Farmers and Merchants Bancshares : Reports Record Earnings of $4,061,794 or $1.35 Per Share for the Six Months Ended June 30, 2021
July 22, 2021 at 04:00 pm EDT
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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.
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.
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
Farmers and Merchants Bank is a Maryland commercial bank engaged in a general commercial and retail banking business. The Bank provides a range of personal banking services designed to meet the needs of local consumers. Its deposit services include checking accounts, savings accounts, money market accounts, certificates of deposit and individual retirement accounts. The Bank also offers repurchase agreements and remote check deposits. The Bank grants available credit for residential mortgages, construction loans, home equity lines, personal installment loans and other consumer financing. It is also engaged in financing commerce and industry by providing credit and deposit services for small to medium sized businesses and the agricultural community in the Bankâs market area. Its main office is located in Upperco, Maryland, and it has six additional full-service branches located in the Maryland communities of Hampstead, Greenmount, Reisterstown, Owings Mills, Eldersburg, and Westminster.