Farmers and Merchants Bancshares, Inc. Reports Earnings of $8,090,127 or $2.66 Per Common Share for the Year Ended December 31, 2022

Rhea-AI Summary

Farmers and Merchants Bancshares, Inc. (FMFG) reported a net income of $8,090,127 for the year ending December 31, 2022, equating to $2.66 per share, a slight decrease from $8,149,606 or $2.70 per share in 2021. The company achieved a return on average equity of 16.03%, up from 14.85% the previous year, while return on average assets declined to 1.13%. Total assets stood at $718 million, with loans increasing by 7.2% to $517 million. However, the book value per share dropped to $15.56 from $18.64, impacted by unrealized losses in the investment portfolio due to rising interest rates. The CEO noted challenges ahead due to higher deposit rates affecting net interest margin.

Positive

• Net income for 2022 was $8,090,127, demonstrating sustained profitability.
• Return on average equity increased to 16.03%, showing improved efficiency.
• Loan portfolio grew by 7.2% year-over-year despite PPP loan forgiveness.

Negative

• Net income per share decreased from $2.70 (2021) to $2.66 (2022).
• Return on average assets declined to 1.13% from 1.16%.
• Book value per share dropped to $15.56 from $18.64 due to unrealized losses on AFS securities.

HAMPSTEAD, Md., Jan. 24, 2023 (GLOBE NEWSWIRE) -- Farmers and Merchants Bancshares, Inc. (the “Company”) (OTC: FMFG), the parent of Farmers and Merchants Bank (the “Bank”), announced that net income for the year ended December 31, 2022 was $8,090,127, or $2.66 per common share (basic and diluted), compared to $8,149,606, or $2.70 per common share (basic and diluted), for the same period in 2021. The Company’s return on average equity during the year ended December 31, 2022 was 16.03% compared to 14.85% for the same period in 2021. The Company’s return on average assets during the year ended December 31, 2022 was 1.13% compared to 1.16% for the same period in 2021. Income from Paycheck Protection Program (“PPP”) loans added approximately $181,000 to net income for the year ended December 31, 2022 compared to $802,000 for the same period in 2021.

Net income for the three months ended December 31, 2022 was $2,014,282, or $0.66 per common share (basic and diluted), compared to $1,965,265, or $0.65 per common share (basic and diluted), for the fourth quarter of 2021.

Net interest income for the year ended December 31, 2022 was $1,248,391 higher than for the same period in 2021 due to a $22.0 million increase in average interest earning assets to $686.7 million for the year ended December 31, 2022 as compared to $664.7 million for the same period in 2021, and an increase in the taxable equivalent net yield on average net interest earning assets to 3.54% for the year ended December 31, 2022 from 3.47% for the year ended December 31, 2021. The taxable equivalent yield on total average interest-earning assets decreased 4 basis points to 3.85% for the year ended December 31, 2022 from 3.89% for the same period in 2021 primarily due to the aforementioned decline in PPP revenue. This decrease was offset by a 13 basis point decrease in the cost of deposits and borrowings to 0.41% for the year ended December 31, 2022 from 0.54% for the same period in 2021. Provision for loan losses totaled $475,000 for the year ended December 31, 2022, compared to $330,000 for the same period in 2021.

Noninterest income increased by $128,024 for the year ended December 31, 2022 when compared to the same period in 2021 primarily as a result of a $151,206 increase in the gain on sale of SBA loans and a $673,483 net gain from insurance proceeds related to storm damage suffered by its Upperco location during the third quarter of 2022, offset by a $696,470 decrease in mortgage banking revenue reflecting a decline in refinances due to rising interest rates. Noninterest expense was $1,238,681 higher in the year ended December 31, 2022 when compared to the same period in 2021 due primarily to a $730,008 increase in salaries and benefits and a $451,083 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 $52,213 during the year ended December 31, 2022 when compared to the same period in 2021 due to a decrease in the amount of nontaxable income included in pretax income year-over-year. The effective tax rate increased to 23.50% during the year ended December 31, 2022 compared to 22.99% during the same period last year.

Total assets were $718 million at December 31, 2022 compared to $717 million at December 31, 2021. Loans increased to $517 million at December 31, 2022 from $482 million at December 31, 2021 despite a $9 million decrease in PPP loans. Investments in debt securities decreased to $147 million at December 31, 2022 from $171 million at December 31, 2021 due primarily to a $25 million increase in the unrealized loss on available for sale (“AFS”) securities. Deposits decreased to $624 million at December 31, 2022 from $626 million at December 31, 2021. Federal Home Loan bank advances increased to $20 million at December 31, 2022 from $5 million at December 31, 2021. Despite the Company’s strong earnings, the book value of the Company’s common stock decreased to $15.56 per share at December 31, 2022, compared to $18.64 per share at December 31, 2021 due to the decline in the market value of the Company’s AFS investment portfolio as a result of the significant rise in interest rates over the last year. 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.

Gary A. Harris, President & CEO, commented “I’d like to wish long-time President & CEO Jim Bosley a happy retirement and thank him again for leading the Bank for over 27 years. Jim left on a high note with net income for 2022 just short of our record earnings set last year. We are also pleased that our loan portfolio grew by 7.2% during 2022 despite PPP loan forgiveness. We look forward to 2023 despite rising rates on deposits which will put pressure on our net interest margin.”

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)

	December 31,				December 31,
	2022				2021
Assets
Cash and due from banks	$	6,414,822			$	25,258,932
Federal funds sold and other interest-bearing deposits		848,715				1,203,174
Cash and cash equivalents		7,263,537				26,462,106
Certificates of deposit in other banks		100,000				350,000
Securities available for sale, at fair value		126,314,449				149,237,916
Securities held to maturity, at cost		20,508,997				21,851,975
Equity security, at fair value		489,145				543,605
Restricted stock, at cost		1,332,500				675,400
Mortgage loans held for sale		428,355				126,500
Loans, less allowance for loan losses of $4,150,198 and $3,650,268		516,920,540				482,011,334
Premises and equipment, net		6,186,594				6,259,421
Accrued interest receivable		1,815,784				1,609,063
Deferred income taxes, net		8,392,658				2,177,450
Other real estate owned, net		1,242,365				1,242,365
Bank owned life insurance		14,585,342				11,556,163
Goodwill and other intangibles, net		7,042,752				7,051,080
Other assets		5,587,654				5,522,877
	$	718,210,672			$	716,677,255
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing	$	126,695,349			$	124,175,615
Interest-bearing		496,915,775				502,239,055
Total deposits		623,611,124				626,414,670
Securities sold under repurchase agreements		5,175,303				5,414,026
Federal Home Loan Bank of Atlanta advances		20,000,000				5,000,000
Long-term debt, net of issuance costs		15,095,642				16,978,905
Accrued interest payable		349,910				295,910
Other liabilities		6,203,730				5,952,286
		670,435,709				660,055,797
Stockholders' equity
Common stock, par value $.01 per share,
authorized 5,000,000 shares; issued and outstanding
3,071,214 in 2022 and 3,037,137 shares in 2021		30,712				30,372
Additional paid-in capital		29,549,914				28,857,422
Retained earnings		35,300,166				29,128,600
Accumulated other comprehensive loss		(17,105,829	)			(1,394,936	)
		47,774,963				56,621,458
	$	718,210,672			$	716,677,255

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

	Three Months Ended December 31,							Twelve Months Ended December 31,
	2022			2021				2022				2021
Interest income
Loans, including fees	$	5,904,409		$	5,663,588			$	22,565,034			$	23,491,614
Investment securities - taxable		811,146			544,129				2,981,300				1,511,970
Investment securities - tax exempt		140,160			148,962				570,655				611,323
Federal funds sold and other interest earning assets		63,001			17,753				152,664				65,496
Total interest income		6,918,716			6,374,432				26,269,653				25,680,403
Interest expense
Deposits		404,371			408,539				1,375,691				1,997,873
Securities sold under repurchase agreements		4,210			6,498				12,768				44,628
Federal Home Loan Bank advances and long-term debt		214,666			192,256				757,699				762,798
Total interest expense		623,247			607,293				2,146,158				2,805,299
Net interest income		6,295,469			5,767,139				24,123,495				22,875,104
Provision for (recovery of) loan losses		380,000			(100,000	)			475,000				330,000
Net interest income after provision for (recovery of) loan losses		5,915,469			5,867,139				23,648,495				22,545,104
Noninterest income
Service charges on deposit accounts		203,457			201,271				777,901				724,086
Mortgage banking income		18,214			206,109				214,043				910,513
Bank owned life insurance income		49,444			55,380				229,179				229,966
Fair value adjustment of equity security		431			(5,140	)			(62,093	)			(15,354	)
Gain on call of debt security		-			-				-				9,190
Gain on insurance proceeds, net		673,483			-				673,483				-
Gain on sale of SBA loans		-			-				158,123				6,917
Other fees and commissions		73,976			70,815				303,302				300,596
Total noninterest income		1,019,005			528,435				2,293,938				2,165,914
Noninterest expense
Salaries		2,208,551			1,848,017				7,865,194				7,214,871
Employee benefits		430,321			418,565				1,798,150				1,718,465
Occupancy		219,988			211,670				890,926				948,757
Furniture and equipment		248,967			197,267				891,250				775,829
Other		1,106,578			1,083,695				3,921,760				3,470,677
Total noninterest expense		4,214,405			3,759,214				15,367,280				14,128,599
Income before income taxes		2,720,069			2,636,360				10,575,153				10,582,419
Income taxes		705,787			671,095				2,485,026				2,432,813
Net income	$	2,014,282		$	1,965,265			$	8,090,127			$	8,149,606
Earnings per common share - basic and diluted	$	0.66		$	0.65			$	2.66			$	2.70

Contact: Mr. Gary A. Harris
President & CEO
(410) 374-1510, ext.104

FAQ

What were Farmers and Merchants Bancshares, Inc.'s earnings for 2022?

Farmers and Merchants Bancshares, Inc. reported earnings of $8,090,127 for the year ending December 31, 2022.

How did the return on average equity change for FMFG in 2022?

The return on average equity for Farmers and Merchants Bancshares increased to 16.03% in 2022 from 14.85% in 2021.

What impact did PPP loans have on FMFG's income in 2022?

Income from Paycheck Protection Program loans added approximately $181,000 to net income in 2022, a decline from $802,000 in 2021.

What was the book value per share for FMFG at the end of 2022?

The book value per share for Farmers and Merchants Bancshares decreased to $15.56 on December 31, 2022, down from $18.64 in 2021.

What challenges does FMFG anticipate in 2023?

The company anticipates challenges in 2023 due to rising rates on deposits which may pressure their net interest margin.