HAMPSTEAD, Md., Feb. 08, 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 year ended December 31, 2020 was $2,682,003, or $0.90 per common share, compared to $4,560,804, or $1.54 per common share, for the year ended December 31, 2019. Net income for the three months ended December 31, 2020 was $417,394, or $0.14 per common share, compared to $1,060,786, or $0.36 per common share, for the three months ended December 31, 2019. On October 1, 2020, the Company consummated its previously-announced acquisition of Carroll Bancorp, Inc. and Carroll Community Bank (collectively “Carroll”).

	Carroll Community Bank
	Balance Sheet at Acquisition on October 1, 2020
		Book value		Fair value
	Cash	$	5,441,610		$	5,441,610
	Investment securities		14,540,495			14,599,320
	Loans held for sale		1,702,950			1,743,195
	Loans		145,153,100			145,080,950
	Premises and equipment		2,619,413			2,684,240
	Other real estate owned		1,411,605			1,411,605
	Other assets		5,290,399			5,388,546
	Goodwill and other intangibles		-			7,061,490
	Total assets	$	176,159,572		$	183,410,956
	Deposits	$	145,177,501		$	145,793,878
	FHLB advances		13,000,000			13,000,000
	Other liabilities		93,828			88,710
	Total liabilities		158,271,329			158,882,588
	Stockholders' equity		17,888,243			24,528,368
	Total liabilities and stockholders equity	$	176,159,572		$	183,410,956

The Company incurred significant one-time costs of $1,624,496 and $3,236,817 during the three- and 12-months ended December 31, 2020, respectively, related to this acquisition. The table below provides a comparison of the Company’s results for the three- and 12-month periods ended December 31, 2020 and 2019, both with and without the acquisition costs.

	Three Months Ended									Twelve Months Ended
	December 31, 2020						December 31, 2019			December 31, 2020						December 31, 2019
				Excluding									Excluding
	As Reported			Acquisition Costs			As Reported			As Reported			Acquisition Costs			As Reported
Income before income taxes	$	444,255		$	2,068,751		$	1,315,612		$	3,169,214		$	6,406,031		$	5,600,138
Income taxes		26,861			443,571			254,826			487,211			1,292,806			1,039,334
Net income	$	417,394		$	1,625,180		$	1,060,786		$	2,682,003		$	5,113,225		$	4,560,804
Earnings per share	$	0.14		$	0.54		$	0.36		$	0.90		$	1.71		$	1.54
Return on average assets		0.25	%		0.97	%		0.95	%		0.51	%		0.97	%		1.06	%
Return on average equity		3.25	%		12.64	%		8.57	%		5.22	%		9.96	%		9.52	%

Net interest income for the year ended December 31, 2020 was $2,282,118 higher than for the year ended December 31, 2019 due to a $73.6 million increase in average interest earning assets to $488.3 million for the year ended December 31, 2020 as compared to $414.7 million for the year ended December 31, 2019, offset by a decline in the taxable equivalent net yield on interest earning assets to 3.58% in the 2020 period from 3.67% in the 2019 period. The net yield declined because the yield on loans and investments decreased 32 basis points to 4.58% for the year ended December 31, 2020 from 4.90% for the year ended December 31, 2019 as a result of the Federal Reserve rate cuts and the Company’s origination of $31 million of Paycheck Protection Program (“PPP”) loans that are yielding less than 2.50%. The Company’s cost of deposits and borrowings of 0.89% for the year ended December 31, 2020 was 26 basis points lower than the cost of 1.15% for the year ended December 31, 2019. The Company expects the cost of funds to continue to decline into 2021 because the Company has significantly reduced rates on many of its deposit products. The provision for loan losses totaled $625,000 for the year ended December 31, 2020 as a result of the economic downturn caused by the COVID-19 pandemic, compared to $40,000 for the year ended December 31, 2019.

Noninterest income increased by $578,552 in the year ended December 31, 2020 when compared to the year ended December 31, 2019, primarily as a result of a $627,227 increase in mortgage banking income and a $210,150 decrease in the write down of other real estate owned, offset by a $176,586 decrease in bank owned life insurance income and a $88,245 decrease in service charges. Noninterest expense was $4,706,594 higher in the year ended December 31, 2020 when compared to the year ended December 31, 2019 due primarily to the aforementioned acquisition costs of $3,236,817 and salary and benefit increases of $970,890 as a result of employees added in the fourth quarter of 2020 in connection with the Carroll acquisition along with usual increases to existing employees. Income taxes declined by $552,123 during the year ended December 31, 2020 when compared to the year ended December 31, 2019 due to lower income before taxes and a higher percentage of tax-exempt revenue, offset by certain acquisition costs that are not deductible.

The acquisition of Carroll was the primary driver of the significant increases in most assets and liabilities from the prior year end. In addition, the origination of $31 million of PPP loans also increased loans and deposits. Total assets increased to $677 million at December 31, 2020 from $442 million at December 31, 2019. Loans increased to $522 million at December 31, 2020 from $359 million at December 31, 2019. Investment in debt securities increased to $78 million at December 31, 2020 from $56 million at December 31, 2019. Deposits increased to $573 million at December 31, 2020 from $377 million at December 31, 2019. In connection with the Carroll acquisition, the Company borrowed $17 million that it used to fund a portion of the $25 million cash merger consideration. The book value of the common stock of Farmers and Merchants Bancshares, Inc. was $17.18 per share at December 31, 2020, compared to $16.63 per share at December 31, 2019.

The COVID-19 pandemic continues almost a full year after it started. The Bank is providing relief to its borrowers, as needed, including temporary deferral of payments. During the second quarter of 2020, the Bank granted 90-day payment deferrals on 107 loans totalling $109.2 million, which was approximately 30% of the portfolio. Of these deferred loans, 13 loans totaling $21.8 million, or 6% of the portfolio, were granted an additional 90-day deferral. Seven loans totaling $14.7 million, or 3% of the portfolio, including some added with the acquisition of Carroll, have been granted additional payment deferrals. All but one of these loans are making full interest payments. 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, “We are excited that the acquisition of Carroll Community Bank and the related system conversion were completed in the fourth quarter. 2020 earnings excluding acquisition costs for both the fourth quarter and the full year significantly exceeded the prior year’s results for the same periods demonstrating the positive impact of the acquisition. In addition, we are pleased to have helped many of our borrowers with payment deferrals and/or PPP loans.”

About the Company

Farmers and Merchants Bancshares, Inc. is a financial holding company and the parent of Farmers and Merchants Bank. Farmers and Merchants 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 nine 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,
	2020		2019
	(Unaudited)
Assets
Cash and due from banks	$	39,898,557	$	6,664,307
Federal funds sold and other interest-bearing deposits		1,077,113		2,457,045
Cash and cash equivalents		40,975,670		9,121,352
Certificates of deposit in other banks		850,000		100,000
Securities available for sale		54,477,286		36,531,774
Securities held to maturity		23,078,519		19,510,018
Equity security at fair value		552,566		532,321
Restricted stock, at cost		900,500		376,200
Mortgage loans held for sale		1,673,350		242,000
Loans, less allowance for loan losses of $3,296,538 and 2,593,715		521,690,514		359,382,843
Premises and equipment		7,736,556		5,036,851
Accrued interest receivable		2,057,491		1,019,540
Deferred income taxes		1,219,668		1,036,078
Other real estate owned		1,411,605		-
Bank owned life insurance		11,297,342		7,145,477
Goodwill and other intangibles		7,059,408		-
Other assets		2,336,607		2,180,644
	$	677,317,082	$	442,215,098
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing	$	103,155,113	$	60,659,015
Interest-bearing		470,246,434		315,954,299
Total deposits		573,401,547		376,613,314
Securities sold under repurchase agreements		24,753,972		10,958,118
Federal Home Loan Bank of Atlanta advances		5,000,000		-
Long-tem debt		16,973,280		-
Accrued interest payable		409,622		346,214
Other liabilities		5,049,178		4,843,936
		625,587,599		392,761,582
Stockholders' equity
Common stock, par value $.01 per share, authorized 5,000,000 shares; issued and outstanding 3,011,255 in 2020 and 2,974,019 in 2019		30,113		29,740
Additional paid-in capital		28,294,139		27,812,991
Retained earnings		22,698,954		21,568,161
Accumulated other comprehensive income		706,277		42,624
		51,729,483		49,453,516
	$	677,317,082	$	442,215,098

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

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2020			2019			2020			2019
	(Unaudited)			(Unaudited)			(Unaudited)
Interest income
Loans, including fees	$	6,085,249		$	4,312,265		$	19,291,162		$	16,894,657
Investment securities - taxable		209,356			238,075			770,394			869,457
Investment securities - tax exempt		162,794			149,030			625,099			580,384
Federal funds sold and other interest earning assets		18,163			76,964			76,525			357,840
Total interest income		6,475,562			4,776,334			20,763,180			18,702,338
Interest expense
Deposits		699,498			942,731			3,128,994			3,519,960
Securities sold under repurchase agreements		11,608			31,729			107,318			114,641
Federal Home Loan Bank advances and other borrowings		196,639			2,835			222,365			45,352
Total interest expense		907,745			977,295			3,458,677			3,679,953
Net interest income		5,567,817			3,799,039			17,304,503			15,022,385
Provision for loan losses		150,000			40,000			625,000			40,000
Net interest income after provision for loan losses		5,417,817			3,759,039			16,679,503			14,982,385
Noninterest income
Service charges on deposit accounts		160,929			168,923			575,430			663,675
Mortgage banking income		340,273			147,843			1,024,937			397,710
Bank owned life insurance income		60,670			42,888			188,143			364,729
Unrealized gain (loss) on equity security		(2,533	)		(2,489	)		10,513			16,232
Write down of other real estate owned		-			-			-			(210,150	)
Gain on sale of SBA loans		61,885			-			125,520			139,535
Other fees and commissions		53,299			27,805			147,576			121,836
Total noninterest income		674,523			384,970			2,072,119			1,493,567
Noninterest expense
Salaries		2,022,907			1,478,611			6,137,050			5,472,609
Employee benefits		475,237			343,974			1,658,651			1,352,202
Occupancy		206,092			177,351			758,357			771,917
Furniture and equipment		339,623			154,272			840,890			614,543
Acquisition		1,624,496			-			3,236,817			-
Other		979,730			674,189			2,950,643			2,664,543
Total noninterest expense		5,648,085			2,828,397			15,582,408			10,875,814
Income before income taxes		444,255			1,315,612			3,169,214			5,600,138
Income taxes		26,861			254,826			487,211			1,039,334
Net income	$	417,394		$	1,060,786		$	2,682,003		$	4,560,804
Earnings per share - basic and diluted	$	0.14		$	0.36		$	0.90		$	1.54

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

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