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): April 27, 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 April 27, 2020, Farmers and Merchants Bancshares, Inc. issued a press release describing its financial results for the three month period ended March 31, 2020. 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 7.01. Regulation FD Disclosure.
On April 28, 2020, the Company will hold its Annual Meeting of Stockholders at which members of management will present information, including certain public financial data and performance trends, for the year ended December 31, 2019 and the first quarter of 2020. A copy of management’s presentation has been posted to, and is available free of charge at, the Company’s Internet website at www.fmb1919.bank in the “Investor Relations” tab under “News & Market Data”. The information on the Company’s website is not, and shall not be deemed to be, a part of this report or incorporated into other filings that the Company makes with the Securities and Exchange Commission.
The information contained in this Item 7.01 shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference in any filing under 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 April 27, 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: April 27, 2020 | By: | /s/ James R. Bosley, Jr. |
| James R. Bosley, Jr. | ||
| President & CEO |
ex_182516.htm
Exhibit 99.1
| FOR IMMEDIATE RELEASE | FOR FURTHER INFORMATION CONTACT: | |
|---|---|---|
| April 27, 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 OF $0.28 PER SHARE FOR THE THREE MONTHS ENDED MARCH 31, 2020
HAMPSTEAD, MARYLAND (April 27, 2020) – Farmers and Merchants Bancshares, Inc. (the “Company”), the parent of Farmers and Merchants Bank (the “Bank”), announced that net income for the three months ended March 31, 2020 was $843,307, or $0.28 per common share, compared to $1,096,287, or $0.37 per common share, for the same period in 2019. As previously announced, the Company entered into a definitive agreement on March 6, 2020 to acquire Carroll Bancorp, Inc. Significant one-time costs will be incurred in connection with the acquisition. During the three months ended March 31, 2020, the Company incurred $179,824 of such costs. The table below provides a comparison of the Company’s results with and without the acquisition costs and the prior year.
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| March 31, 2020 | March 31, 2019 | ||||||||
| Excluding | |||||||||
| As Reported | Acquisition Costs | As Reported | |||||||
| Income before taxes | $ | 996,223 | $ | 1,176,047 | $ | 1,350,263 | |||
| Income taxes | 152,916 | 202,399 | 253,976 | ||||||
| Net income | $ | 843,307 | $ | 973,648 | $ | 1,096,287 | |||
| Earnings per share | $ | 0.28 | $ | 0.33 | $ | 0.37 | |||
| Return on average assets | 0.75 | % | 0.87 | % | 1.05 | % | |||
| Return on average equity | 6.72 | % | 7.76 | % | 9.49 | % |
Net interest income for the three months ended March 31, 2020 was $39,381 higher than for the same period in 2019 due to a $28.2 increase in interest earning assets to $430.0 million for the three months ended March 31, 2020 as compared to $401.8 million for the same period in 2019, offset by a decline in the taxable equivalent net yield on interest earning assets to 3.54% in the 2020 period from 3.73% in the 2019 period. The net yield declined because the yield on loans and investments decreased 13 basis points to 4.42% for the three months ended March 31, 2020 from 4.55% for the same period in 2019 as a result of the Federal Reserve rate cuts. Additionally, while our cost of deposits and borrowings of 1.13% for the three months ended March 31, 2020 is lower than the previous three quarters, it is still higher than the cost of 1.06% for the three months ended March 31, 2019. We expect the cost of funds to continue to decline over the remainder of 2020 since we have significantly reduced rates on many of our deposit products. The provision for loan losses totaled $125,000 for the three months ended March 31, 2020, an increase of $112,000 over the same period in 2019 as a result of the economic downturn caused by the COVID-19 pandemic.
Noninterest income decreased by $90,394 in the three months ended March 31, 2020 when compared to the same period in 2019 primarily as a result of a $130,015 decrease in the gain on the sale of SBA loans, offset by a $29,538 increase in mortgage banking income. Noninterest expense was $191,027 higher in the three months ended March 31, 2020 when compared to the same period in 2019 due primarily to the aforementioned acquisition costs of 179,824 and usual salary and benefit increases of $93,276, offset by a decrease in other expenses of $56,107 and a decrease in occupancy, furniture and equipment costs of $25,966. Without the acquisition costs, noninterest expenses increased only $11,203. Income taxes declined by $101,060 during the three months ended March 31, 2020 when compared to the same period in 2019 due to lower income before taxes and a higher percentage of tax-exempt revenue.
Total assets increased to $460 million at March 31, 2020 from $442 million at December 31, 2019. Loans decreased to $358 million at March 31, 2020 from $359 million at December 31, 2019. Investment in debt securities increased to $60 million at March 31, 2020 from $56 million at December 31, 2019. Deposits increased to $390 million at March 31, 2020 from $377 million at December 31, 2019. The book value of the common stock of Farmers and Merchants Bancshares, Inc. was $16.95 per share at March 31, 2020, compared to $16.63 per share at December 31, 2019.
The COVID-19 pandemic is wreaking havoc on the U.S. economy. The full impact and its effect on the banking industry will not be known for several quarters, but will be significant. The Bank is providing relief to our borrowers, as needed, including temporary deferral of payments. In addition, the Bank has made a significant amount of Paycheck Protection Program loans to customers.
James R. Bosley, Jr., President and CEO, commented “We are all in uncharted territory with the COVID-19 pandemic. The Bank is committed to the safety of our customers and employees as well as assisting businesses and individuals during these difficult times. The Bank has thrived for over 100 years through the Great Depression of the 1930s and most recently the Great Recession. We are confident that our well-capitalized bank will thrive in this current crisis. In addition, we look forward to the completion of our acquisition of Carroll Community Bank. The acquisition process continues to proceed at the expected pace.”
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 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 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, | |||
|---|---|---|---|
| 2019 | |||
| Assets | |||
| Cash and due from banks | 17,409,858 | $ | 6,664,307 |
| Federal funds sold and other interest-bearing deposits | 5,233,944 | 2,457,045 | |
| Cash and cash equivalents | 22,643,802 | 9,121,352 | |
| Certificate of deposit in other bank | 100,000 | 100,000 | |
| Securities available for sale | 40,666,045 | 36,531,774 | |
| Securities held to maturity | 19,017,782 | 19,510,018 | |
| Equity security at fair value | 543,599 | 532,321 | |
| Federal Home Loan Bank stock, at cost | 611,300 | 376,200 | |
| Mortgage loans held for sale | 1,481,450 | 242,000 | |
| Loans, less allowance for loan losses of 2,740,150 and 2,593,715 | 358,319,859 | 359,382,843 | |
| Premises and equipment | 5,136,920 | 5,036,851 | |
| Accrued interest receivable | 1,065,397 | 1,019,540 | |
| Deferred income taxes | 988,558 | 1,036,078 | |
| Bank owned life insurance | 7,187,489 | 7,145,477 | |
| Other assets | 1,839,179 | 2,180,644 | |
| 459,601,380 | $ | 442,215,098 | |
| Liabilities and Stockholders' Equity | |||
| Deposits | |||
| Noninterest-bearing | 61,153,068 | $ | 60,659,015 |
| Interest-bearing | 328,611,361 | 315,954,299 | |
| Total deposits | 389,764,429 | 376,613,314 | |
| Securities sold under repurchase agreements | 9,708,344 | 10,958,118 | |
| Federal Home Loan Bank of Atlanta advances | 5,000,000 | - | |
| Accrued interest payable | 349,725 | 346,214 | |
| Other liabilities | 4,356,888 | 4,843,936 | |
| 409,179,386 | 392,761,582 | ||
| Stockholders' equity | |||
| Common stock, par value .01 per share, authorized 5,000,000 shares; issued and outstanding 2,974,019 shares in 2020 and 2019 | 29,740 | 29,740 | |
| Additional paid-in capital | 27,812,991 | 27,812,991 | |
| Retained earnings | 22,411,468 | 21,568,161 | |
| Accumulated other comprehensive income | 167,795 | 42,624 | |
| 50,421,994 | 49,453,516 | ||
| 459,601,380 | $ | 442,215,098 |
All values are in US Dollars.
Farmers and Merchants Bancshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
| Three Months Ended March 31, | ||||
|---|---|---|---|---|
| 2020 | 2019 | |||
| Interest income | ||||
| Loans, including fees | $ | 4,322,654 | $ | 4,160,086 |
| Investment securities - taxable | 210,506 | 174,836 | ||
| Investment securities - tax exempt | 144,084 | 138,088 | ||
| Federal funds sold and other interest earning assets | 32,792 | 74,526 | ||
| Total interest income | 4,710,036 | 4,547,536 | ||
| Interest expense | ||||
| Deposits | 906,199 | 775,531 | ||
| Securities sold under repurchase agreements | 38,194 | 25,299 | ||
| Federal Home Loan Bank advances and other borrowings | 109 | 20,553 | ||
| Total interest expense | 944,502 | 821,383 | ||
| Net interest income | 3,765,534 | 3,726,153 | ||
| Provision for loan losses | 125,000 | 13,000 | ||
| Net interest income after provision for loan losses | 3,640,534 | 3,713,153 | ||
| Noninterest income | ||||
| Service charges on deposit accounts | 158,555 | 152,060 | ||
| Mortgage banking income | 62,257 | 32,719 | ||
| Bank owned life insurance income | 42,012 | 40,386 | ||
| Unrealized gain (loss) on equity security | 8,510 | 7,845 | ||
| Gain on sale of SBA loans | - | 130,015 | ||
| Other fees and commissions | 30,668 | 29,371 | ||
| Total noninterest income | 302,002 | 392,396 | ||
| Noninterest expense | ||||
| Salaries | 1,354,919 | 1,326,783 | ||
| Employee benefits | 447,104 | 381,964 | ||
| Occupancy | 183,152 | 214,420 | ||
| Furniture and equipment | 160,449 | 155,147 | ||
| Acquisition | 179,824 | - | ||
| Other | 620,865 | 676,972 | ||
| Total noninterest expense | 2,946,313 | 2,755,286 | ||
| Income before income taxes | 996,223 | 1,350,263 | ||
| Income taxes | 152,916 | 253,976 | ||
| Net income | $ | 843,307 | $ | 1,096,287 |
| Earnings per share - basic and diluted | $ | 0.28 | $ | 0.37 |