8-K

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): July 20, 2022

Farmers and Merchants Bancshares, Inc.

(Exact name of registrant as specified in its charter)

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:

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 July 20, 2022, Farmers and Merchants Bancshares, Inc. issued a press release describing its financial results for the three- and six-month periods ended June 30, 2022. 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 (the “Securities Act”), 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.

The exhibits furnished with this report are listed in the following Exhibit Index:

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.

ex_396256.htm

Exhibit 99.1

FARMERS AND MERCHANTS BANCSHARES, INC. REPORTS EARNINGS OF $4,101,535 OR $1.35 PER SHARE FOR THE SIX MONTHS ENDED JUNE 30, 2022

HAMPSTEAD, MARYLAND (July 20, 2022) – 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, 2022 was $4,101,535, or $1.35 per common share (basic and diluted), compared to $4,061,794, or $1.35 per common share, for the same period in 2021. The Company’s return on average equity during the six months ended June 30, 2022 was 15.37% compared to 15.18% for the same period in 2021. The Company’s return on average assets during the six months ended June 30, 2022 was 1.15% compared to 1.18% for the same period in 2021. Income from Paycheck Protection Program (“PPP”) loans added approximately $159,000 to net income for the six months ended June 30, 2022 compared to $507,000 for the same period in 2021. As of June 30, 2022, $36,000 of deferred PPP fees, net of income taxes, have not been recognized.

Net income for the three months ended June 30, 2022 was $2,050,733, or $0.67 per common share, compared to $2,032,219, or $0.67 per common share, for the second quarter of 2021 and $2,050,802, or $0.68 per common share, for the first quarter of 2022.

Net interest income for the six months ended June 30, 2022 was $620,298 higher than for the same period in 2021 due to a $29.0 million increase in average interest earning assets to $679.3 million for the six months ended June 30, 2022 as compared to $650.3 million for the same period in 2021, and an increase in the taxable equivalent net yield on interest earning assets to 3.48% for the six months ended June 30, 2022 from 3.45% for the six months ended June 30, 2021. The taxable equivalent yield on total average interest-earning assets decreased 14 basis points to 3.78% for the six months ended June 30, 2022 from 3.92% for the same period in 2021. This decrease was offset by a 21 basis point decrease in the cost of deposits and borrowings to 0.39% for the six months ended June 30, 2022 from 0.60% for the same period in 2021. There was no provision for loan losses for the six months ended June 30, 2022, compared to $100,000 for the same period in 2021.

Noninterest income decreased by $168,053 for the six months ended June 30, 2022 when compared to the same period in 2021 primarily as a result of a $309,259 decrease in mortgage banking revenue reflecting a decline in refinances due to rising interest rates, offset by a $158,123 increase in the gain on sale of SBA loans. Noninterest expense was $463,927 higher in the six months ended June 30, 2022 when compared to the same period in 2021 due primarily to $235,964 increase in salaries and benefits and a $222,992 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 $48,577 during the six months ended June 30, 2022 when compared to the same period in 2021 due to higher income before taxes as well as a decrease in the amount of nontaxable income included in pretax income year-over-year. The effective tax rate increased to 22.69% during the six months ended June 30, 2022 compared to 22.15% during the same period last year.

Total assets decreased to $710 million at June 30, 2022 from $717 million at December 31, 2021. Loans increased to $491 million at June 30, 2022 from $482 million at December 31, 2021 despite an $8 million decrease in PPP loans. Investments in debt securities decreased to $159 million at June 30, 2022 from $171 million at December 31, 2021. Deposits increased to $629 million at June 30, 2022 from $626 million at December 31, 2021. Despite the Company’s strong earnings, the book value of the Company’s common stock decreased to $15.78 per share at June 30, 2022, compared to $18.64 per share at December 31, 2021 due to the decline in the market value of the Company’s available for sale (“AFS”) investment portfolio as a result of the significant rise in interest rates over the last six months. 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.

Since the COVID-19 pandemic began in 2020, the Company has provided relief to the Bank’s 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 June 30, 2022, there was 1 modified loan, now classified as a troubled debt restructuring, which totaled $4.2 million, or 1% of the loan portfolio. In addition, the Company has originated $60 million of PPP loans to customers. As of June 30, 2022, $58 million of PPP loans have been forgiven. The Company expects that the majority of the remaining $2 million will be forgiven in 2022.

James R. Bosley, Jr., CEO, commented “Year to date 2022 earnings are slightly ahead of 2021’s record earnings despite the significant decline in PPP and mortgage banking income. In addition, our 2022 quarterly earnings have been very strong and consistent. We are pleased with the loan portfolio growth and performance that we have experienced in 2022”

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)

All values are in US Dollars.

Farmers and Merchants Bancshares, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)