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Farmers and Merchants Bancshares, Inc. Reports Record Earnings of $2,029,575 or $0.67 Per Share For the Three Months Ended March 31, 2021

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Farmers and Merchants Bancshares, Inc.
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HAMPSTEAD, Md., April 15, 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 three months ended March 31, 2021 was $2,029,575, or $0.67 per common share, both all-time quarterly records, compared to $843,307, or $0.28 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 $369,000 to net income.

The Company incurred significant one-time costs during 2020 in connection with the Company’s acquisition of Carroll. The table below provides a comparison of the Company’s results for the first quarter of 2021 versus the same period of the prior year with and without $179,824 of acquisition costs incurred during the first quarter of 2020.

Three Months Ended

March 31, 2021

March 31, 2020

Excluding

As Reported

As Reported

Acquisition Costs

Income before taxes

$

2,615,276

$

996,223

$

1,176,047

Income taxes

585,701

152,916

202,399

Net income

$

2,029,575

$

843,307

$

973,648

Earnings per share

$

0.67

$

0.28

$

0.33

Return on average assets

1.19

%

0.75

%

0.87

%

Return on average equity

15.37

%

6.72

%

7.76

%

Net interest income for the three months ended March 31, 2021 was $1,807,921 higher than for the same period in 2020 due to a $225.4 million increase in average interest earning assets to $655.4 million for the three months ended March 31, 2021 as compared to $430.0 million for the same period in 2020, offset by a decline in the taxable equivalent net yield on interest earning assets to 3.43% for the three months ended March 31, 2021 from 3.54% for the three months ended March 31, 2020. The net yield declined because the yield on loans and investments decreased 50 basis points to 3.92% for the three months ended March 31, 2021 from 4.42% for the same period in 2020 as a result of the Federal Reserve rate cuts in March 2020. Our cost of deposits and borrowings decreased 50 basis points to 0.63% for the three months ended March 31, 2021 from 1.13% for the three months ended March 31, 2020. The provision for loan losses totaled $120,000 for the three months ended March 31, 2021, compared to $125,000 for the same period in 2020.

Noninterest income increased by $254,943 for the three months ended March 31, 2021 when compared to the same period in 2020 primarily as a result of a $194,010 increase in mortgage banking income, a $28,107 increase in bank owned life insurance revenue, and a $37,613 gain on sale of Carroll’s Westminster, Maryland branch office. Noninterest expense was $448,811 higher in the three months ended March 31, 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 $297,203, other expenses increased $228,138 and occupancy, furniture and equipment costs increased $103,294. The aforementioned acquisition costs decreased $179,824. Income taxes increased by $432,785 during the three months ended March 31, 2021 when compared to the same period in 2020 due to higher income before taxes.

Total assets increased to $696 million at March 31, 2021 from $677 million at December 31, 2020. Loans decreased slightly to $519 million at March 31, 2021 from $522 million at December 31, 2020. Investment in debt securities increased to $97 million at March 31, 2021 from $78 million at December 31, 2020. Deposits increased to $603 million at March 31, 2021 from $573 million at December 31, 2020. The book value of the Company’s common stock was $17.64 per share at March 31, 2021, compared to $17.18 per share at December 31, 2020.

The COVID-19 pandemic appears to be winding down with immunizations occurring at a rapid pace. 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 totalling $109.2 million, or 30% of its loan portfolio. At March 31, 2021, $15.9 million, or 3% of the loan portfolio, have COVID-19 modifications. In addition, the Company has originated $59 million of PPP loans to customers, $38 million in 2020 and $21 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.

James R. Bosley, Jr., President and CEO, commented, “We are pleased that the Carroll acquisition is contributing significantly to net income, as planned, and along with income from PPP loans resulted in the best quarter in our 100+ year history. We will continue to provide for the health and safety of our employees and customers until the pandemic is safely over.”

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”.

FOR FURTHER INFORMATION CONTACT:

Contact:

Mr. James R. Bosley, Jr.

President

(410) 374-1510, ext.104


Farmers and Merchants Bancshares, Inc. and Subsidiaries
Consolidated Balance Sheets

March 31,

December 31,

2021

2020

(Unaudited)

Assets

Cash and due from banks

$

41,378,357

$

39,898,557

Federal funds sold and other interest-bearing deposits

535,535

1,077,113

Cash and cash equivalents

41,913,892

40,975,670

Certificates of deposit in other banks

350,000

850,000

Securities available for sale

74,849,166

54,477,286

Securities held to maturity

21,945,447

23,078,519

Equity security at fair value

545,713

552,566

Restricted stock, at cost

675,400

900,500

Mortgage loans held for sale

1,682,700

1,673,350

Loans, less allowance for loan losses of $3,423,088 and $3,296,538

519,239,304

521,690,514

Premises and equipment

6,343,681

7,736,556

Accrued interest receivable

1,883,128

2,057,491

Deferred income taxes

1,464,784

1,219,668

Other real estate owned

1,411,605

1,411,605

Bank owned life insurance

15,067,461

11,297,342

Goodwill and other intangibles

7,057,326

7,059,408

Other assets

1,952,747

2,336,607

$

696,382,354

$

677,317,082

Liabilities and Stockholders' Equity

Deposits

Noninterest-bearing

$

121,925,868

$

103,155,113

Interest-bearing

481,315,407

470,246,434

Total deposits

603,241,275

573,401,547

Securities sold under repurchase agreements

12,648,269

24,753,972

Federal Home Loan Bank of Atlanta advances

5,000,000

5,000,000

Long-term debt

16,974,687

16,973,280

Accrued interest payable

357,961

409,622

Other liabilities

5,046,750

5,049,178

643,268,942

625,587,599

Stockholders' equity

Common stock, par value $.01 per share,

authorized 5,000,000 shares; issued and outstanding

3,011,255 shares in 2021 and 2020

30,113

30,113

Additional paid-in capital

28,294,139

28,294,139

Retained earnings

24,728,529

22,698,954

Accumulated other comprehensive income

60,631

706,277

53,113,412

51,729,483

$

696,382,354

$

677,317,082


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

Three Months Ended March 31,

2021

2020

Interest income

Loans, including fees

$

5,984,657

$

4,322,654

Investment securities - taxable

211,224

210,506

Investment securities - tax exempt

160,574

144,084

Federal funds sold and other interest earning assets

14,137

32,792

Total interest income

6,370,592

4,710,036

Interest expense

Deposits

595,520

906,199

Securities sold under repurchase agreements

13,511

38,194

Federal Home Loan Bank advances and other borrowings

188,106

109

Total interest expense

797,137

944,502

Net interest income

5,573,455

3,765,534

Provision for loan losses

120,000

125,000

Net interest income after provision for loan losses

5,453,455

3,640,534

Noninterest income

Service charges on deposit accounts

159,191

158,555

Mortgage banking income

256,267

62,257

Bank owned life insurance income

70,119

42,012

Unrealized gain (loss) on equity security

(100

)

8,510

Gain on sale of former branch office

37,613

-

Other fees and commissions

33,855

30,668

Total noninterest income

556,945

302,002

Noninterest expense

Salaries

1,626,338

1,354,919

Employee benefits

472,888

447,104

Occupancy

250,212

183,152

Furniture and equipment

196,683

160,449

Acquisition

-

179,824

Other

849,003

620,865

Total noninterest expense

3,395,124

2,946,313

Income before income taxes

2,615,276

996,223

Income taxes

585,701

152,916

Net income

$

2,029,575

$

843,307

Earnings per share - basic and diluted

$

0.67

$

0.28