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PRESS RELEASE: Paid content from Globe Newswire
Press release content from Globe Newswire. The AP news staff was not involved in its creation.

Farmers and Merchants Bancshares, Inc. Reports Record Earnings of $4,061,794 or $1.35 Per Share ...

July 22, 2021 GMT

HAMPSTEAD, Md., July 22, 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 six months ended June 30, 2021 was $4,061,794, or $1.35 per common share, both all-time semi-annual records, compared to $1,879,362, or $0.63 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 $507,000 to net income.

Net income for the three months ended June 30, 2021 was $2,032,219, or $0.67 per share, which was a new quarterly record, compared to $1,036,055, or $0.35 per common share, for the second quarter of 2020 and $2,029,575, or $0.67 per common share, for the first quarter of 2021.

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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 six months ended June 30, 2021 versus the same periods of the prior year with and without $165,096 and $344,920 of acquisition costs incurred during the three and six month periods ended June 30, 2020, respectively.

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  Three Months Ended Six Months Ended
  June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
      Excluding     Excluding
  As Reported As Reported Acquisition Costs As Reported As Reported Acquisition Costs
             
Income before taxes $ 2,601,944   $ 1,266,626   $ 1,431,722   $ 5,217,220   $ 2,262,849   $ 2,607,769  
Income taxes   569,725     230,571     276,001     1,155,426     383,487     478,400  
Net income $ 2,032,219   $ 1,036,055   $ 1,155,721   $ 4,061,794   $ 1,879,362   $ 2,129,369  
Earnings per share $ 0.67   $ 0.35   $ 0.39   $ 1.35   $ 0.63   $ 0.72  
Return on average assets   1.16 %   0.85 %   0.94 %   1.18 %   0.80 %   0.91 %
Return on average equity   15.02 %   8.05 %   8.98 %   15.18 %   7.39 %   8.38 %

Net interest income for the six months ended June 30, 2021 was $3,480,039 higher than for the same period in 2020 due to a $199.5 million increase in average interest earning assets to $650.3 million for the six months ended June 30, 2021 as compared to $450.8 million for the same period in 2020, and a slight increase in the taxable equivalent net yield on interest earning assets to 3.45% for the six months ended June 30, 2021 from 3.44% for the six months ended June 30, 2020. While the net yield remained flat, the taxable equivalent yield on total interest-earning assets decreased 32 basis points to 3.93% for the six months ended June 30, 2021 from 4.25% for the same period in 2020. This was offset by a 47 basis point decrease in the cost of deposits and borrowings to 0.60% for the six months ended June 30, 2021 from 1.07% for the six months ended June 30, 2020. The provision for loan losses totaled $100,000 for the six months ended June 30, 2021, compared to $475,000 for the same period in 2020.

Noninterest income increased by $195,273 for the six months ended June 30, 2021 when compared to the same period in 2020 primarily as a result of an $84,566 increase in mortgage banking income, a $67,818 increase in bank owned life insurance revenue, a $59,461 increase in service charges, and a $37,613 gain on sale of Carroll’s Westminster, Maryland branch office, offset by a $63,635 decrease in the gain on sale of SBA loans. Noninterest expense was $1,095,941 higher in the six months ended June 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 $924,344, other expenses increased $335,422, and occupancy, furniture and equipment costs increased $181,095. These increases were offset by a decrease of $344,920 in one-time acquisition costs related to the Carroll acquisition. Income taxes increased by $771,939 during the six months ended June 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 six months ended June 30, 2021 compared to 17% during the same period last year due to a lower percentage of tax exempt income.

Total assets increased to $707 million at June 30, 2021 from $677 million at December 31, 2020. Loans decreased to $517 million at June 30, 2021 from $522 million at December 31, 2020 due to a $6 million decrease in PPP loans. Investments in debt securities increased to $120 million at June 30, 2021 from $78 million at December 31, 2020. Deposits increased to $612 million at June 30, 2021 from $573 million at December 31, 2020. The book value of the Company’s common stock was $18.00 per share at June 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 June 30, 2021, modified loans totaled $5.1 million, or 1% of the loan portfolio. In addition, the Company has originated $60 million of PPP loans to customers, $38 million in 2020 and $22 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. Management has chosen to maintain an elevated loan loss reserve in light of 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 first and foremost very happy to see the pandemic wind down although our thoughts go out to those permanently impacted by it. We will continue to be diligent about the health and safety of our employees and customers. It is gratifying that our record earnings have continued into the second quarter. The Carroll acquisition continues to contribute as planned and income from PPP loans remains a significant addition to the bottom line.”

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

  June 30, December 31,
    2021     2020
  (Unaudited)  
Assets  
     
Cash and due from banks $ 31,687,027   $ 39,898,557
Federal funds sold and other interest-bearing deposits   769,123     1,077,113
          Cash and cash equivalents   32,456,150     40,975,670
Certificates of deposit in other banks   350,000     850,000
Securities available for sale   98,251,607     54,477,286
Securities held to maturity   21,401,599     23,078,519
Equity security at fair value   547,914     552,566
Restricted stock, at cost   675,169     900,500
Mortgage loans held for sale   1,317,820     1,673,350
Loans, less allowance for loan losses of $3,404,168 and $3,296,538   517,356,334     521,690,514
Premises and equipment   6,304,771     7,736,556
Accrued interest receivable   1,777,967     2,057,491
Deferred income taxes, net   1,521,861     1,219,668
Other real estate owned   1,411,605     1,411,605
Bank owned life insurance   15,150,383     11,297,342
Goodwill and other intangibles   7,055,274     7,059,408
Other assets   1,908,201     2,336,607
  $ 707,486,655   $ 677,317,082
     
Liabilities and Stockholders' Equity
     
Deposits    
  Noninterest-bearing $ 126,712,827   $ 103,155,113
  Interest-bearing   485,417,230     470,246,434
          Total deposits   612,130,057     573,401,547
Securities sold under repurchase agreements   13,686,564     24,753,972
Federal Home Loan Bank of Atlanta advances   5,000,000     5,000,000
Long-term debt   16,976,093     16,973,280
Accrued interest payable   154,780     409,622
Other liabilities   5,123,819     5,049,178
    653,071,313     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   25,917,571     22,698,954
  Accumulated other comprehensive (loss) income   (89,713 )   706,277
    54,415,342     51,729,483
  $ 707,486,655   $ 677,317,082
The accompanying notes are an integral part of these consolidated financial statements.

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

  Three Months Ended June 30, Six Months Ended June 30,
    2021       2020     2021     2020
         
Interest income        
  Loans, including fees $ 5,783,660     $ 4,393,267   $ 11,768,317   $ 8,715,921
  Investment securities - taxable   329,731       191,255     540,955     401,761
  Investment securities - tax exempt   152,412       154,699     312,986     298,783
  Federal funds sold and other interest earning assets   15,308       16,007     29,445     48,799
          Total interest income   6,281,111       4,755,228     12,651,703     9,465,264
         
Interest expense        
  Deposits   533,437       832,464     1,128,957     1,738,663
  Securities sold under repurchase agreements   14,972       39,496     28,483     77,690
  Federal Home Loan Bank advances and other borrowings   190,181       12,865     378,287     12,974
          Total interest expense   738,590       884,825     1,535,727     1,829,327
          Net interest income   5,542,521       3,870,403     11,115,976     7,635,937
         
(Recovery of) provision for loan losses   (20,000 )     350,000     100,000     475,000
         
          Net interest income after (recovery of)provision for loan losses   5,562,521       3,520,403     11,015,976     7,160,937
         
Noninterest income        
  Service charges on deposit accounts   176,483       117,658     335,674     276,213
  Mortgage banking income   240,666       350,110     496,933     412,367
  Bank owned life insurance income   82,922       43,211     153,041     85,223
  Gain on sale of premises and equipment   -       -     37,613     -
  Unrealized gain (loss) on equity security   511       4,535     411     13,045
  Gain on premium call of debt security   -       -     8,569     -
  Gain on sale of SBA loans   -       63,635     -     63,635
  Other fees and commissions   47,974       29,077     73,260     59,745
          Total noninterest income   548,556       608,226     1,105,501     910,228
         
Noninterest expense        
  Salaries   1,844,736       1,296,278     3,471,074     2,651,197
  Employee benefits   438,133       359,450     911,021     806,554
  Occupancy   245,318       185,394     495,530     368,546
  Furniture and equipment   183,689       165,812     380,372     326,261
  Acquisition   -       165,096     -     344,920
  Other   797,257       689,973     1,646,260     1,310,838
          Total noninterest expense   3,509,133       2,862,003     6,904,257     5,808,316
         
Income before income taxes   2,601,944       1,266,626     5,217,220     2,262,849
Income taxes   569,725       230,571     1,155,426     383,487
Net income $ 2,032,219     $ 1,036,055   $ 4,061,794   $ 1,879,362
         
Earnings per share - basic and diluted $ 0.67     $ 0.35   $ 1.35   $ 0.63

FOR FURTHER INFORMATION CONTACT:

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