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OFFON

FARMERS AND MERCHANTS BANCSHARES, INC.

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

10/21/2021 | 08:31am EST

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, 2021September 30, 2020September 30, 2021September 30, 2020
   Excluding  Excluding
 As ReportedAs ReportedAcquisition CostsAs ReportedAs ReportedAcquisition 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


Source: Farmers and Merchants Bancshares, Inc.

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Financials (USD)
Sales 2020 18,8 M - -
Net income 2020 2,68 M - -
Net Debt 2020 6,35 M - -
P/E ratio 2020 14,8x
Yield 2020 3,91%
Capitalization 71,1 M 71,1 M -
EV / Sales 2019 3,51x
EV / Sales 2020 2,46x
Nbr of Employees -
Free-Float 100%
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Managers and Directors
James R. Bosley President, Chief Executive Officer & Director
Mark C. Krebs Chief Financial Officer & Treasurer
Bruce L. Schindler Chairman
Roger D. Cassell Independent Director
John J. Schuster Vice Chairman