8-K
Farmers & Merchants Bancshares, Inc. (FMFG)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 23, 2020
Farmers and Merchants Bancshares, Inc.
(Exact name of registrant as specified in its charter)
| Maryland | 000-55756 | 81-3605835 |
|---|---|---|
| (State or other jurisdiction of | (Commission file number) | (IRS Employer |
| incorporation or organization) | Identification No.) | |
| 4510 Lower Beckleysville Road, Suite H, Hampstead, MD | 21074 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (410) 374-1510
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operation and Financial Condition.
On January 23, 2020, Farmers and Merchants Bancshares, Inc. issued a press release describing its financial results for the three- and twelve-month periods ended December 31, 2019. A copy of the press release is furnished herewith as Exhibit 99.1.
The information contained in this Item 2.02 and in Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The exhibits furnished with this report are listed in the following Exhibit Index:
| Exhibit No. | Description |
|---|---|
| 99.1 | Press release dated January 23, 2020 (furnished herewith). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FARMERS AND MERCHANTS BANCSHARES, INC. | ||
|---|---|---|
| Dated: January 23, 2020 | By: | /s/ James R. Bosley, Jr. |
| James R. Bosley, Jr. | ||
| President & CEO |
ex_170255.htm
Exhibit 99.1
| FOR IMMEDIATE RELEASE | FOR FURTHER INFORMATION CONTACT: | |
|---|---|---|
| January 23, 2020 | ||
| Farmers and Merchants Bancshares, Inc. | Contact: | Mr. James R. Bosley, Jr. |
| 4510 Lower Beckleysville Rd, Suite H | President | |
| Hampstead, Maryland 21074 | (410) 374-1510, ext.104 |
FARMERS AND MERCHANTS BANCSHARES, INC. REPORTS EARNINGS FOR 2019 OF $4,560,804 OR $1.54 PER SHARE
HAMPSTEAD, MARYLAND (January 23, 2020) – 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, 2019 was $4,560,804, or $1.54 per common share, compared to $4,712,676, or $1.61 per common share, in 2018. This was the second highest net income in the history of the Company and the Bank. The Company’s return on average equity during 2019 was 9.52% compared to 10.77% during 2018. The Company’s return on average assets during 2019 was 1.06% compared to 1.14% during 2018.
Net interest income for 2019 was $238,707 lower than 2018 due to a decline in the taxable equivalent net yield on interest earning assets to 3.67% in 2019 from 3.88% in 2018, offset by a $18.0 million increase in interest earning assets to $414.7 million for 2019 as compared to $396.7 million for 2018. Despite the recent Federal Reserve rate cuts, the net yield continues to decline as our cost of deposits and borrowings has increased 33 basis points to 1.15% for 2019 from 0.82% for 2018 while the yield on loans and investments has increased only 4 basis points to 4.55% for 2019 from 4.51% for 2018.
Noninterest income increased by $128,294 during 2019 when compared 2018 primarily as a result of a $125,943 increase in mortgage banking income and a $202,965 increase in bank owned life insurance income due to proceeds received from a policy, offset by a $86,491 decrease in the gain on the sale of SBA loans and a $154,800 write-down of other real estate owned (“OREO”) that was required by law due to the length of time that the OREO has been held. Noninterest expense was $543,334 higher during 2019 when compared 2018 due primarily to usual salary and benefit increases of $316,548, an increase in occupancy costs of $65,724, and an increase in other expenses of $178,849. Income taxes declined by $66,875 during 2019 when compared to 2018 due to lower income before taxes and a higher percentage of tax exempt revenue.
Net income for the three months ended December 31, 2019 was $1,060,786, or $0.36 per common share, compared to $1,136,805, or $0.39 per common share, for the same period in 2018. The decrease of $76,019 was due to a decrease in net interest income of $74,303, a decrease in noninterest income of $76,271, and an increase in noninterest expenses of $351,154, offset by a decrease in the provision for loan losses of $410,000 and a decrease in income taxes of $15,709.
Total assets increased 6% to $442 million at December 31, 2019 from $417 million at December 31, 2018. Loans increased 5% to $359 million at December 31, 2019 from $341 million at December 31, 2018. Investment in debt securities increased 25% to $56 million at December 31, 2019 from $45 million at December 31, 2018. Deposits increased 6% to $377 million at December 31, 2019 from $355 million at December 31, 2018. The book value of the common stock of Farmers and Merchants Bancshares, Inc. was $16.63 per share at December 31, 2019, compared to $15.41 per share at December 31, 2018.
James R. Bosley, Jr., President and CEO, commented “We are pleased to have such strong results during 2019 as we celebrated the Bank’s 100 year anniversary. In addition to the second highest net income in our history, we achieved solid growth in assets, loans, and deposits. As we end our 100 year celebration we would like to thank those who made it possible: our customers, shareholders, employees, and directors.”
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 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
| December 31, | ||||
|---|---|---|---|---|
| 2018 | ||||
| Assets | ||||
| Cash and due from banks | 6,664,307 | $ | 11,480,608 | |
| Federal funds sold and other interest-bearing deposits | 2,457,045 | 3,137,629 | ||
| Cash and cash equivalents | 9,121,352 | 14,618,237 | ||
| Certificate of deposit in other bank | 100,000 | 100,000 | ||
| Securities available for sale | 36,531,774 | 26,591,991 | ||
| Securities held to maturity | 19,510,018 | 18,127,067 | ||
| Equity security at fair value | 532,321 | 503,827 | ||
| Federal Home Loan Bank stock, at cost | 376,200 | 575,800 | ||
| Mortgage loans held for sale | 242,000 | 573,638 | ||
| Loans, less allowance for loan losses of 2,593,715 and 2,509,334 | 359,382,843 | 340,900,635 | ||
| Premises and equipment | 5,036,851 | 5,075,310 | ||
| Accrued interest receivable | 1,019,540 | 990,529 | ||
| Deferred income taxes | 1,036,078 | 1,179,454 | ||
| Other real estate owned | - | 210,150 | ||
| Bank owned life insurance | 7,145,477 | 7,053,354 | ||
| Other assets | 2,180,644 | 657,885 | ||
| 442,215,098 | $ | 417,157,877 | ||
| Liabilities and Stockholders' Equity | ||||
| Deposits | ||||
| Noninterest-bearing | 60,659,015 | $ | 62,717,520 | |
| Interest-bearing | 315,954,299 | 291,995,483 | ||
| Total deposits | 376,613,314 | 354,713,003 | ||
| Securities sold under repurchase agreements | 10,958,118 | 11,012,000 | ||
| Federal Home Loan Bank of Atlanta advances | - | 3,000,000 | ||
| Accrued interest payable | 346,214 | 311,489 | ||
| Other liabilities | 4,843,936 | 2,726,678 | ||
| 392,761,582 | 371,763,170 | |||
| Stockholders' equity | ||||
| Common stock, par value .01 per share, authorized 5,000,000 shares; issued and outstanding 2,974,019 shares in 2019 and 1,682,997 shares in 2018 | 29,740 | 16,830 | ||
| Additional paid-in capital | 27,812,991 | 27,324,794 | ||
| Retained earnings | 21,568,161 | 18,621,382 | ||
| Accumulated other comprehensive income | 42,624 | (568,299 | ) | |
| 49,453,516 | 45,394,707 | |||
| 442,215,098 | $ | 417,157,877 |
All values are in US Dollars.
Farmers and Merchants Bancshares, Inc. and Subsidiaries
Consolidated Statements of Income
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | ||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | |||||||||
| Interest income | |||||||||||
| Loans, including fees | $ | 4,312,265 | $ | 4,229,789 | $ | 16,894,657 | $ | 16,401,554 | |||
| Investment securities - taxable | 238,075 | 160,302 | 869,457 | 610,951 | |||||||
| Investment securities - tax exempt | 149,030 | 142,474 | 580,384 | 570,529 | |||||||
| Federal funds sold and other interest earning assets | 76,964 | 67,326 | 357,840 | 185,299 | |||||||
| Total interest income | 4,776,334 | 4,599,891 | 18,702,338 | 17,768,333 | |||||||
| Interest expense | |||||||||||
| Deposits | 942,731 | 682,593 | 3,519,960 | 2,225,616 | |||||||
| Securities sold under repurchase agreements | 31,729 | 32,639 | 114,641 | 144,881 | |||||||
| Federal Home Loan Bank advances and other borrowings | 2,835 | 11,317 | 45,352 | 136,744 | |||||||
| Total interest expense | 977,295 | 726,549 | 3,679,953 | 2,507,241 | |||||||
| Net interest income | 3,799,039 | 3,873,342 | 15,022,385 | 15,261,092 | |||||||
| Provision for loan losses | 40,000 | 450,000 | 40,000 | 475,000 | |||||||
| Net interest income after provision for loan losses | 3,759,039 | 3,423,342 | 14,982,385 | 14,786,092 | |||||||
| Noninterest income | |||||||||||
| Service charges on deposit accounts | 168,923 | 174,260 | 663,675 | 670,653 | |||||||
| Mortgage banking income | 147,843 | 51,962 | 397,710 | 271,767 | |||||||
| Bank owned life insurance income | 42,888 | 40,490 | 364,729 | 161,764 | |||||||
| Unrealized gain (loss) on equity security | (2,489 | ) | 3,919 | 16,232 | (11,429 | ) | |||||
| Write down of other real estate owned | - | - | (210,150 | ) | (55,350 | ) | |||||
| Gain on sale of SBA loans | - | 162,201 | 139,535 | 226,026 | |||||||
| Other fees and commissions | 27,805 | 28,409 | 121,836 | 101,842 | |||||||
| Total noninterest income | 384,970 | 461,241 | 1,493,567 | 1,365,273 | |||||||
| Noninterest expense | |||||||||||
| Salaries | 1,478,611 | 1,301,900 | 5,472,609 | 5,194,871 | |||||||
| Employee benefits | 343,974 | 295,112 | 1,352,202 | 1,313,392 | |||||||
| Occupancy | 177,351 | 170,745 | 771,917 | 706,193 | |||||||
| Furniture and equipment | 154,272 | 156,377 | 614,543 | 632,330 | |||||||
| Other | 674,189 | 553,109 | 2,664,543 | 2,485,694 | |||||||
| Total noninterest expense | 2,828,397 | 2,477,243 | 10,875,814 | 10,332,480 | |||||||
| Income before income taxes | 1,315,612 | 1,407,340 | 5,600,138 | 5,818,885 | |||||||
| Income taxes | 254,826 | 270,535 | 1,039,334 | 1,106,209 | |||||||
| Net income | $ | 1,060,786 | $ | 1,136,805 | $ | 4,560,804 | $ | 4,712,676 | |||
| Earnings per share - basic and diluted | $ | 0.36 | $ | 0.39 | $ | 1.54 | $ | 1.61 |
| Farmers and Merchants Bancshares, Inc. | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Consolidated Financial Data | |||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (unaudited) | |||||||||||||||
| OPERATING DATA | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | |||
| Interest income | $ | 18,702,338 | $ | 17,768,333 | $ | 16,594,803 | $ | 15,351,497 | $ | 14,705,401 | |||||
| Interest expense | 3,679,953 | 2,507,241 | 1,707,240 | 1,346,120 | 1,189,646 | ||||||||||
| Net interest income | 15,022,385 | 15,261,092 | 14,887,563 | 14,005,377 | 13,515,755 | ||||||||||
| Provision for loan losses | 40,000 | 475,000 | 410,000 | - | - | ||||||||||
| Net interest income after provision for loan losses | 14,982,385 | 14,786,092 | 14,477,563 | 14,005,377 | 13,515,755 | ||||||||||
| Noninterest income | 1,493,567 | 1,365,273 | 1,337,094 | 1,465,197 | 1,986,260 | ||||||||||
| Noninterest expense | 10,875,814 | 10,332,480 | 10,023,102 | 9,534,625 | 8,703,588 | ||||||||||
| Income before income taxes | 5,600,138 | 5,818,885 | 5,791,555 | 5,935,949 | 6,798,427 | ||||||||||
| Income taxes | 1,039,334 | 1,106,209 | 2,002,314 | 2,026,820 | 2,530,205 | ||||||||||
| Net income | $ | 4,560,804 | $ | 4,712,676 | $ | 3,789,241 | $ | 3,909,129 | $ | 4,268,222 | |||||
| PER SHARE DATA | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | |||
| Net income (Basic) | $ | 1.54 | $ | 1.61 | $ | 1.30 | $ | 1.35 | $ | 1.49 | |||||
| Dividends | $ | 0.51 | $ | 0.47 | $ | 0.43 | $ | 0.40 | $ | 0.37 | |||||
| Book value | $ | 16.63 | $ | 15.41 | $ | 14.32 | $ | 13.46 | $ | 12.57 | |||||
| KEY RATIOS | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | |||
| Return on average assets | 1.06 | % | 1.14 | % | 0.96 | % | 1.08 | % | 1.29 | % | |||||
| Return on average equity | 9.52 | % | 10.77 | % | 9.26 | % | 10.26 | % | 12.26 | % | |||||
| Net yield on interest-earning assets | 3.67 | % | 3.88 | % | 4.04 | % | 4.21 | % | 4.40 | % | |||||
| Efficiency ratio | 65.85 | % | 62.15 | % | 61.78 | % | 61.63 | % | 56.14 | % | |||||
| Average equity to average assets | 11.10 | % | 10.60 | % | 10.32 | % | 10.56 | % | 10.50 | % | |||||
| Dividend payout ratio | 33.12 | % | 29.43 | % | 33.33 | % | 29.58 | % | 24.52 | % | |||||
| AT PERIOD END | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | |||
| Total assets | $ | 442,215,098 | $ | 417,157,877 | $ | 402,904,469 | $ | 379,831,359 | $ | 345,309,996 | |||||
| Gross loans | 362,494,703 | 343,940,842 | 335,595,916 | 298,126,919 | 271,263,338 | ||||||||||
| Cash and cash equivalents | 9,121,352 | 14,618,237 | 7,237,385 | 13,312,915 | 20,192,839 | ||||||||||
| Debt securities | 56,041,792 | 44,719,058 | 46,133,692 | 52,373,567 | 40,248,651 | ||||||||||
| Deposits | 376,613,314 | 354,713,003 | 319,796,424 | 302,715,136 | 275,964,737 | ||||||||||
| Borrowings | 10,958,118 | 14,012,000 | 38,768,507 | 36,226,159 | 31,490,619 | ||||||||||
| Stockholders' equity | 49,453,516 | 45,394,707 | 41,798,932 | 39,012,277 | 36,223,361 | ||||||||||
| SELECTED AVERAGE BALANCES | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ||||||
| Total assets | $ | 431,595,287 | $ | 412,586,954 | $ | 396,454,271 | $ | 361,005,005 | $ | 331,522,302 | |||||
| Gross loans | 344,793,736 | 343,573,784 | 319,825,707 | 284,804,975 | 273,626,511 | ||||||||||
| Cash and cash equivalents | 20,124,328 | 12,054,442 | 12,428,778 | 13,271,319 | 15,227,040 | ||||||||||
| Debt securities | 53,049,768 | 44,471,457 | 50,251,527 | 48,301,835 | 31,041,271 | ||||||||||
| Deposits | 367,570,825 | 339,624,630 | 315,159,559 | 284,921,811 | 265,634,314 | ||||||||||
| Borrowings | 11,975,017 | 26,524,352 | 38,627,588 | 36,175,989 | 29,363,070 | ||||||||||
| Stockholders' equity | 47,927,778 | 43,748,434 | 40,926,674 | 38,115,746 | 34,810,159 | ||||||||||
| ASSET QUALITY | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** | ****** |
| Nonperforming assets | $ | - | $ | 1,209,468 | $ | 2,657,702 | $ | 1,166,889 | $ | 1,429,313 | |||||
| Nonperforming assets/total assets | 0.00 | % | 0.29 | % | 0.66 | % | 0.31 | % | 0.41 | % | |||||
| Allowance for loan losses/total loans | 0.72 | % | 0.73 | % | 0.73 | % | 0.79 | % | 0.95 | % |