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): October 20, 2022
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 October 20, 2022, Farmers and Merchants Bancshares, Inc. issued a press release describing its financial results for the three- and nine-month periods ended September 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.
| (d) | Exhibits. |
|---|
The exhibits furnished with this report are listed in the following Exhibit Index:
| Exhibit No. | Description |
|---|---|
| 99.1 | Press release dated October 20, 2022 (furnished herewith) |
| 104 | Cover page interactive data file (embedded within the iXBRL document) |
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: October 20, 2022 | By: | /s/ James R. Bosley, Jr. |
| James R. Bosley, Jr. | ||
| CEO |
ex_433770.htm
Exhibit 99.1
| FOR IMMEDIATE RELEASE | FOR FURTHER INFORMATION CONTACT: | |
|---|---|---|
| October 20, 2022 | ||
| Farmers and Merchants Bancshares, Inc. | Contact: | Mr. James R. Bosley, Jr. |
| 4510 Lower Beckleysville Rd, Suite H | Chief Executive Officer | |
| Hampstead, Maryland 21074 | (410) 374-1510, ext.104 |
FARMERS AND MERCHANTS BANCSHARES, INC. REPORTS EARNINGS OF
$6,075,845 OR $2.00 PER common SHARE FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2022
HAMPSTEAD, MARYLAND (October 20, 2022) – Farmers and Merchants Bancshares, Inc. (the “Company”), the parent of Farmers and Merchants Bank (the “Bank”), announced that net income for the nine months ended September 30, 2022 was $6,075,845, or $2.00 per common share (basic and diluted), compared to $6,184,341, or $2.05 per common share (basic and diluted), for the same period in 2021. The Company’s return on average equity during the nine months ended September 30, 2022 was 15.53% compared to 15.17% for the same period in 2021. The Company’s return on average assets during the nine months ended September 30, 2022 was 1.14% compared to 1.18% for the same period in 2021. Income from Paycheck Protection Program (“PPP”) loans added approximately $181,000 to net income for the nine months ended September 30, 2022 compared to $679,000 for the same period in 2021.
Net income for the three months ended September 30, 2022 was $1,974,310, or $0.65 per common share (basic and diluted), compared to $2,122,547, or $0.70 per common share, for the third quarter of 2021.
Net interest income for the nine months ended September 30, 2022 was $720,061 higher than for the same period in 2021 due to a $24.9 million increase in average interest earning assets to $682.6 million for the nine months ended September 30, 2022 as compared to $657.7 million for the same period in 2021, and an increase in the taxable equivalent net yield on average net interest earning assets to 3.51% for the nine months ended September 30, 2022 from 3.50% for the nine months ended September 30, 2021. The taxable equivalent yield on total average interest-earning assets decreased 13 basis points to 3.81% for the nine months ended September 30, 2022 from 3.94% for the same period in 2021. This decrease was offset by a 17 basis point decrease in the cost of deposits and borrowings to 0.39% for the nine months ended September 30, 2022 from 0.56% for the same period in 2021. There was a $95,000 provision for loan losses for the nine months ended September 30, 2022, compared to $430,000 for the same period in 2021.
Noninterest income decreased by $362,546 for the nine months ended September 30, 2022 when compared to the same period in 2021 primarily as a result of a $508,575 decrease in mortgage banking revenue reflecting a decline in refinances due to rising interest rates, offset by a $151,206 increase in the gain on sale of SBA loans. Noninterest expense was $783,490 higher in the nine months ended September 30, 2022 when compared to the same period in 2021 due primarily to a $357,718 increase in salaries and benefits and a $428,200 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 $17,521 during the nine months ended September 30, 2022 when compared to the same period in 2021 due to a decrease in the amount of nontaxable income included in pretax income year-over-year. The effective tax rate increased to 22.65% during the nine months ended September 30, 2022 compared to 22.17% during the same period last year.
Total assets were $717 million at both September 30, 2022 and December 31, 2021. Loans increased to $505 million at September 30, 2022 from $482 million at December 31, 2021 despite a $9 million decrease in PPP loans. Investments in debt securities decreased to $149 million at September 30, 2022 from $171 million at December 31, 2021 due primarily to a $24 million increase in the unrealized loss on available for sale (“AFS”) securities. Deposits increased to $639 million at September 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 $15.01 per share at September 30, 2022, compared to $18.64 per share at December 31, 2021 due to the decline in the market value of the Company’s AFS investment portfolio as a result of the significant rise in interest rates over the last nine 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.
James R. Bosley, Jr., CEO, commented “Year to date net income has been very strong and well above our budget, however, increasing rates on deposits may negatively impact fourth quarter earnings. We are pleased with our loan portfolio annualized growth rate of 6.4% - it is exceeding our expectations for 2022 and should have a positive impact on earnings in 2023 and beyond.”
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)
| December 31, | |||||
|---|---|---|---|---|---|
| 2021 | |||||
| Assets | |||||
| Cash and due from banks | 14,495,448 | $ | 25,258,932 | ||
| Federal funds sold and other interest-bearing deposits | 1,536,296 | 1,203,174 | |||
| Cash and cash equivalents | 16,031,744 | 26,462,106 | |||
| Certificates of deposit in other banks | 100,000 | 350,000 | |||
| Securities available for sale, at fair value | 128,614,033 | 149,237,916 | |||
| Securities held to maturity, at cost | 20,537,254 | 21,851,975 | |||
| Equity security, at fair value | 486,237 | 543,605 | |||
| Restricted stock, at cost | 695,000 | 675,400 | |||
| Mortgage loans held for sale | 370,000 | 126,500 | |||
| Loans, less allowance for loan losses of 3,747,178 and 3,650,268 | 505,395,375 | 482,011,334 | |||
| Premises and equipment, net | 6,316,605 | 6,259,421 | |||
| Accrued interest receivable | 1,600,382 | 1,609,063 | |||
| Deferred income taxes, net | 8,347,805 | 2,177,450 | |||
| Other real estate owned, net | 1,242,365 | 1,242,365 | |||
| Bank owned life insurance | 14,535,898 | 11,556,163 | |||
| Goodwill and other intangibles, net | 7,044,834 | 7,051,080 | |||
| Other assets | 5,662,828 | 5,522,877 | |||
| 716,980,360 | $ | 716,677,255 | |||
| Liabilities and Stockholders' Equity | |||||
| Deposits | |||||
| Noninterest-bearing | 131,269,680 | $ | 124,175,615 | ||
| Interest-bearing | 507,700,154 | 502,239,055 | |||
| Total deposits | 638,969,834 | 626,414,670 | |||
| Securities sold under repurchase agreements | 5,422,642 | 5,414,026 | |||
| Federal Home Loan Bank of Atlanta advances | 5,000,000 | 5,000,000 | |||
| Long-term debt, net of issuance costs | 15,566,458 | 16,978,905 | |||
| Accrued interest payable | 260,266 | 295,910 | |||
| Other liabilities | 5,918,252 | 5,952,286 | |||
| 671,137,452 | 660,055,797 | ||||
| Stockholders' equity | |||||
| Common stock, par value .01 per share, authorized 5,000,000 shares; issued and outstanding 3,053,487 in 2022 and 3,037,137 shares in 2021 | 30,535 | 30,372 | |||
| Additional paid-in capital | 29,197,340 | 28,857,422 | |||
| Retained earnings | 34,263,001 | 29,128,600 | |||
| Accumulated other comprehensive loss | (17,647,968 | ) | (1,394,936 | ) | |
| 45,842,908 | 56,621,458 | ||||
| 716,980,360 | $ | 716,677,255 |
All values are in US Dollars.
Farmers and Merchants Bancshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Interest income | ||||||||||||
| Loans, including fees | $ | 5,606,913 | $ | 6,059,709 | $ | 16,660,625 | $ | 17,828,026 | ||||
| Investment securities - taxable | 783,606 | 426,886 | 2,170,154 | 967,841 | ||||||||
| Investment securities - tax exempt | 140,185 | 149,375 | 430,495 | 462,361 | ||||||||
| Federal funds sold and other interest earning assets | 55,361 | 18,298 | 89,663 | 47,743 | ||||||||
| Total interest income | 6,586,065 | 6,654,268 | 19,350,937 | 19,305,971 | ||||||||
| Interest expense | ||||||||||||
| Deposits | 313,556 | 460,377 | 971,320 | 1,589,334 | ||||||||
| Securities sold under repurchase agreements | 2,874 | 9,647 | 8,558 | 38,130 | ||||||||
| Federal Home Loan Bank advances and long-term debt | 177,883 | 192,255 | 543,033 | 570,542 | ||||||||
| Total interest expense | 494,313 | 662,279 | 1,522,911 | 2,198,006 | ||||||||
| Net interest income | 6,091,752 | 5,991,989 | 17,828,026 | 17,107,965 | ||||||||
| Provision for loan losses | 95,000 | 330,000 | 95,000 | 430,000 | ||||||||
| Net interest income after provision for loan losses | 5,996,752 | 5,661,989 | 17,733,026 | 16,677,965 | ||||||||
| Noninterest income | ||||||||||||
| Service charges on deposit accounts | 201,251 | 187,141 | 574,444 | 522,815 | ||||||||
| Mortgage banking income | 8,155 | 207,471 | 195,829 | 704,404 | ||||||||
| Bank owned life insurance income | 70,479 | 49,116 | 179,735 | 174,602 | ||||||||
| Fair value adjustment of equity security | (17,611 | ) | (2,056 | ) | (62,524 | ) | (10,214 | ) | ||||
| Gain on call of debt security | - | 621 | - | 9,190 | ||||||||
| Gain on sale of SBA loans | - | 6,917 | 158,123 | 6,917 | ||||||||
| Other fees and commissions | 75,211 | 82,768 | 229,326 | 229,765 | ||||||||
| Total noninterest income | 337,485 | 531,978 | 1,274,933 | 1,637,479 | ||||||||
| Noninterest expense | ||||||||||||
| Salaries | 1,987,991 | 1,895,780 | 5,656,643 | 5,366,854 | ||||||||
| Employee benefits | 418,422 | 388,879 | 1,367,829 | 1,299,900 | ||||||||
| Occupancy | 229,273 | 241,557 | 670,938 | 737,087 | ||||||||
| Furniture and equipment | 203,075 | 198,190 | 642,283 | 578,562 | ||||||||
| Other | 945,930 | 740,722 | 2,815,182 | 2,386,982 | ||||||||
| Total noninterest expense | 3,784,691 | 3,465,128 | 11,152,875 | 10,369,385 | ||||||||
| Income before income taxes | 2,549,546 | 2,728,839 | 7,855,084 | 7,946,059 | ||||||||
| Income taxes | 575,236 | 606,292 | 1,779,239 | 1,761,718 | ||||||||
| Net income | $ | 1,974,310 | $ | 2,122,547 | $ | 6,075,845 | $ | 6,184,341 | ||||
| Earnings per common share - basic and diluted | $ | 0.65 | $ | 0.70 | $ | 2.00 | $ | 2.05 |