HAMPSTEAD, Md., July 22, 2020 (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, 2020 was $1,879,362, or $0.63 per common share, compared to $2,322,108, or $0.79 per common share, for the same period in 2019. Net income for the three months ended June 30, 2020 was $1,036,055, or $0.35 per common share, compared to $1,225,821, or $0.42 per common share, for the same period in 2019. As previously announced, the Company entered into a definitive agreement on March 6, 2020 to acquire Carroll Bancorp, Inc. Significant one-time costs will be incurred in connection with the acquisition. During the three and six months ended June 30, 2020, the Company incurred $165,096 and $344,920, respectively, of such costs. The table below provides a comparison of the Company’s results with and without the acquisition costs and the prior year.

	Three Months Ended									Six Months Ended
	June 30, 2020						June 30, 2019			June 30, 2020						June 30, 2019
				Excluding									Excluding
	As Reported			Acquisition Costs			As Reported			As Reported			Acquisition Costs			As Reported
Income before taxes	$	1,266,626		$	1,431,722		$	1,448,629		$	2,262,849		$	2,607,769		$	2,798,892
Income taxes		230,571			276,001			222,808			383,487			478,400			476,784
Net income	$	1,036,055		$	1,155,721		$	1,225,821		$	1,879,362		$	2,129,369		$	2,322,108
Earnings per share	$	0.35		$	0.39		$	0.42		$	0.63		$	0.72		$	0.79
Return on average assets		0.85%			0.94%			1.14%			0.80%			0.91%			1.09%
Return on average equity		8.05%			8.98%			10.34%			7.39%			8.38%			9.92%

Net interest income for the six months ended June 30, 2020 was $175,192 higher than for the same period in 2019 due to a $42.9 million increase in average interest earning assets to $450.8 million for the six months ended June 30, 2020 as compared to $407.9 million for the same period in 2019, offset by a decline in the taxable equivalent net yield on interest earning assets to 3.44% in the 2020 period from 3.70% in the 2019 period. The net yield declined because the yield on loans and investments decreased 31 basis points to 4.25% for the six months ended June 30, 2020 from 4.56% for the same period in 2019 as a result of the Federal Reserve rate cuts and our origination of $31 million of Paycheck Protection Program (“PPP”) loans that are earning 1.00%. Our cost of deposits and borrowings of 1.07% for the six months ended June 30, 2020 was 4 basis points lower than the cost of 1.11% for the six months ended June 30, 2019. We expect the cost of funds to continue to decline over the remainder of 2020 because we have significantly reduced rates on many of our deposit products. The provision for loan losses totaled $475,000 for the six months ended June 30, 2020, an increase of $462,000 over the same period in 2019, as a result of the economic downturn caused by the COVID-19 pandemic.

Noninterest income increased by $194,599 in the six months ended June 30, 2020 when compared to the same period in 2019 primarily as a result of a $306,769 increase in mortgage banking income and a $210,150 decrease in the write down of other real estate owned, offset by a $197,175 decrease in bank owned life insurance income, a $75,900 decrease in the gain on the sale of SBA loans, and a $41,962 decrease in service charges. Noninterest expense was $443,834 higher in the six months ended June 30, 2020 when compared to the same period in 2019 due primarily to the aforementioned acquisition costs of 344,920 and usual salary and benefit increases of $125,852, offset by a decrease in occupancy, furniture and equipment costs of $21,236. Income taxes declined by $93,297 during the six months ended June 30, 2020 when compared to the same period in 2019 due to lower income before taxes and a higher percentage of tax-exempt revenue.

Total assets increased to $504 million at June 30, 2020 from $442 million at December 31, 2019.  Loans increased to $384 million at June 30, 2020 from $359 million at December 31, 2019. The increase in loans was due primarily to the origination of $31 million of PPP loans. Investment in debt securities increased to $73 million at June 30, 2020 from $56 million at December 31, 2019. Deposits increased to $431 million at June 30, 2020 from $377 million at December 31, 2019.  The increase in deposits was due to an inflow of funds from depositors who abandoned riskier investments for the safety of a bank and to the aforementioned PPP loans.  The majority of PPP loans were made to existing customers, so the loan proceeds were deposited in checking accounts. In many cases, the customer has not withdrawn the PPP funds. The book value of the common stock of Farmers and Merchants Bancshares, Inc. was $17.23 per share at June 30, 2020, compared to $16.63 per share at December 31, 2019.

The COVID-19 pandemic has been wreaking havoc on the U.S. economy. The full impact and its effect on the banking industry will not be known for several quarters, but will be significant. The Bank is providing relief to our borrowers, as needed, including temporary deferral of payments. As of June 30, 2020, the Bank had granted 90-day payment deferrals on 107 loans totalling $109.2 million, which is approximately 30% of the portfolio. The 90-day deferral period has ended for most of the loans and approximately 15 loans totaling $27.8 million will be seeking a second 90-day deferral. In addition, as mentioned previously, the Bank has made a significant amount of PPP loans to customers.

James R. Bosley, Jr., President and CEO, commented “While the COVID-19 pandemic is not over, we are happy to report that our employees are healthy and that most of our borrowers are weathering the storm.  Our customers have adapted to the new ways we all have to conduct business. We are pleased to have helped many of our borrowers with payment deferrals and/or PPP loans. Our acquisition of Carroll Community Bank continues to proceed.  We expect the closing to occur in the third quarter.”

About the Company

Farmers and Merchants Bancshares, Inc. is a financial holding company and the parent of Farmers and Merchants Bank.  The Bank was chartered in Maryland in 1919, and is currently celebrating 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 and Route 795 corridors from Owings Mills, Maryland to the Pennsylvania State line. The main office is located in Upperco, Maryland, with seven additional branches in Owings Mills, Hampstead, Greenmount, Reisterstown, and Westminster. 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
	June 30,		December 31,
	2020		2019
	(Unaudited)
Assets
Cash and due from banks	$	26,517,065		$	6,664,307
Federal funds sold and other interest-bearing deposits	476,565				2,457,045
Cash and cash equivalents	26,993,630		9,121,352
Certificates of deposit in other banks	1,600,000		100,000
Securities available for sale	50,595,971		36,531,774
Securities held to maturity	22,092,361		19,510,018
Equity security at fair value	550,806		532,321
Federal Home Loan Bank stock, at cost	611,300		376,200
Mortgage loans held for sale	1,473,976		242,000
Loans, less allowance for loan losses of $3,136,712 and 2,593,715	383,769,692		359,382,843
Premises and equipment	5,041,743		5,036,851
Accrued interest receivable	1,724,532		1,019,540
Deferred income taxes	745,539		1,036,078
Bank owned life insurance	7,230,699		7,145,477
Other assets		2,062,869			2,180,644
	$	504,493,118		$	442,215,098
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing	$	85,951,086		$	60,659,015
Interest-bearing		345,210,014			315,954,299
Total deposits	431,161,100		376,613,314
Securities sold under repurchase agreements	11,250,921		10,958,118
Federal Home Loan Bank of Atlanta advances	5,000,000		-
Accrued interest payable	309,006		346,214
Other liabilities		5,206,034			4,843,936
		452,927,061			392,761,582
Stockholders' equity
Common stock, par value $.01 per share,
authorized 5,000,000 shares; issued and outstanding
2,991,963 in 2020 and 2,974,019 in 2019	29,920		29,740
Additional paid-in capital	28,054,158		27,812,991
Retained earnings	22,674,059		21,568,161
Accumulated other comprehensive income		807,920			42,624
		51,566,057			49,453,516
	$	504,493,118		$	442,215,098

Farmers and Merchants Bancshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
	Three Months Ended June 30,							Six Months Ended June 30,
	2020			2019				2020			2019
Interest income
Loans, including fees	$	4,393,267		$	4,172,235			$	8,715,921		$	8,332,321
Investment securities - taxable	191,255			222,272				401,761			397,108
Investment securities - tax exempt	154,699			143,125				298,783			281,213
Federal funds sold and other interest earning assets	16,007			121,824				48,799			196,350
Total interest income	4,755,228			4,659,456				9,465,264			9,206,992
Interest expense
Deposits	832,464			885,246				1,738,663			1,660,777
Securities sold under repurchase agreements	39,496			28,423				77,690			53,722
Federal Home Loan Bank advances and other borrowings	12,865			11,195				12,974			31,748
Total interest expense	884,825			924,864				1,829,327			1,746,247
Net interest income	3,870,403			3,734,592				7,635,937			7,460,745
Provision for loan losses	350,000			-				475,000			13,000
Net interest income after provision for loan losses	3,520,403			3,734,592				7,160,937			7,447,745
Noninterest income
Service charges on deposit accounts	117,658			166,115				276,213			318,175
Mortgage banking income	350,110			72,879				412,367			105,598
Bank owned life insurance income	43,211			242,012				85,223			282,398
Unrealized gain on equity security	4,535			6,911				13,045			14,756
Write down of other real estate owned	-			(210,150		)		-			(210,150		)
Gain on sale of SBA loans	63,635			9,520				63,635			139,535
Other fees and commissions	29,077			35,946				59,745			65,317
Total noninterest income	608,226			323,233				910,228			715,629
Noninterest expense
Salaries	1,296,278			1,309,007				2,651,197			2,635,790
Employee benefits	359,450			314,145				806,554			696,109
Occupancy	185,394			190,543				368,546			404,963
Furniture and equipment	165,812			155,933				326,261			311,080
Acquisition	165,096			-				344,920			-
Other	689,973			639,568				1,310,838			1,316,540
Total noninterest expense	2,862,003			2,609,196				5,808,316			5,364,482
Income before income taxes	1,266,626			1,448,629				2,262,849			2,798,892
Income taxes	230,571			222,808				383,487			476,784
Net income	$	1,036,055		$	1,225,821			$	1,879,362		$	2,322,108
Earnings per share - basic and diluted	$	0.35		$	0.42			$	0.63		$	0.79

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

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