Farmers and Merchants Bancshares, Inc. Reports Record Earnings of $6,184,341 or $2.05 Per Share for the Nine Months Ended September 30, 2021

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HAMPSTEAD, Md., Oct. 21, 2021 (GLOBE NEWSWIRE) -- Farmers and Merchants Bancshares, Inc. (the “Company”), the parent of Farmers and Merchants Bank (the “Bank”), announced that net income for the nine months ended September 30, 2021 was $6,184,341, or $2.05 per common share (basic and diluted), both all-time nine-month records, compared to $2,264,609, or $0.76 per common share (basic and diluted), for the same period in 2020. The primary driver of the significant increase in net income was the acquisition of Carroll Bancorp, Inc. and its subsidiary, Carroll Community Bank (collectively, “Carroll”), that was completed in the fourth quarter of 2020. Also, income from Paycheck Protection Program (“PPP”) loans added approximately $679,000 to net income. As of September 30, 2021, $354,000 of deferred PPP fees, net of income taxes, have not been recognized.

Net income for the three months ended September 30, 2021 was $2,122,547, or $0.70 per common share, which was a new quarterly record, compared to $385,247, or $0.13 per common share, for the third quarter of 2020 and $2,032,219, or $0.67 per common share, for the second quarter of 2021.

The Company incurred significant one-time costs during 2020 in connection with the acquisition of Carroll. The table below provides a comparison of the Company’s results for the three and nine months ended September 30, 2021 versus the same periods of the prior year with and without $1,267,401 and $1,612,321 of acquisition costs incurred during the three and nine month periods ended September 30, 2020, respectively.

Three Months Ended (unaudited)

Nine Months Ended (unaudited)

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Excluding

Excluding

As Reported

As Reported

Acquisition Costs

As Reported

As Reported

Acquisition Costs

Income before taxes

$

2,728,839

$

462,110

$

1,729,511

$

7,946,059

$

2,724,959

$

4,337,280

Income taxes

606,292

76,863

370,835

1,761,718

460,350

849,235

Net income

$

2,122,547

$

385,247

$

1,358,676

$

6,184,341

$

2,264,609

$

3,488,045

Earnings per share,

basic and diluted

$

0.70

$

0.13

$

0.45

$

2.05

$

0.76

$

1.17

Return on average assets

1.19%

0.31%

1.10%

1.18%

0.63%

0.97%

Return on average equity

15.15%

2.95%

10.40%

15.17%

5.88%

9.06%

Net interest income for the nine months ended September 30, 2021 was $5,371,279 higher than for the same period in 2020 due to a $200.3 million increase in average interest earning assets to $657.7 million for the nine months ended September 30, 2021 as compared to $457.4 million for the same period in 2020, and an increase in the taxable equivalent net yield on interest earning assets to 3.50% for the nine months ended September 30, 2021 from 3.46% for the nine months ended September 30, 2020. While the net yield increased 4 basis points, the taxable equivalent yield on total interest-earning assets decreased 26 basis points to 3.94% for the nine months ended September 30, 2021 from 4.20% for the same period in 2020. This was offset by a 42 basis point decrease in the cost of deposits and borrowings to 0.56% for the nine months ended September 30, 2021 from 0.98% for the nine months ended September 30, 2020. The provision for loan losses totaled $430,000 for the nine months ended September 30, 2021, compared to $475,000 for the same period in 2020.

Noninterest income increased by $239,883 for the nine months ended September 30, 2021 when compared to the same period in 2020 primarily as a result of a $105,510 increase in bank owned life insurance income, a $108,314 increase in service charges on deposits, a $32,597 increase in other fees and commissions, and a $44,510 gain on the sale of Carroll’s Westminster, Maryland branch office and other equipment, offset by a $56,718 decrease in the gain on the sale of SBA loans. Noninterest expense was $435,062 higher in the nine months ended September 30, 2021 when compared to the same period in 2020 due primarily to additional personnel, locations and customers added with the acquisition of Carroll. Salaries and benefits increased $1,369,197, other expenses increased $416,069, and occupancy, furniture and equipment costs increased $262,117. These increases were offset by a decrease of $1,612,321 in one-time acquisition costs related to the Carroll acquisition. Income taxes increased by $1,301,368 during the nine months ended September 30, 2021 when compared to the same period in 2020 due to higher income before taxes. The effective tax rate increased to 22% during the nine months ended September 30, 2021 compared to 17% during the same period last year due to a lower percentage of tax exempt income.

Total assets increased to $717 million at September 30, 2021 from $677 million at December 31, 2020. Loans decreased to $496 million at September 30, 2021 from $522 million at December 31, 2020 due primarily to a $16 million decrease in PPP loans. Investments in debt securities increased to $143 million at September 30, 2021 from $78 million at December 31, 2020. Deposits increased to $622 million at September 30, 2021 from $573 million at December 31, 2020. The book value of the Company’s common stock was $18.62 per share at September 30, 2021, compared to $17.18 per share at December 31, 2020.

During the COVID-19 pandemic, the Company has provided relief to our borrowers, as needed, including temporary deferral of payments. At the start of the pandemic in 2020, the Company modified loans totaling $109.2 million, or 30% of its loan portfolio. At September 30, 2021, modified loans totaled $4.3 million, or 1% of the loan portfolio. In addition, the Company has originated $60 million of PPP loans to customers, of which $38 million were made in 2020 and $22 million were made in 2021. The Company increased its loan loss reserve significantly in 2020 due to the pandemic. Management has analyzed and adjusted the loan loss reserve for loans that had payment deferrals longer than six months and for which six full monthly principal and interest payments have not yet been received.

James R. Bosley, Jr., President and CEO, commented “We are pleased that our record earnings have continued through the third quarter. The Carroll acquisition is contributing as planned and the acquired loan portfolio has performed very well. Income from PPP loans, which has been a significant addition to the bottom line in 2021, will eventually end and will adversely impact 2022 comparative results.”

About the Company

The Company is a financial holding company and the parent of the Bank. The Bank was chartered in Maryland in 1919 and has over 100 years of service to the community. The Bank serves the deposit and financing needs of both consumers and businesses in Carroll and Baltimore Counties along the Route 30, Route 795, Route 140, and Route 26 corridors. The main office is located in Upperco, Maryland, with seven additional branches in Owings Mills, Hampstead, Greenmount, Reisterstown, Westminster, and Eldersburg. Certain broker-dealers make a market in the common stock of Farmers and Merchants Bancshares, Inc., and trades are reported through the OTC Markets Group’s Pink Market under the symbol “FMFG”.

Forward-Looking Statements

The statements contained herein that are not historical facts are forward-looking statements (as defined by the Private Securities Litigation Reform Act of 1995) based on management's current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. These statements are evidenced by terms such as “anticipate,” “estimate,” “should,” “will,” “expect,” “believe,” “intend,” and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the section of the periodic reports filed by Farmers and Merchants Bancshares, Inc. with the Securities and Exchange Commission entitled “Risk Factors”.

Farmers and Merchants Bancshares, Inc. and Subsidiaries
Consolidated Balance Sheets

September 30,

December 31,

2021

2020

(Unaudited)

Assets

Cash and due from banks

$

39,157,850

$

39,898,557

Federal funds sold and other interest-bearing deposits

444,014

1,077,113

Cash and cash equivalents

39,601,864

40,975,670

Certificates of deposit in other banks

350,000

850,000

Securities available for sale, at fair value

121,265,582

54,477,286

Securities held to maturity, at cost

21,883,882

23,078,519

Equity security, at fair value

547,349

552,566

Restricted stock, at cost

675,400

900,500

Mortgage loans held for sale

1,757,550

1,673,350

Loans, less allowance for loan losses of $3,744,218 and $3,296,538

495,781,194

521,690,514

Premises and equipment

6,291,405

7,736,556

Accrued interest receivable

1,579,447

2,057,491

Deferred income taxes, net

1,610,156

1,219,668

Other real estate owned

1,411,605

1,411,605

Bank owned life insurance

15,230,325

11,297,342

Goodwill and other intangibles

7,053,162

7,059,408

Other assets

1,703,283

2,336,607

$

716,742,204

$

677,317,082

Liabilities and Stockholders' Equity

Deposits

Noninterest-bearing

$

125,841,422

$

103,155,113

Interest-bearing

496,091,137

470,246,434

Total deposits

621,932,559

573,401,547

Securities sold under repurchase agreements

10,475,121

24,753,972

Federal Home Loan Bank of Atlanta advances

5,000,000

5,000,000

Long-term debt, net of issuance costs

16,977,499

16,973,280

Accrued interest payable

323,420

409,622

Other liabilities

5,728,289

5,049,178

660,436,888

625,587,599

Stockholders' equity

Common stock, par value $.01 per share,

authorized 5,000,000 shares; issued and outstanding

3,023,487 shares in 2021 and 3,011,255 shares in 2020

30,235

30,113

Additional paid-in capital

28,557,249

28,294,139

Retained earnings

28,040,118

22,698,954

Accumulated other comprehensive (loss) income

(322,286

)

706,277

56,305,316

51,729,483

$

716,742,204

$

677,317,082


Farmers and Merchants Bancshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Interest income

Loans, including fees

$

6,059,709

$

4,489,992

$

17,828,026

$

13,205,913

Investment securities - taxable

426,886

159,277

967,841

561,038

Investment securities - tax exempt

149,375

163,522

462,361

462,305

Federal funds sold and other interest earning assets

18,298

9,563

47,743

58,362

Total interest income

6,654,268

4,822,354

19,305,971

14,287,618

Interest expense

Deposits

460,377

690,833

1,589,334

2,429,496

Securities sold under repurchase agreements

9,647

18,020

38,130

95,710

Federal Home Loan Bank advances and other borrowings

192,255

12,752

570,542

25,726

Total interest expense

662,279

721,605

2,198,006

2,550,932

Net interest income

5,991,989

4,100,749

17,107,965

11,736,686

Provision for loan losses

330,000

-

430,000

475,000

Net interest income after provision for loan losses

5,661,989

4,100,749

16,677,965

11,261,686

Noninterest income

Service charges on deposit accounts

187,141

138,288

522,815

414,501

Mortgage banking income

207,471

272,297

704,404

684,664

Bank owned life insurance income

79,942

42,250

232,983

127,473

Gain on sale of premises and equipment

6,897

-

44,510

-

Fair value adjustment of equity security

(2,056

)

1

(10,214

)

13,046

Gain on premium call of debt security

621

-

9,190

-

Gain on sale of SBA loans

6,917

-

6,917

63,635

Other fees and commissions

45,045

34,532

126,874

94,277

Total noninterest income

531,978

487,368

1,637,479

1,397,596

Noninterest expense

Salaries

1,895,780

1,462,946

5,366,854

4,114,143

Employee benefits

388,879

376,860

1,299,900

1,183,414

Occupancy

241,557

183,719

737,087

552,265

Furniture and equipment

198,190

175,006

578,562

501,267

Acquisition

-

1,267,401

-

1,612,321

Other

740,722

660,075

2,386,982

1,970,913

Total noninterest expense

3,465,128

4,126,007

10,369,385

9,934,323

Income before income taxes

2,728,839

462,110

7,946,059

2,724,959

Income taxes

606,292

76,863

1,761,718

460,350

Net income

$

2,122,547

$

385,247

$

6,184,341

$

2,264,609

Earnings per share - basic and diluted

$

0.70

$

0.13

$

2.05

$

0.76

Contact:
Mr. James R. Bosley, Jr.
President
(410) 374-1510, ext.104


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