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

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, 2021			September 30, 2020						September 30, 2021			September 30, 2020
							Excluding									Excluding
	As Reported			As Reported			Acquisition Costs			As Reported			As Reported			Acquisition 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