacity of President and Chief Executive Officer of the Bank and the Company. Pursuant to the terms of the Employment Agreement, Mr. Eller would receive annual base pay of $389,480, subject to upward adjustment, and would be entitled to participate in the Bank’s employee benefit plans and programs generally available to similarly situated employees. The 2021 Employment Agreement also provided for Mr. Eller’s participation in the Bank’s Annual Cash Incentive Plan and 401(k) Plan, and receipt of grants of restricted common shares of the Company with a target range of 4,000 shares. Additionally, Mr. Eller will receive grants of unrestricted common shares of the Company as compensation in amounts equal to that provided for non-employee Directors with such grant equal to $6,000 in value of the common shares of the Company in 2021. The Agreement also provided four weeks of vacation, a monthly automobile allowance, reimbursement for appropriate business expenses, and an obligation on the part of the Company to maintain a term life insurance policy for the benefit of Mr. Eller in the amount of $600,000. Under the terms of the 2021 Employment Agreement, Mr. Eller is subject to covenants not to compete and not to solicit during the term of the Agreement and for one year after termination of his employment with the Bank. During the term of the 2021 Employment Agreement, the restrictions apply without geographic limit. After termination of Mr. Eller’s employment with the Bank, the covenants not to compete and not to solicit would apply to counties where the Bank has offices and contiguous counties. The 2021 Employment Agreement also contains provisions governing payouts to Mr. Eller in connection with certain terminations from employment, which are discussed under the section of this Proxy Statement captioned “Post-Employment Compensation/Changes in Control Agreements.”

  22. 2023 Grants of Plan-Based Awards

    2023 Grants of Plan-Based Awards

  23. 2023 Grants of Plan-Based Awards

    | Name and Principal Position | Grant Date | All Other Stock Awards: Number of Shares of Stock or Units | Grant Date Fair Value of Stock and Option Awards | | Lars B. Eller, President | 3/1/2023 | 4,800 | $124,320 | | and CEO (PEO) | | | | | Barbara J. Britenriker, EVP (PFO) | 3/1/2023 | 2,100 | $54,390 | | Rex D. Rice, EVP | 3/1/2023 | 1,900 | $49,210 | | Benét S. Rupp, EVP | 3/1/2023 | 1,900 | $49,210 |

  24. 2023 Grants of Plan-Based Awards

    Narrative Explanation to the Grants of Plan-Based Awards table The above amounts represent information regarding restricted stock awards made to each of the respective Named Executive Officers during 2023 under the terms of the Company’s Long-Term Incentive Plan. The awards vest in full after three years of service from the date of grant to the respective officer. The vesting of the awards is accelerated in the event of the death or disability of the officer or upon a change in control.

  25. Outstanding Equity Awards at 2023 Fiscal Year-End Table

    Outstanding Equity Awards at 2023 Fiscal Year-End Table

  26. Outstanding Equity Awards at 2023 Fiscal Year-End Table

    | Name and Principal Position | Number of Shares or Units of Stock that have not Vested (1) (#) | Market Value of Shares or Units of Stock that have not Vested (2) ($) | | Lars B. Eller, President and CEO (PEO) | 11,800 | 292,640 | | Barbara J. Britenriker, Executive Vice President (PFO) | 6,100 | 151,280 | | Rex D. Rice, Executive Vice President | 4,300 | 106,640 | | Benét S. Rupp, Executive Vice President | 4,400 | 109,120 |

  27. Post-Employment Compensation/Change in Control Agreements

    | Potential Payments upon Death | | | | | | Name of Executive | Payments upon Death under Executive Life Insurance Arrangements | Payments upon Death under Group Term Insurance Policy | Acceleration of Stock Awards | Total | | Lars B. Eller | $100,000 | $600,000 | $292,640 | $992,640 | | Barbara J. Britenriker | $400,000 | $550,000 | $151,280 | $1,101,280 | | Rex D. Rice | $273,404 | $480,000 | $106,640 | $860,044 | | Benét S. Rupp | $100,000 | $476,000 | $109,120 | $685,120 |

  28. Post-Employment Compensation/Change in Control Agreements

    | Potential Payments upon Termination of Employment and/or Change in Control | | | | | | Name of Executive | Change in Control Severance Payments (2x Salary and Bonus) | Continuation of Health and Welfare Benefits | Acceleration of Stock Awards | Total | | Lars B. Eller | $1,141,821 | $16,480 | $292,640 | $1,450,941 | | Barbara J. Britenriker | $594,424 | $36,021 | $151,280 | $781,725 | | | (1x Salary and Bonus) | | | | | Rex D. Rice | $302,139 | $18,574 | $106,640 | $427,353 | | Benét S. Rupp | $281,120 | $9,484 | $109,120 | $399,724 |

  29. Post-Employment Compensation/Change in Control Agreements

    | Potential Payments upon Permanent Disability | | | | | | Name of Executive | Payments under Group Long-Term Disability Insurance Policy (Annual Benefit) | Continuation of Health and Welfare Benefits | Acceleration of Stock Awards | Total | | Lars B. Eller | $233,340 | $16,480 | $292,640 | $542,460 | | Barbara J. Britenriker | $144,000 | $36,021 | $151,280 | $331,301 | | Rex D. Rice | $144,000 | $18,574 | $106,640 | $269,214 | | Benét S. Rupp | $144,000 | $9,484 | $109,120 | $262,604 |

  30. CEO Pay Ratio Disclosure

    CEO Pay Ratio Disclosure Introduction. The Securities and Exchange Commission adopted a rule under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requiring annual disclosure of the ratio of the median employee’s annual total compensation to the total annual compensation of the president and chief executive officer (“CEO”). The purpose of the required disclosure is to provide a measure of the equitability of pay within the organization. We believe our executive compensation program must be consistent and internally equitable to motivate our employees to perform in ways that enhance shareholder value. We are committed to internal pay equity, and the Compensation Committee monitors the relationship between the pay of our executive officers and the pay of our non-executive employees. The Compensation Committee reviewed a comparison of our CEO’s annual total compensation in fiscal year 2023 to that of all other Company employees for the same period. Identification of Median Employee. The Median Employee was identified by examining the Company’s payroll records for all individuals, excluding the Company’s CEO and the CEO of the Company’s subsidiary, The Farmers & Merchants State Bank, who were actively employed by the Company on December 31, 2023 (whether employed on a full-time, part-time, or seasonal basis). As of this date, the Company employed 456 individuals. For such employees, no assumptions, adjustments, or estimates with respect to total cash compensation were made. Wages and salaries were not annualized for those employees that were not employed for the full year of 2023. Pay Elements. The Company’s contributions to the 401(k) profit sharing plan and the medical benefits provided are included as all employees including the CEO are offered the exact same benefits and the Company utilizes the Internal Revenue Service provisions for 401(k) discrimination testing. Additionally, the Group Term Life Insurance and Accidental Death and Dismemberment benefits were included as these benefits cover all employees though the benefit would differ based on age and base salary. The Median Employee identified is not an Officer of the Company and thus is not eligible for all compensation elements available to Officers. As a Director of the Company, Mr. Eller’s director fees are included in annual base salary. Pay elements included in the annual total compensation calculation for each employee include:

  31. CEO Pay Ratio Disclosure

    | ● | Base salary received in fiscal year 2023 (including paid time off plans) |

  32. CEO Pay Ratio Disclosure

    | ● | Annual incentive payment based on Company performance in fiscal year 2023 |

  33. CEO Pay Ratio Disclosure

    | ● | Retirement contributions to the 401(k) profit sharing plan |

  34. CEO Pay Ratio Disclosure

    | ● | Medical benefits |

  35. CEO Pay Ratio Disclosure

    | ● | Group Term Life Insurance premiums |

  36. CEO Pay Ratio Disclosure

    Based on the above methodology for determining annual total compensation for comparison purposes, the annualized total compensation for fiscal year 2023 for the CEO of the Company’s subsidiary, The Farmers & Merchants State Bank was $715,518 (which also included a monthly Car Allowance) and for the Median Employee was $46,148. The resulting ratio of the CEO’s pay for the Company’s subsidiary, The Farmers & Merchants State Bank, to the pay of the Median Employee for fiscal year 2023 is 15.50 to 1.00.

  37. Pay vs. Performance

    Pay vs. Performance

  38. Pay vs. Performance

    | Year | Summary Compensation Table Total for PEO ($)(1) | Compensation Actually Paid to PEO ($)(3) | Average Summary Compensation Table Total for Non-PEO NEOs ($)(2) | Average Compensation Actually Paid to Non-PEO NEOs ($)(3) | Value of Initial Fixed $100 Investment Based On Total Shareholder Return ($)(4) | Net Income ($)(5) (000’s) | | 2023 | $701,875 | $666,819 | $337,707 | $322,661 | $117 | $22,787 | | 2022 | $753,619 | $708,932 | $380,612 | $361,563 | $125 | $32,515 | | 2021 | $717,791 | $811,841 | $372,176 | $413,630 | $146 | $23,495 |

  39. Pay vs. Performance

    | (1) Lars B. Eller was the Registrant’s PEO for each of the 2023, 2022 and 2021 fiscal years. |

  40. Pay vs. Performance

    | (2) For the 2023 and 2022 fiscal years, the Registrant’s Non-PEO NEOs were: Barbara J. Britenriker; Rex D. Rice; and Benet S. Rupp. Ms. Rupp first became an NEO during 2022. For the 2021 fiscal year, the Registrant’s Non-PEO NEOs were: Barbara J. Britenriker; Edward A. Leininger; and Rex D. Rice. Mr. Leininger retired effective May 27, 2022. |

  41. Pay vs. Performance

    | (3) The amounts disclosed reflect the amounts listed in the Compensation Actually Paid Adjustments Table presented below. |

  42. Pay vs. Performance

    | (4) Computed based upon a hypothetical investment of $100 in common stock on January 1, 2021 with dividends paid reinvested. |

  43. Pay vs. Performance

    | (5) As reported on Registrant’s Consolidated Statements of Income for the applicable fiscal reporting year, as provided under Part II Item 8 of Registrant’s Annual Report on Form 10-K. |

  44. Pay vs. Performance

    | | 2023 | | 2022 | | 2021 | | | Adjustment | PEO ($) | Non-PEO NEOs ($) | PEO ($) | Non-PEO NEOs ($) | PEO ($) | Non-PEO NEOs ($) | | Less Grant date value of equity awards | (124,320) | (50,937) | (122,560) | (48,003) | (68,100) | (30,276) | | Year-end fair value of current year award | 119,040 | 48,782 | 108,720 | 42,582 | 98,490 | 43,762 | | Year-over-year change in fair value of unvested awards | (16,660) | (6,902) | (33,900) | (14,974) | 58,980 | 26,053 | | Change in value of awards vesting during the current year | (23,910) | (10,494) | (4,290) | (1,907) | NA | (800) | | Dividends paid on unvested awards | 10,794 | 4,505 | 7,343 | 3,253 | 4,680 | 2,706 | | Total adjustments | (35,056) | (15,046) | (44,687) | (19,049) | 94,050 | 41,454 |

  45. Director Compensation Discussion

    Director Compensation Discussion The Compensation Committee reviews the level of compensation of its directors on an annual basis. To determine the appropriateness of the current level of compensation for directors, the Committee has historically obtained data from a number of different sources including publicly available data describing director compensation in peer companies and survey data collected by members of the Compensation Committee. At the Committee’s request, the President and Chief Executive Officer initiated compilation of an analysis of director fees and the number of directors from the nineteen peer bank holding companies also used for comparison of executive officer compensation. The Committee reviews this information at least once a year in conjunction with information from external consultants and events in the industry and marketplace to determine if any changes or revisions are deemed necessary. Cash compensation is paid to directors in the form of annual retainer fees. The director fee structure effective January 1, 2023, was as follows:

  46. Director Compensation Discussion

    | ● | Board Chairman Cash Retainer of $70,000 per year; |

  47. Director Compensation Discussion

    | ● | Board Committee Chair Cash Retainer of $55,000 per year; |

  48. Director Compensation Discussion

    | ● | Board Non-Committee Chair Cash Retainer of $50,000 per year; and |

  49. Director Compensation Discussion

    | ● | In addition to a cash retainer, each Director was awarded the number of shares equivalent to $15,000 from the Long-Term Stock Incentive Plan adopted by the Company in 2015. Shares were awarded immediately preceding the first Thursday in June 2023. Proration for service is based on a 365-day calendar year. |

  50. Director Compensation Discussion

    Regardless of how Directors participate in a meeting (in person, virtually, or by teleconference call), full compensation will be provided. Additionally, reimbursement for out-of-pocket travel expenses will be provided for those Directors residing outside a 60-mile radius of the Corporate Office of the Company located in Archbold, Ohio. The table regarding Director Fees Earned or Paid in Cash reflects the fee structure in effect during 2023.

  51. 2023 Director Compensation

    2023 Director Compensation

  52. 2023 Director Compensation

    | Name | Fees Earned or Paid in Cash | Stock Awards | | Andrew Briggs | $50,000(1) | $15,000 | | Eugene N. Burkholder | $55,000 | $15,000 | | Lars B. Eller | $0(2) | $15,000 | | Jo Ellen Hornish | $50,000 | $15,000 | | Jack C. Johnson | $70,000 | $15,000 | | Lori A. Johnston | $55,000 | $15,000 | | Marcia S. Latta | $55,000 | $15,000 | | Steven J. Planson | $50,000 | $15,000 | | Kevin J. Sauder | $55,000 | $15,000 | | Frank R. Simon | $50,000 | $15,000 | | K. Brad Stamm | $50,000 | $15,000 | | David P. Vernon | $50,000 | $15,000 |

  53. 2023 Director Compensation

    | (1) Mr. Briggs retired as First Senior Vice President of Business Development effective December 2022. Mr. Briggs will continue in the role of Director with the Company. |

  54. 2023 Director Compensation

    | (2) Pursuant to the terms of his Employment Agreement, Mr. Eller is not separately compensated for attendance at Board or Committee meetings, and director fees are deemed to be included in his base salary. |

  55. 2023 Director Compensation

    Director compensation is intended to retain and help attract appropriate individuals to serve. In consideration of the Company’s listing on the NASDAQ Capital Market Exchange and based on a Director’s increased responsibility and accountability, the committee feels director compensation should be fair and equitable in comparison to peers. Considering the current regulatory focus on the banking industry, increased shareholder and public scrutiny, and the economic times, performance expectations such as wise counsel, strong leadership, and board member involvement through regular board meeting attendance and committee meeting attendance are extremely important and should be appropriately compensated. In recognition of the value and benefits diversity brings to the Board of Directors, consideration has been given to ensure director compensation is suitable and appropriate to attract qualified individuals who further enhance the Board diversity composition through race, gender, and ethnicity, as well as diverse skills, experience, background, and perspectives.