Farmers and Merchants Bancshares, Inc. Reports Record Earnings of $8,149,606 or $2.70 Per Share for the Year Ended December 31, 2021

HAMPSTEAD, Md., Feb. 02, 2022 (GLOBE NEWSWIRE) -- Farmers and Merchants Bancshares, Inc. (the “Company”), the parent of Farmers and Merchants Bank (the “Bank”), announced that net income for the year ended December 31, 2021 was $8,149,606, or $2.70 per common share (basic and diluted), both all-time annual records, compared to $2,682,003, or $0.90 per common share (basic and diluted), for the year ended December 31, 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 $802,000 to net income. As of December 31, 2021, $196,000 of deferred PPP fees, net of income taxes, have not been recognized.

Net income for the three months ended December 31, 2021 was $1,965,265, or $0.65 per common share, compared to $417,394, or $0.14 per common share, for the fourth quarter of 2020.

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 twelve months ended December 31, 2021 versus the same periods of the prior year with and without $1,624,496 and $3,236,817 of acquisition costs incurred during the three and twelve month periods ended December 31, 2020, respectively.

Net interest income for the twelve months ended December 31, 2021 was $5,570,601 higher than for the same period in 2020 due to a $164.7 million increase in average interest earning assets to $664.7 million for the twelve months ended December 31, 2021 as compared to $500.0 million for the same period in 2020, offset by a decrease in the taxable equivalent net yield on interest earning assets to 3.47% for the twelve months ended December 31, 2021 from 3.50% for the twelve months ended December 31, 2020. The taxable equivalent yield on total interest-earning assets decreased 30 basis points to 3.89% for the twelve months ended December 31, 2021 from 4.19% for the same period in 2020. This was offset by a 35 basis point decrease in the cost of deposits and borrowings to 0.54% for the twelve months ended December 31, 2021 from 0.89% for the twelve months ended December 31, 2020. The provision for loan losses totaled $330,000 for the twelve months ended December 31, 2021, compared to $625,000 for the same period in 2020.

Noninterest income increased by $93,795 for the twelve months ended December 31, 2021 when compared to the same period in 2020 primarily as a result of a 148,656 increase in service charges on deposits and a $41,823 increase in bank owned life insurance income, offset by a $114,424 decrease in mortgage banking revenue. Noninterest expense was $1,453,809 lower in the twelve months ended December 31, 2021 when compared to the same period in 2020 due primarily to $3,236,817 in one-time acquisition costs related to the Carroll acquisition, offset by additional personnel, locations and customers added with the acquisition of Carroll. Salaries and benefits increased $1,137,635, other expenses increased $520,034, and occupancy, furniture and equipment costs increased $125,339. Income taxes increased by $1,945,602 during the twelve months ended December 31, 2021 when compared to the same period in 2020 due to higher income before taxes. The effective tax rate increased to 23% during the twelve months ended December 31, 2021 compared to 15% during the same period last year due to a lower percentage of tax exempt income.

Total assets increased to $717 million at December 31, 2021 from $677 million at December 31, 2020. Loans decreased to $482 million at December 31, 2021 from $522 million at December 31, 2020 due primarily to a $22 million decrease in PPP loans. Investments in debt securities increased to $171 million at December 31, 2021 from $78 million at December 31, 2020. Deposits increased to $626 million at December 31, 2021 from $573 million at December 31, 2020. The book value of the Company’s common stock was $18.64 per share at December 31, 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 December 31, 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. $50 million of PPP loans have been forgiven as of December 31, 2021. The Company expects that the majority of the remaining $10 million will be forgiven in 2022.

James R. Bosley, Jr., President and CEO, commented “We are pleased that our 2021 earnings were the highest in the 102 year history of the Company and our return on average equity was just shy of 15%. The significant increase in assets from the Carroll acquisition was the driving factor in the higher earnings. We are also pleased that our combined loan portfolio has performed so well despite the pandemic issues over the last two years. Income from PPP loans, which has been a significant addition to the bottom line in 2021, will decrease by at least 75% in 2022 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

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