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 21, 2021
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 21, 2021, Farmers and Merchants Bancshares, Inc. issued a press release describing its financial results for the three- and nine-month periods ended September 30, 2021. 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 21, 2021 (furnished herewith). |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL 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 21, 2021 | By: | /s/ James R. Bosley, Jr. |
| James R. Bosley, Jr. | ||
| President & CEO |
ex_293824.htm
Exhibit 99.1
| FOR IMMEDIATE RELEASE | FOR FURTHER INFORMATION CONTACT: | |
|---|---|---|
| October 21, 2021 | ||
| 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 RECORD EARNINGS OF $6,184,341 OR $2.05 PER SHARE FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
HAMPSTEAD, MARYLAND (October 21, 2021) – 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, 2021 was $6,184,341, or $2.05 per common share (basic and diluted), both all-time nine-month records, compared to $2,264,609, or $0.76 per common share (basic and diluted), for the same period in 2020. The primary driver of the significant increase in net income was the acquisition of Carroll Bancorp, Inc. and its subsidiary, Carroll Community Bank (collectively, “Carroll”), that was completed in the fourth quarter of 2020. Also, income from Paycheck Protection Program (“PPP”) loans added approximately $679,000 to net income. As of September 30, 2021, $354,000 of deferred PPP fees, net of income taxes, have not been recognized.
Net income for the three months ended September 30, 2021 was $2,122,547, or $0.70 per common share, which was a new quarterly record, compared to $385,247, or $0.13 per common share, for the third quarter of 2020 and $2,032,219, or $0.67 per common share, for the second quarter of 2021.
The Company incurred significant one-time costs during 2020 in connection with the acquisition of Carroll. The table below provides a comparison of the Company’s results for the three and nine months ended September 30, 2021 versus the same periods of the prior year with and without $1,267,401 and $1,612,321 of acquisition costs incurred during the three and nine month periods ended September 30, 2020, respectively.
| Three Months Ended (unaudited) | Nine Months Ended (unaudited) | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30,<br><br> <br>2021 | September 30,<br><br> <br>2020 | September 30,<br><br> <br>2021 | September 30,<br><br> <br>2020 | |||||||||||||||
| Excluding | Excluding | |||||||||||||||||
| As Reported | As Reported | Acquisition Costs | As Reported | As Reported | Acquisition Costs | |||||||||||||
| Income before taxes | $ | 2,728,839 | $ | 462,110 | $ | 1,729,511 | $ | 7,946,059 | $ | 2,724,959 | $ | 4,337,280 | ||||||
| Income taxes | 606,292 | 76,863 | 370,835 | 1,761,718 | 460,350 | 849,235 | ||||||||||||
| Net income | $ | 2,122,547 | $ | 385,247 | $ | 1,358,676 | $ | 6,184,341 | $ | 2,264,609 | $ | 3,488,045 | ||||||
| Earnings per share, basic and diluted | $ | 0.70 | $ | 0.13 | $ | 0.45 | $ | 2.05 | $ | 0.76 | $ | 1.17 | ||||||
| Return on average assets | 1.19 | % | 0.31 | % | 1.10 | % | 1.18 | % | 0.63 | % | 0.97 | % | ||||||
| Return on average equity | 15.15 | % | 2.95 | % | 10.40 | % | 15.17 | % | 5.88 | % | 9.06 | % |
Net interest income for the nine months ended September 30, 2021 was $5,371,279 higher than for the same period in 2020 due to a $200.3 million increase in average interest earning assets to $657.7 million for the nine months ended September 30, 2021 as compared to $457.4 million for the same period in 2020, and an increase in the taxable equivalent net yield on interest earning assets to 3.50% for the nine months ended September 30, 2021 from 3.46% for the nine months ended September 30, 2020. While the net yield increased 4 basis points, the taxable equivalent yield on total interest-earning assets decreased 26 basis points to 3.94% for the nine months ended September 30, 2021 from 4.20% for the same period in 2020. This was offset by a 42 basis point decrease in the cost of deposits and borrowings to 0.56% for the nine months ended September 30, 2021 from 0.98% for the nine months ended September 30, 2020. The provision for loan losses totaled $430,000 for the nine months ended September 30, 2021, compared to $475,000 for the same period in 2020.
Noninterest income increased by $239,883 for the nine months ended September 30, 2021 when compared to the same period in 2020 primarily as a result of a $105,510 increase in bank owned life insurance income, a $108,314 increase in service charges on deposits, a $32,597 increase in other fees and commissions, and a $44,510 gain on the sale of Carroll’s Westminster, Maryland branch office and other equipment, offset by a $56,718 decrease in the gain on the sale of SBA loans. Noninterest expense was $435,062 higher in the nine months ended September 30, 2021 when compared to the same period in 2020 due primarily to additional personnel, locations and customers added with the acquisition of Carroll. Salaries and benefits increased $1,369,197, other expenses increased $416,069, and occupancy, furniture and equipment costs increased $262,117. These increases were offset by a decrease of $1,612,321 in one-time acquisition costs related to the Carroll acquisition. Income taxes increased by $1,301,368 during the nine months ended September 30, 2021 when compared to the same period in 2020 due to higher income before taxes. The effective tax rate increased to 22% during the nine months ended September 30, 2021 compared to 17% during the same period last year due to a lower percentage of tax exempt income.
Total assets increased to $717 million at September 30, 2021 from $677 million at December 31, 2020. Loans decreased to $496 million at September 30, 2021 from $522 million at December 31, 2020 due primarily to a $16 million decrease in PPP loans. Investments in debt securities increased to $143 million at September 30, 2021 from $78 million at December 31, 2020. Deposits increased to $622 million at September 30, 2021 from $573 million at December 31, 2020. The book value of the Company’s common stock was $18.62 per share at September 30, 2021, compared to $17.18 per share at December 31, 2020.
During the COVID-19 pandemic, the Company has provided relief to our 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 September 30, 2021, modified loans totaled $4.3 million, or 1% of the loan portfolio. In addition, the Company has originated $60 million of PPP loans to customers, of which $38 million were made in 2020 and $22 million were made in 2021. The Company increased its loan loss reserve significantly in 2020 due to the pandemic. Management has analyzed and adjusted the loan loss reserve for loans that had payment deferrals longer than six months and for which six full monthly principal and interest payments have not yet been received.
James R. Bosley, Jr., President and CEO, commented “We are pleased that our record earnings have continued through the third quarter. The Carroll acquisition is contributing as planned and the acquired loan portfolio has performed very well. Income from PPP loans, which has been a significant addition to the bottom line in 2021, will eventually end and will adversely impact 2022 comparative results.”
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
| December 31, | ||||
|---|---|---|---|---|
| 2020 | ||||
| Assets | ||||
| Cash and due from banks | 39,157,850 | $ | 39,898,557 | |
| Federal funds sold and other interest-bearing deposits | 444,014 | 1,077,113 | ||
| Cash and cash equivalents | 39,601,864 | 40,975,670 | ||
| Certificates of deposit in other banks | 350,000 | 850,000 | ||
| Securities available for sale, at fair value | 121,265,582 | 54,477,286 | ||
| Securities held to maturity, at cost | 21,883,882 | 23,078,519 | ||
| Equity security, at fair value | 547,349 | 552,566 | ||
| Restricted stock, at cost | 675,400 | 900,500 | ||
| Mortgage loans held for sale | 1,757,550 | 1,673,350 | ||
| Loans, less allowance for loan losses of 3,744,218 and 3,296,538 | 495,781,194 | 521,690,514 | ||
| Premises and equipment | 6,291,405 | 7,736,556 | ||
| Accrued interest receivable | 1,579,447 | 2,057,491 | ||
| Deferred income taxes, net | 1,610,156 | 1,219,668 | ||
| Other real estate owned | 1,411,605 | 1,411,605 | ||
| Bank owned life insurance | 15,230,325 | 11,297,342 | ||
| Goodwill and other intangibles | 7,053,162 | 7,059,408 | ||
| Other assets | 1,703,283 | 2,336,607 | ||
| 716,742,204 | $ | 677,317,082 | ||
| Liabilities and Stockholders' Equity | ||||
| Deposits | ||||
| Noninterest-bearing | 125,841,422 | $ | 103,155,113 | |
| Interest-bearing | 496,091,137 | 470,246,434 | ||
| Total deposits | 621,932,559 | 573,401,547 | ||
| Securities sold under repurchase agreements | 10,475,121 | 24,753,972 | ||
| Federal Home Loan Bank of Atlanta advances | 5,000,000 | 5,000,000 | ||
| Long-term debt, net of issuance costs | 16,977,499 | 16,973,280 | ||
| Accrued interest payable | 323,420 | 409,622 | ||
| Other liabilities | 5,728,289 | 5,049,178 | ||
| 660,436,888 | 625,587,599 | |||
| Stockholders' equity | ||||
| Common stock, par value .01 per share, authorized 5,000,000 shares; issued and outstanding 3,023,487 shares in 2021 and 3,011,255 shares in 2020 | 30,235 | 30,113 | ||
| Additional paid-in capital | 28,557,249 | 28,294,139 | ||
| Retained earnings | 28,040,118 | 22,698,954 | ||
| Accumulated other comprehensive (loss) income | (322,286 | ) | 706,277 | |
| 56,305,316 | 51,729,483 | |||
| 716,742,204 | $ | 677,317,082 |
All values are in US Dollars.
| The accompanying notes are an integral part of these consolidated financial statements. |
|---|
Farmers and Merchants Bancshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||
| Interest income | ||||||||||
| Loans, including fees | $ | 6,059,709 | $ | 4,489,992 | $ | 17,828,026 | $ | 13,205,913 | ||
| Investment securities - taxable | 426,886 | 159,277 | 967,841 | 561,038 | ||||||
| Investment securities - tax exempt | 149,375 | 163,522 | 462,361 | 462,305 | ||||||
| Federal funds sold and other interest earning assets | 18,298 | 9,563 | 47,743 | 58,362 | ||||||
| Total interest income | 6,654,268 | 4,822,354 | 19,305,971 | 14,287,618 | ||||||
| Interest expense | ||||||||||
| Deposits | 460,377 | 690,833 | 1,589,334 | 2,429,496 | ||||||
| Securities sold under repurchase agreements | 9,647 | 18,020 | 38,130 | 95,710 | ||||||
| Federal Home Loan Bank advances and other borrowings | 192,255 | 12,752 | 570,542 | 25,726 | ||||||
| Total interest expense | 662,279 | 721,605 | 2,198,006 | 2,550,932 | ||||||
| Net interest income | 5,991,989 | 4,100,749 | 17,107,965 | 11,736,686 | ||||||
| Provision for loan losses | 330,000 | - | 430,000 | 475,000 | ||||||
| Net interest income after provision for loan losses | 5,661,989 | 4,100,749 | 16,677,965 | 11,261,686 | ||||||
| Noninterest income | ||||||||||
| Service charges on deposit accounts | 187,141 | 138,288 | 522,815 | 414,501 | ||||||
| Mortgage banking income | 207,471 | 272,297 | 704,404 | 684,664 | ||||||
| Bank owned life insurance income | 79,942 | 42,250 | 232,983 | 127,473 | ||||||
| Gain on sale of premises and equipment | 6,897 | - | 44,510 | - | ||||||
| Fair value adjustment of equity security | (2,056 | ) | 1 | (10,214 | ) | 13,046 | ||||
| Gain on premium call of debt security | 621 | - | 9,190 | - | ||||||
| Gain on sale of SBA loans | 6,917 | - | 6,917 | 63,635 | ||||||
| Other fees and commissions | 45,045 | 34,532 | 126,874 | 94,277 | ||||||
| Total noninterest income | 531,978 | 487,368 | 1,637,479 | 1,397,596 | ||||||
| Noninterest expense | ||||||||||
| Salaries | 1,895,780 | 1,462,946 | 5,366,854 | 4,114,143 | ||||||
| Employee benefits | 388,879 | 376,860 | 1,299,900 | 1,183,414 | ||||||
| Occupancy | 241,557 | 183,719 | 737,087 | 552,265 | ||||||
| Furniture and equipment | 198,190 | 175,006 | 578,562 | 501,267 | ||||||
| Acquisition | - | 1,267,401 | - | 1,612,321 | ||||||
| Other | 740,722 | 660,075 | 2,386,982 | 1,970,913 | ||||||
| Total noninterest expense | 3,465,128 | 4,126,007 | 10,369,385 | 9,934,323 | ||||||
| Income before income taxes | 2,728,839 | 462,110 | 7,946,059 | 2,724,959 | ||||||
| Income taxes | 606,292 | 76,863 | 1,761,718 | 460,350 | ||||||
| Net income | $ | 2,122,547 | $ | 385,247 | $ | 6,184,341 | $ | 2,264,609 | ||
| Earnings per share - basic and diluted | $ | 0.70 | $ | 0.13 | $ | 2.05 | $ | 0.76 |