Farmers and Merchants Bancshares, Inc. Reports Record Earnings of $2,029,575 or $0.67 Per Share For the Three Months Ended March 31, 2021

Hampstead, Maryland, UNITED STATES


HAMPSTEAD, Md., April 15, 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 three months ended March 31, 2021 was $2,029,575, or $0.67 per common share, both all-time quarterly records, compared to $843,307, or $0.28 per common share, 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 $369,000 to net income.

The Company incurred significant one-time costs during 2020 in connection with the Company’s acquisition of Carroll. The table below provides a comparison of the Company’s results for the first quarter of 2021 versus the same period of the prior year with and without $179,824 of acquisition costs incurred during the first quarter of 2020.

 Three Months Ended
 March 31, 2021March 31, 2020
   Excluding
 As ReportedAs ReportedAcquisition Costs
    
Income before taxes$2,615,276 $996,223 $1,176,047 
Income taxes 585,701  152,916  202,399 
Net income$2,029,575 $843,307 $973,648 
Earnings per share$0.67 $0.28 $0.33 
Return on average assets 1.19% 0.75% 0.87%
Return on average equity 15.37% 6.72% 7.76%
    

Net interest income for the three months ended March 31, 2021 was $1,807,921 higher than for the same period in 2020 due to a $225.4 million increase in average interest earning assets to $655.4 million for the three months ended March 31, 2021 as compared to $430.0 million for the same period in 2020, offset by a decline in the taxable equivalent net yield on interest earning assets to 3.43% for the three months ended March 31, 2021 from 3.54% for the three months ended March 31, 2020. The net yield declined because the yield on loans and investments decreased 50 basis points to 3.92% for the three months ended March 31, 2021 from 4.42% for the same period in 2020 as a result of the Federal Reserve rate cuts in March 2020. Our cost of deposits and borrowings decreased 50 basis points to 0.63% for the three months ended March 31, 2021 from 1.13% for the three months ended March 31, 2020. The provision for loan losses totaled $120,000 for the three months ended March 31, 2021, compared to $125,000 for the same period in 2020.

Noninterest income increased by $254,943 for the three months ended March 31, 2021 when compared to the same period in 2020 primarily as a result of a $194,010 increase in mortgage banking income, a $28,107 increase in bank owned life insurance revenue, and a $37,613 gain on sale of Carroll’s Westminster, Maryland branch office. Noninterest expense was $448,811 higher in the three months ended March 31, 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 $297,203, other expenses increased $228,138 and occupancy, furniture and equipment costs increased $103,294. The aforementioned acquisition costs decreased $179,824. Income taxes increased by $432,785 during the three months ended March 31, 2021 when compared to the same period in 2020 due to higher income before taxes.

Total assets increased to $696 million at March 31, 2021 from $677 million at December 31, 2020. Loans decreased slightly to $519 million at March 31, 2021 from $522 million at December 31, 2020. Investment in debt securities increased to $97 million at March 31, 2021 from $78 million at December 31, 2020. Deposits increased to $603 million at March 31, 2021 from $573 million at December 31, 2020. The book value of the Company’s common stock was $17.64 per share at March 31, 2021, compared to $17.18 per share at December 31, 2020.

The COVID-19 pandemic appears to be winding down with immunizations occurring at a rapid pace. 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 totalling $109.2 million, or 30% of its loan portfolio. At March 31, 2021, $15.9 million, or 3% of the loan portfolio, have COVID-19 modifications. In addition, the Company has originated $59 million of PPP loans to customers, $38 million in 2020 and $21 million in 2021. The Company increased its loan loss reserve significantly in 2020 due to the pandemic, but has yet to incur any actual losses.

James R. Bosley, Jr., President and CEO, commented, “We are pleased that the Carroll acquisition is contributing significantly to net income, as planned, and along with income from PPP loans resulted in the best quarter in our 100+ year history. We will continue to provide for the health and safety of our employees and customers until the pandemic is safely over.”

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”.

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


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

 March 31, December 31,
 2021 2020
 (Unaudited)   
Assets 
     
Cash and due from banks$41,378,357 $39,898,557
Federal funds sold and other interest-bearing deposits 535,535  1,077,113
          Cash and cash equivalents 41,913,892  40,975,670
Certificates of deposit in other banks 350,000  850,000
Securities available for sale 74,849,166  54,477,286
Securities held to maturity 21,945,447  23,078,519
Equity security at fair value 545,713  552,566
Restricted stock, at cost 675,400  900,500
Mortgage loans held for sale 1,682,700  1,673,350
Loans, less allowance for loan losses of $3,423,088 and $3,296,538 519,239,304  521,690,514
Premises and equipment 6,343,681  7,736,556
Accrued interest receivable 1,883,128  2,057,491
Deferred income taxes 1,464,784  1,219,668
Other real estate owned 1,411,605  1,411,605
Bank owned life insurance 15,067,461  11,297,342
Goodwill and other intangibles 7,057,326  7,059,408
Other assets 1,952,747  2,336,607
 $696,382,354 $677,317,082
   
Liabilities and Stockholders' Equity
   
Deposits  
  Noninterest-bearing$121,925,868 $103,155,113
  Interest-bearing 481,315,407  470,246,434
          Total deposits 603,241,275  573,401,547
Securities sold under repurchase agreements 12,648,269  24,753,972
Federal Home Loan Bank of Atlanta advances 5,000,000  5,000,000
Long-term debt 16,974,687  16,973,280
Accrued interest payable 357,961  409,622
Other liabilities 5,046,750  5,049,178
  643,268,942  625,587,599
Stockholders' equity  
  Common stock, par value $.01 per share,  
  authorized 5,000,000 shares; issued and outstanding  
  3,011,255 shares in 2021 and 2020 30,113  30,113
  Additional paid-in capital 28,294,139  28,294,139
  Retained earnings 24,728,529  22,698,954
  Accumulated other comprehensive income 60,631  706,277
  53,113,412  51,729,483
 $696,382,354 $677,317,082
 


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

 Three Months Ended March 31,
  2021   2020
     
Interest income    
  Loans, including fees$5,984,657  $4,322,654
  Investment securities - taxable 211,224   210,506
  Investment securities - tax exempt 160,574   144,084
  Federal funds sold and other interest earning assets 14,137   32,792
          Total interest income 6,370,592   4,710,036
   
Interest expense  
  Deposits 595,520   906,199
  Securities sold under repurchase agreements 13,511   38,194
  Federal Home Loan Bank advances and other borrowings 188,106   109
          Total interest expense 797,137   944,502
          Net interest income 5,573,455   3,765,534
   
Provision for loan losses 120,000   125,000
   
          Net interest income after provision for loan losses 5,453,455   3,640,534
   
Noninterest income  
  Service charges on deposit accounts 159,191   158,555
  Mortgage banking income 256,267   62,257
  Bank owned life insurance income 70,119   42,012
  Unrealized gain (loss) on equity security (100)  8,510
  Gain on sale of former branch office 37,613   -
  Other fees and commissions 33,855   30,668
          Total noninterest income 556,945   302,002
   
Noninterest expense  
  Salaries 1,626,338   1,354,919
  Employee benefits 472,888   447,104
  Occupancy 250,212   183,152
  Furniture and equipment 196,683   160,449
  Acquisition -   179,824
  Other 849,003   620,865
          Total noninterest expense 3,395,124   2,946,313
   
Income before income taxes 2,615,276   996,223
Income taxes 585,701   152,916
Net income$2,029,575  $843,307
   
Earnings per share - basic and diluted$0.67  $0.28