Farmers and Merchants Bancshares, Inc. Reports Record Earnings of $8,149,606 or $2.70 Per Share for the Year Ended December 31, 2021

Rhea-AI Summary

Farmers and Merchants Bancshares reported record net income of $8,149,606 ($2.70 per share) for 2021, up from $2,682,003 ($0.90 per share) in 2020. The increase was primarily driven by the acquisition of Carroll Bancorp and income from PPP loans, contributing approximately $802,000. Assets grew to $717 million, with deposits increasing to $626 million. However, the company anticipates that PPP loan earnings will decrease by at least 75% in 2022, impacting future results.

Positive

• Record net income of $8.15 million, a significant year-over-year increase.
• Earnings per share reached $2.70, marking an all-time high.
• Increase in total assets to $717 million, up from $677 million in 2020.
• Deposits rose to $626 million, demonstrating strong growth.

Negative

• PPP loan income expected to decrease by at least 75% in 2022, adversely affecting earnings.
• Loans decreased to $482 million from $522 million, indicating a decline.

HAMPSTEAD, Md., Feb. 02, 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 year ended December 31, 2021 was $8,149,606, or $2.70 per common share (basic and diluted), both all-time annual records, compared to $2,682,003, or $0.90 per common share (basic and diluted), for the year ended December 31, 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 $802,000 to net income. As of December 31, 2021, $196,000 of deferred PPP fees, net of income taxes, have not been recognized.

Net income for the three months ended December 31, 2021 was $1,965,265, or $0.65 per common share, compared to $417,394, or $0.14 per common share, for the fourth quarter of 2020.

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 twelve months ended December 31, 2021 versus the same periods of the prior year with and without $1,624,496 and $3,236,817 of acquisition costs incurred during the three and twelve month periods ended December 31, 2020, respectively.

	Three Months Ended (unaudited)									Twelve Months Ended (unaudited)
	December 31, 2021			December 31, 2020						December 31, 2021			December 31, 2020
							Excluding									Excluding
	As Reported			As Reported			Acquisition Costs			As Reported			As Reported			Acquisition Costs
Income before taxes	$	2,636,360		$	444,255		$	2,068,751		$	10,582,419		$	3,169,214		$	6,406,031
Income taxes		671,095			26,861			443,571			2,432,813			487,211			1,292,806
Net income	$	1,965,265		$	417,394		$	1,625,180		$	8,149,606		$	2,682,003		$	5,113,225
Earnings per share,
basic and diluted	$	0.65		$	0.14		$	0.54		$	2.70		$	0.90		$	1.71
Return on average assets		1.09%			0.25%			0.97%			1.16%			0.51%			0.97%
Return on average equity		13.91%			3.25%			12.64%			14.85%			5.22%			9.96%

Net interest income for the twelve months ended December 31, 2021 was $5,570,601 higher than for the same period in 2020 due to a $164.7 million increase in average interest earning assets to $664.7 million for the twelve months ended December 31, 2021 as compared to $500.0 million for the same period in 2020, offset by a decrease in the taxable equivalent net yield on interest earning assets to 3.47% for the twelve months ended December 31, 2021 from 3.50% for the twelve months ended December 31, 2020. The taxable equivalent yield on total interest-earning assets decreased 30 basis points to 3.89% for the twelve months ended December 31, 2021 from 4.19% for the same period in 2020. This was offset by a 35 basis point decrease in the cost of deposits and borrowings to 0.54% for the twelve months ended December 31, 2021 from 0.89% for the twelve months ended December 31, 2020. The provision for loan losses totaled $330,000 for the twelve months ended December 31, 2021, compared to $625,000 for the same period in 2020.

Noninterest income increased by $93,795 for the twelve months ended December 31, 2021 when compared to the same period in 2020 primarily as a result of a 148,656 increase in service charges on deposits and a $41,823 increase in bank owned life insurance income, offset by a $114,424 decrease in mortgage banking revenue. Noninterest expense was $1,453,809 lower in the twelve months ended December 31, 2021 when compared to the same period in 2020 due primarily to $3,236,817 in one-time acquisition costs related to the Carroll acquisition, offset by additional personnel, locations and customers added with the acquisition of Carroll. Salaries and benefits increased $1,137,635, other expenses increased $520,034, and occupancy, furniture and equipment costs increased $125,339. Income taxes increased by $1,945,602 during the twelve months ended December 31, 2021 when compared to the same period in 2020 due to higher income before taxes. The effective tax rate increased to 23% during the twelve months ended December 31, 2021 compared to 15% during the same period last year due to a lower percentage of tax exempt income.

Total assets increased to $717 million at December 31, 2021 from $677 million at December 31, 2020. Loans decreased to $482 million at December 31, 2021 from $522 million at December 31, 2020 due primarily to a $22 million decrease in PPP loans. Investments in debt securities increased to $171 million at December 31, 2021 from $78 million at December 31, 2020. Deposits increased to $626 million at December 31, 2021 from $573 million at December 31, 2020. The book value of the Company’s common stock was $18.64 per share at December 31, 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 December 31, 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. $50 million of PPP loans have been forgiven as of December 31, 2021. The Company expects that the majority of the remaining $10 million will be forgiven in 2022.

James R. Bosley, Jr., President and CEO, commented “We are pleased that our 2021 earnings were the highest in the 102 year history of the Company and our return on average equity was just shy of 15%. The significant increase in assets from the Carroll acquisition was the driving factor in the higher earnings. We are also pleased that our combined loan portfolio has performed so well despite the pandemic issues over the last two years. Income from PPP loans, which has been a significant addition to the bottom line in 2021, will decrease by at least 75% in 2022 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

	December 31,			December 31,
	2021			2020
	(Unaudited)
Assets
Cash and due from banks	$	25,258,932		$	39,898,557
Federal funds sold and other interest-bearing deposits		1,203,174			1,077,113
Cash and cash equivalents		26,462,106			40,975,670
Certificates of deposit in other banks		350,000			850,000
Securities available for sale, at fair value		149,237,916			54,477,286
Securities held to maturity, at cost		21,851,975			23,078,519
Equity security, at fair value		543,605			552,566
Restricted stock, at cost		675,400			900,500
Mortgage loans held for sale		126,500			1,673,350
Loans, less allowance for loan losses of $3,650,268 and $3,296,538		482,011,334			521,690,514
Premises and equipment, net		6,259,421			7,736,556
Accrued interest receivable		1,609,063			2,057,491
Deferred income taxes, net		2,177,450			1,219,668
Other real estate owned, net		1,242,365			1,411,605
Bank owned life insurance		11,556,163			11,297,342
Goodwill and other intangibles		7,051,080			7,059,408
Other assets		5,522,877			2,336,607
	$	716,677,255		$	677,317,082
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing	$	124,175,615		$	103,155,113
Interest-bearing		502,239,055			470,246,434
Total deposits		626,414,670			573,401,547
Securities sold under repurchase agreements		5,414,026			24,753,972
Federal Home Loan Bank of Atlanta advances		5,000,000			5,000,000
Long-term debt, net of issuance costs		16,978,905			16,973,280
Accrued interest payable		295,910			409,622
Other liabilities		5,952,286			5,049,178
		660,055,797			625,587,599
Stockholders' equity
Common stock, par value $.01 per share,
authorized 5,000,000 shares; issued and outstanding
3,037,137 shares in 2021 and 3,011,255 shares in 2020		30,372			30,113
Additional paid-in capital		28,857,422			28,294,139
Retained earnings		29,128,600			22,698,954
Accumulated other comprehensive (loss) income		(1,394,936	)		706,277
		56,621,458			51,729,483
	$	716,677,255		$	677,317,082

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

	Three Months Ended December 31,						Twelve Months Ended December 31,
		2021			2020			2021			2020
Interest income
Loans, including fees	$	5,663,588		$	6,085,249		$	23,491,614		$	19,291,162
Investment securities - taxable		544,129			209,356			1,511,970			770,394
Investment securities - tax exempt		148,962			162,794			611,323			625,099
Federal funds sold and other interest earning assets		17,753			18,163			65,496			76,525
Total interest income		6,374,432			6,475,562			25,680,403			20,763,180
Interest expense
Deposits		408,539			699,498			1,997,873			3,128,994
Securities sold under repurchase agreements		6,498			11,608			44,628			107,318
Federal Home Loan Bank advances and other borrowings		192,256			196,639			762,798			222,365
Total interest expense		607,293			907,745			2,805,299			3,458,677
Net interest income		5,767,139			5,567,817			22,875,104			17,304,503
Provision for (recovery of) loan losses		(100,000	)		150,000			330,000			625,000
Net interest income after provision for (recovery of) loan losses		5,867,139			5,417,817			22,545,104			16,679,503
Noninterest income
Service charges on deposit accounts		201,271			160,929			724,086			575,430
Mortgage banking income		206,109			340,273			910,513			1,024,937
Bank owned life insurance income		55,380			60,670			229,966			188,143
Fair value adjustment of equity security		(5,140	)		(2,533	)		(15,354	)		10,513
Gain on premium call of debt security		-			-			9,190			-
Other fees and commissions		70,815			115,184			307,513			273,096
Total noninterest income		528,435			674,523			2,165,914			2,072,119
Noninterest expense
Salaries		1,848,017			2,022,907			7,214,871			6,137,050
Employee benefits		418,565			475,237			1,718,465			1,658,651
Occupancy		211,670			206,092			948,757			758,357
Furniture and equipment		197,267			339,623			775,829			840,890
Acquisition		-			1,624,496			-			3,236,817
Other		1,083,695			979,730			3,470,677			2,950,643
Total noninterest expense		3,759,214			5,648,085			14,128,599			15,582,408
Income before income taxes		2,636,360			444,255			10,582,419			3,169,214
Income taxes		671,095			26,861			2,432,813			487,211
Net income	$	1,965,265		$	417,394		$	8,149,606		$	2,682,003
Earnings per share - basic and diluted	$	0.65		$	0.14		$	2.70		$	0.90

                                                     

FOR FURTHER INFORMATION CONTACT:
Contact:	Mr. James R. Bosley, Jr.
	President
	(410) 374-1510, ext.104

FAQ

What were the earnings for Farmers and Merchants Bancshares in 2021?

Farmers and Merchants Bancshares reported net income of $8,149,606 for 2021, or $2.70 per share.

How did the acquisition of Carroll Bancorp impact FMFG's income?

The acquisition of Carroll Bancorp significantly contributed to FMFG's record earnings in 2021.

What is the expected impact of PPP loans on FMFG's earnings in 2022?

FMFG expects a decrease of at least 75% in income from PPP loans in 2022.

What was FMFG's total asset value at the end of 2021?

FMFG's total assets were $717 million as of December 31, 2021.

How much did FMFG's deposits increase in 2021?

FMFG's deposits increased to $626 million in 2021, up from $573 million in 2020.