Farmers and Merchants Bancshares, Inc. Reports Earnings of $4,101,535 or $1.35 per Share for the Six Months Ended June 30, 2022

Rhea-AI Summary

Farmers and Merchants Bancshares reported net income of $4.1 million for the first half of 2022, maintaining earnings per share at $1.35. The return on average equity rose to 15.37%, while return on average assets slightly decreased to 1.15%. Income from PPP loans dropped significantly from $507,000 to $159,000 compared to the previous year. Net interest income increased by $620,298, driven by a rise in average interest-earning assets to $679.3 million. However, noninterest income fell by $168,053 due to decreased mortgage banking revenue.

Positive

• Net income for H1 2022 increased slightly to $4.1 million compared to $4.06 million in H1 2021.
• Return on average equity improved to 15.37% from 15.18% year-over-year.
• Net interest income rose by $620,298 driven by a $29 million increase in average interest-earning assets.

Negative

• Income from PPP loans saw a sharp decline from $507,000 in H1 2021 to $159,000 in H1 2022.
• Noninterest income decreased by $168,053 primarily due to a drop in mortgage banking revenue.
• Book value of common stock fell to $15.78 per share from $18.64 due to declines in market value of AFS investment portfolio.

HAMPSTEAD, Md., July 20, 2022 (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, 2022 was $4,101,535, or $1.35 per common share (basic and diluted), compared to $4,061,794, or $1.35 per common share, for the same period in 2021. The Company’s return on average equity during the six months ended June 30, 2022 was 15.37% compared to 15.18% for the same period in 2021. The Company’s return on average assets during the six months ended June 30, 2022 was 1.15% compared to 1.18% for the same period in 2021. Income from Paycheck Protection Program (“PPP”) loans added approximately $159,000 to net income for the six months ended June 30, 2022 compared to $507,000 for the same period in 2021. As of June 30, 2022, $36,000 of deferred PPP fees, net of income taxes, have not been recognized.

Net income for the three months ended June 30, 2022 was $2,050,733, or $0.67 per common share, compared to $2,032,219, or $0.67 per common share, for the second quarter of 2021 and $2,050,802, or $0.68 per common share, for the first quarter of 2022.                

Net interest income for the six months ended June 30, 2022 was $620,298 higher than for the same period in 2021 due to a $29.0 million increase in average interest earning assets to $679.3 million for the six months ended June 30, 2022 as compared to $650.3 million for the same period in 2021, and an increase in the taxable equivalent net yield on interest earning assets to 3.48% for the six months ended June 30, 2022 from 3.45% for the six months ended June 30, 2021. The taxable equivalent yield on total average interest-earning assets decreased 14 basis points to 3.78% for the six months ended June 30, 2022 from 3.92% for the same period in 2021. This decrease was offset by a 21 basis point decrease in the cost of deposits and borrowings to 0.39% for the six months ended June 30, 2022 from 0.60% for the same period in 2021. There was no provision for loan losses for the six months ended June 30, 2022, compared to $100,000 for the same period in 2021.

Noninterest income decreased by $168,053 for the six months ended June 30, 2022 when compared to the same period in 2021 primarily as a result of a $309,259 decrease in mortgage banking revenue reflecting a decline in refinances due to rising interest rates, offset by a $158,123 increase in the gain on sale of SBA loans. Noninterest expense was $463,927 higher in the six months ended June 30, 2022 when compared to the same period in 2021 due primarily to $235,964 increase in salaries and benefits and a $222,992 increase in other expenses. The increase in salaries and benefits was due to normal annual salary increases as well as the hiring of several new employees. The increase in other expenses was due primarily to third party fees related to the hiring of new employees. Income taxes increased by $48,577 during the six months ended June 30, 2022 when compared to the same period in 2021 due to higher income before taxes as well as a decrease in the amount of nontaxable income included in pretax income year-over-year. The effective tax rate increased to 22.69% during the six months ended June 30, 2022 compared to 22.15% during the same period last year.

Total assets decreased to $710 million at June 30, 2022 from $717 million at December 31, 2021. Loans increased to $491 million at June 30, 2022 from $482 million at December 31, 2021 despite an $8 million decrease in PPP loans. Investments in debt securities decreased to $159 million at June 30, 2022 from $171 million at December 31, 2021. Deposits increased to $629 million at June 30, 2022 from $626 million at December 31, 2021. Despite the Company’s strong earnings, the book value of the Company’s common stock decreased to $15.78 per share at June 30, 2022, compared to $18.64 per share at December 31, 2021 due to the decline in the market value of the Company’s available for sale (“AFS”) investment portfolio as a result of the significant rise in interest rates over the last six months. Changes in the market value of the AFS investment portfolio, net of income taxes, are reflected in the Company’s equity but are not included in the income statement. Because the Company has the intent and ability to hold the investments to maturity, no actual losses in the AFS investment portfolio are anticipated and the declines in market value are considered temporary. The decline in the market value of the AFS investment portfolio did not have an impact on regulatory capital because the Bank elected many years ago to not include in the calculation of regulatory capital changes in the market value of the AFS investment portfolio regardless of whether they are positive or negative.

Since the COVID-19 pandemic began in 2020, the Company has provided relief to the Bank’s 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, 2022, there was 1 modified loan, now classified as a troubled debt restructuring, which totaled $4.2 million, or 1% of the loan portfolio. In addition, the Company has originated $60 million of PPP loans to customers. As of June 30, 2022, $58 million of PPP loans have been forgiven. The Company expects that the majority of the remaining $2 million will be forgiven in 2022.

James R. Bosley, Jr., CEO, commented “Year to date 2022 earnings are slightly ahead of 2021’s record earnings despite the significant decline in PPP and mortgage banking income. In addition, our 2022 quarterly earnings have been very strong and consistent. We are pleased with the loan portfolio growth and performance that we have experienced in 2022”

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
(Unaudited)

	June 30,				December 31,
		2022				2021
Assets
Cash and due from banks	$	17,626,699			$	25,258,932
Federal funds sold and other interest-bearing deposits		764,765				1,203,174
Cash and cash equivalents		18,391,464				26,462,106
Certificates of deposit in other banks		100,000				350,000
Securities available for sale, at fair value		138,203,495				149,237,916
Securities held to maturity, at cost		20,551,611				21,851,975
Equity security, at fair value		501,662				543,605
Restricted stock, at cost		695,000				675,400
Mortgage loans held for sale		-				126,500
Loans, less allowance for loan losses of $3,648,128 and $3,650,268		491,076,252				482,011,334
Premises and equipment, net		6,224,363				6,259,421
Accrued interest receivable		1,587,370				1,609,063
Deferred income taxes, net		6,707,600				2,177,450
Other real estate owned, net		1,242,365				1,242,365
Bank owned life insurance		11,665,419				11,556,163
Goodwill and other intangibles, net		7,046,916				7,051,080
Other assets		5,762,923				5,522,877
	$	709,756,440			$	716,677,255
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing	$	135,196,047			$	124,175,615
Interest-bearing		494,276,250				502,239,055
Total deposits		629,472,297				626,414,670
Securities sold under repurchase agreements		5,649,445				5,414,026
Federal Home Loan Bank of Atlanta advances		5,000,000				5,000,000
Long-term debt, net of issuance costs		16,037,274				16,978,905
Accrued interest payable		268,749				295,910
Other liabilities		5,139,695				5,952,286
		661,567,460				660,055,797
Stockholders' equity
Common stock, par value $.01 per share,
authorized 5,000,000 shares; issued and outstanding
3,053,487 in 2022 and 3,037,137 shares in 2021		30,535				30,372
Additional paid-in capital		29,197,475				28,857,422
Retained earnings		32,288,555				29,128,600
Accumulated other comprehensive loss		(13,327,585	)			(1,394,936	)
		48,188,980				56,621,458
	$	709,756,440			$	716,677,255

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

	Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
Interest income
Loans, including fees	$	5,370,350			$	5,783,660			$	11,053,712			$	11,768,317
Investment securities - taxable		742,087				329,731				1,386,548				540,955
Investment securities - tax exempt		140,823				152,412				290,310				312,986
Federal funds sold and other interest earning assets		21,887				15,308				34,302				29,445
Total interest income		6,275,147				6,281,111				12,764,872				12,651,703
Interest expense
Deposits		319,204				533,437				657,764				1,128,957
Securities sold under repurchase agreements		2,433				14,972				5,684				28,483
Federal Home Loan Bank advances and long-term debt		181,325				190,181				365,150				378,287
Total interest expense		502,962				738,590				1,028,598				1,535,727
Net interest income		5,772,185				5,542,521				11,736,274				11,115,976
Provision for (recovery of) loan losses		-				(20,000	)			-				100,000
Net interest income after provision for (recovery of) loan losses		5,772,185				5,562,521				11,736,274				11,015,976
Noninterest income
Service charges on deposit accounts		191,727				176,483				373,193				335,674
Mortgage banking income		64,986				240,666				187,674				496,933
Bank owned life insurance income		56,266				82,922				109,256				153,041
Fair value adjustment of equity security		(18,096	)			511				(44,913	)			411
Gain on call of debt security		-				-				-				8,569
Gain on sale of SBA loans		64,523				-				158,123				-
Other fees and commissions		82,235				47,974				154,115				110,873
Total noninterest income		441,641				548,556				937,448				1,105,501
Noninterest expense
Salaries		1,928,257				1,844,736				3,668,652				3,471,074
Employee benefits		437,615				438,133				949,407				911,021
Occupancy		213,238				245,318				441,665				495,530
Furniture and equipment		224,593				183,689				439,208				380,372
Other		764,883				797,257				1,869,252				1,646,260
Total noninterest expense		3,568,586				3,509,133				7,368,184				6,904,257
Income before income taxes		2,645,240				2,601,944				5,305,538				5,217,220
Income taxes		594,507				569,725				1,204,003				1,155,426
Net income	$	2,050,733			$	2,032,219			$	4,101,535			$	4,061,794
Earnings per common share - basic and diluted	$	0.67			$	0.67			$	1.35			$	1.35

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

FAQ

What is the net income reported by Farmers and Merchants Bancshares for the first half of 2022?

Farmers and Merchants Bancshares reported a net income of $4.1 million for the first half of 2022.

How does the return on average equity compare year-over-year for FMFG?

Return on average equity for FMFG increased to 15.37% in the first half of 2022, compared to 15.18% in the same period of 2021.

What were the earnings per share for Farmers and Merchants Bancshares in the second quarter of 2022?

The earnings per share for Farmers and Merchants Bancshares in the second quarter of 2022 was $0.67.

What decline in net interest income was reported by FMFG for H1 2022?

Net interest income for FMFG increased by $620,298 for the first half of 2022, compared to H1 2021.

How much did the book value of FMFG's common stock decrease by in 2022?

The book value of Farmers and Merchants Bancshares' common stock decreased from $18.64 per share at the end of 2021 to $15.78 per share by June 30, 2022.