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): February 8, 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 February 8, 2021, Farmers and Merchants Bancshares, Inc. issued a press release describing its financial results for the three- and 12-month periods ended December 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 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 February 8, 2021 (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: February 8, 2021 | By: | /s/ James R. Bosley, Jr. |
| James R. Bosley, Jr. | ||
| President & CEO |
ex_224737.htm
Exhibit 99.1
| FOR IMMEDIATE RELEASE | FOR FURTHER INFORMATION CONTACT: | |
|---|---|---|
| February 8, 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 EARNINGS OF $0.90 PER SHARE FOR THE YEAR ENDED DECEMBER 31, 2020
HAMPSTEAD, MARYLAND (February 8, 2021) – 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, 2020 was $2,682,003, or $0.90 per common share, compared to $4,560,804, or $1.54 per common share, for the year ended December 31, 2019. Net income for the three months ended December 31, 2020 was $417,394, or $0.14 per common share, compared to $1,060,786, or $0.36 per common share, for the three months ended December 31, 2019. On October 1, 2020, the Company consummated its previously-announced acquisition of Carroll Bancorp, Inc. and Carroll Community Bank (collectively “Carroll”).
| Carroll Community Bank | ||||
|---|---|---|---|---|
| Balance Sheet at Acquisition on October 1, 2020 | ||||
| Book value | Fair value | |||
| Cash | $ | 5,441,610 | $ | 5,441,610 |
| Investment securities | 14,540,495 | 14,599,320 | ||
| Loans held for sale | 1,702,950 | 1,743,195 | ||
| Loans | 145,153,100 | 145,080,950 | ||
| Premises and equipment | 2,619,413 | 2,684,240 | ||
| Other real estate owned | 1,411,605 | 1,411,605 | ||
| Other assets | 5,290,399 | 5,388,546 | ||
| Goodwill and other intangibles | - | 7,061,490 | ||
| Total assets | $ | 176,159,572 | $ | 183,410,956 |
| Deposits | $ | 145,177,501 | $ | 145,793,878 |
| FHLB advances | 13,000,000 | 13,000,000 | ||
| Other liabilities | 93,828 | 88,710 | ||
| Total liabilities | 158,271,329 | 158,882,588 | ||
| Stockholders' equity | 17,888,243 | 24,528,368 | ||
| Total liabilities and stockholders equity | $ | 176,159,572 | $ | 183,410,956 |
The Company incurred significant one-time costs of $1,624,496 and $3,236,817 during the three- and 12-months ended December 31, 2020, respectively, related to this acquisition. The table below provides a comparison of the Company’s results for the three- and 12-month periods ended December 31, 2020 and 2019, both with and without the acquisition costs.
| Three Months Ended | Twelve Months Ended | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||||||||||||
| Excluding | Excluding | |||||||||||||||||
| As Reported | Acquisition Costs | As Reported | As Reported | Acquisition Costs | As Reported | |||||||||||||
| Income before income taxes | $ | 444,255 | $ | 2,068,751 | $ | 1,315,612 | $ | 3,169,214 | $ | 6,406,031 | $ | 5,600,138 | ||||||
| Income taxes | 26,861 | 443,571 | 254,826 | 487,211 | 1,292,806 | 1,039,334 | ||||||||||||
| Net income | $ | 417,394 | $ | 1,625,180 | $ | 1,060,786 | $ | 2,682,003 | $ | 5,113,225 | $ | 4,560,804 | ||||||
| Earnings per share | $ | 0.14 | $ | 0.54 | $ | 0.36 | $ | 0.90 | $ | 1.71 | $ | 1.54 | ||||||
| Return on average assets | 0.25 | % | 0.97 | % | 0.95 | % | 0.51 | % | 0.97 | % | 1.06 | % | ||||||
| Return on average equity | 3.25 | % | 12.64 | % | 8.57 | % | 5.22 | % | 9.96 | % | 9.52 | % |
Net interest income for the year ended December 31, 2020 was $2,282,118 higher than for the year ended December 31, 2019 due to a $73.6 million increase in average interest earning assets to $488.3 million for the year ended December 31, 2020 as compared to $414.7 million for the year ended December 31, 2019, offset by a decline in the taxable equivalent net yield on interest earning assets to 3.58% in the 2020 period from 3.67% in the 2019 period. The net yield declined because the yield on loans and investments decreased 32 basis points to 4.58% for the year ended December 31, 2020 from 4.90% for the year ended December 31, 2019 as a result of the Federal Reserve rate cuts and the Company’s origination of $31 million of Paycheck Protection Program (“PPP”) loans that are yielding less than 2.50%. The Company’s cost of deposits and borrowings of 0.89% for the year ended December 31, 2020 was 26 basis points lower than the cost of 1.15% for the year ended December 31, 2019. The Company expects the cost of funds to continue to decline into 2021 because the Company has significantly reduced rates on many of its deposit products. The provision for loan losses totaled $625,000 for the year ended December 31, 2020 as a result of the economic downturn caused by the COVID-19 pandemic, compared to $40,000 for the year ended December 31, 2019.
Noninterest income increased by $578,552 in the year ended December 31, 2020 when compared to the year ended December 31, 2019, primarily as a result of a $627,227 increase in mortgage banking income and a $210,150 decrease in the write down of other real estate owned, offset by a $176,586 decrease in bank owned life insurance income and a $88,245 decrease in service charges. Noninterest expense was $4,706,594 higher in the year ended December 31, 2020 when compared to the year ended December 31, 2019 due primarily to the aforementioned acquisition costs of $3,236,817 and salary and benefit increases of $970,890 as a result of employees added in the fourth quarter of 2020 in connection with the Carroll acquisition along with usual increases to existing employees. Income taxes declined by $552,123 during the year ended December 31, 2020 when compared to the year ended December 31, 2019 due to lower income before taxes and a higher percentage of tax-exempt revenue, offset by certain acquisition costs that are not deductible.
The acquisition of Carroll was the primary driver of the significant increases in most assets and liabilities from the prior year end. In addition, the origination of $31 million of PPP loans also increased loans and deposits. Total assets increased to $677 million at December 31, 2020 from $442 million at December 31, 2019. Loans increased to $522 million at December 31, 2020 from $359 million at December 31, 2019. Investment in debt securities increased to $78 million at December 31, 2020 from $56 million at December 31, 2019. Deposits increased to $573 million at December 31, 2020 from $377 million at December 31, 2019. In connection with the Carroll acquisition, the Company borrowed $17 million that it used to fund a portion of the $25 million cash merger consideration. The book value of the common stock of Farmers and Merchants Bancshares, Inc. was $17.18 per share at December 31, 2020, compared to $16.63 per share at December 31, 2019.
The COVID-19 pandemic continues almost a full year after it started. The Bank is providing relief to its borrowers, as needed, including temporary deferral of payments. During the second quarter of 2020, the Bank granted 90-day payment deferrals on 107 loans totalling $109.2 million, which was approximately 30% of the portfolio. Of these deferred loans, 13 loans totaling $21.8 million, or 6% of the portfolio, were granted an additional 90-day deferral. Seven loans totaling $14.7 million, or 3% of the portfolio, including some added with the acquisition of Carroll, have been granted additional payment deferrals. All but one of these loans are making full interest payments. In addition, as mentioned previously, the Bank has made a significant amount of PPP loans to customers.
James R. Bosley, Jr., President and CEO, commented “We are excited that the acquisition of Carroll Community Bank and the related system conversion were completed in the fourth quarter. 2020 earnings excluding acquisition costs for both the fourth quarter and the full year significantly exceeded the prior year’s results for the same periods demonstrating the positive impact of the acquisition. In addition, we are pleased to have helped many of our borrowers with payment deferrals and/or PPP loans.”
About the Company
Farmers and Merchants Bancshares, Inc. is a financial holding company and the parent of Farmers and Merchants Bank. Farmers and Merchants 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 nine 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, | |||
|---|---|---|---|
| 2019 | |||
| Assets | |||
| Cash and due from banks | 39,898,557 | $ | 6,664,307 |
| Federal funds sold and other interest-bearing deposits | 1,077,113 | 2,457,045 | |
| Cash and cash equivalents | 40,975,670 | 9,121,352 | |
| Certificates of deposit in other banks | 850,000 | 100,000 | |
| Securities available for sale | 54,477,286 | 36,531,774 | |
| Securities held to maturity | 23,078,519 | 19,510,018 | |
| Equity security at fair value | 552,566 | 532,321 | |
| Restricted stock, at cost | 900,500 | 376,200 | |
| Mortgage loans held for sale | 1,673,350 | 242,000 | |
| Loans, less allowance for loan losses of 3,296,538 and 2,593,715 | 521,690,514 | 359,382,843 | |
| Premises and equipment | 7,736,556 | 5,036,851 | |
| Accrued interest receivable | 2,057,491 | 1,019,540 | |
| Deferred income taxes | 1,219,668 | 1,036,078 | |
| Other real estate owned | 1,411,605 | - | |
| Bank owned life insurance | 11,297,342 | 7,145,477 | |
| Goodwill and other intangibles | 7,059,408 | - | |
| Other assets | 2,336,607 | 2,180,644 | |
| 677,317,082 | $ | 442,215,098 | |
| Liabilities and Stockholders' Equity | |||
| Deposits | |||
| Noninterest-bearing | 103,155,113 | $ | 60,659,015 |
| Interest-bearing | 470,246,434 | 315,954,299 | |
| Total deposits | 573,401,547 | 376,613,314 | |
| Securities sold under repurchase agreements | 24,753,972 | 10,958,118 | |
| Federal Home Loan Bank of Atlanta advances | 5,000,000 | - | |
| Long-tem debt | 16,973,280 | - | |
| Accrued interest payable | 409,622 | 346,214 | |
| Other liabilities | 5,049,178 | 4,843,936 | |
| 625,587,599 | 392,761,582 | ||
| Stockholders' equity | |||
| Common stock, par value .01 per share, authorized 5,000,000 shares; issued and outstanding 3,011,255 in 2020 and 2,974,019 in 2019 | 30,113 | 29,740 | |
| Additional paid-in capital | 28,294,139 | 27,812,991 | |
| Retained earnings | 22,698,954 | 21,568,161 | |
| Accumulated other comprehensive income | 706,277 | 42,624 | |
| 51,729,483 | 49,453,516 | ||
| 677,317,082 | $ | 442,215,098 |
All values are in US Dollars.
Farmers and Merchants Bancshares, Inc. and Subsidiaries
Consolidated Statements of Income
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | ||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | |||||||||
| Interest income | |||||||||||
| Loans, including fees | $ | 6,085,249 | $ | 4,312,265 | $ | 19,291,162 | $ | 16,894,657 | |||
| Investment securities - taxable | 209,356 | 238,075 | 770,394 | 869,457 | |||||||
| Investment securities - tax exempt | 162,794 | 149,030 | 625,099 | 580,384 | |||||||
| Federal funds sold and other interest earning assets | 18,163 | 76,964 | 76,525 | 357,840 | |||||||
| Total interest income | 6,475,562 | 4,776,334 | 20,763,180 | 18,702,338 | |||||||
| Interest expense | |||||||||||
| Deposits | 699,498 | 942,731 | 3,128,994 | 3,519,960 | |||||||
| Securities sold under repurchase agreements | 11,608 | 31,729 | 107,318 | 114,641 | |||||||
| Federal Home Loan Bank advances and other borrowings | 196,639 | 2,835 | 222,365 | 45,352 | |||||||
| Total interest expense | 907,745 | 977,295 | 3,458,677 | 3,679,953 | |||||||
| Net interest income | 5,567,817 | 3,799,039 | 17,304,503 | 15,022,385 | |||||||
| Provision for loan losses | 150,000 | 40,000 | 625,000 | 40,000 | |||||||
| Net interest income after provision for loan losses | 5,417,817 | 3,759,039 | 16,679,503 | 14,982,385 | |||||||
| Noninterest income | |||||||||||
| Service charges on deposit accounts | 160,929 | 168,923 | 575,430 | 663,675 | |||||||
| Mortgage banking income | 340,273 | 147,843 | 1,024,937 | 397,710 | |||||||
| Bank owned life insurance income | 60,670 | 42,888 | 188,143 | 364,729 | |||||||
| Unrealized gain (loss) on equity security | (2,533 | ) | (2,489 | ) | 10,513 | 16,232 | |||||
| Write down of other real estate owned | - | - | - | (210,150 | ) | ||||||
| Gain on sale of SBA loans | 61,885 | - | 125,520 | 139,535 | |||||||
| Other fees and commissions | 53,299 | 27,805 | 147,576 | 121,836 | |||||||
| Total noninterest income | 674,523 | 384,970 | 2,072,119 | 1,493,567 | |||||||
| Noninterest expense | |||||||||||
| Salaries | 2,022,907 | 1,478,611 | 6,137,050 | 5,472,609 | |||||||
| Employee benefits | 475,237 | 343,974 | 1,658,651 | 1,352,202 | |||||||
| Occupancy | 206,092 | 177,351 | 758,357 | 771,917 | |||||||
| Furniture and equipment | 339,623 | 154,272 | 840,890 | 614,543 | |||||||
| Acquisition | 1,624,496 | - | 3,236,817 | - | |||||||
| Other | 979,730 | 674,189 | 2,950,643 | 2,664,543 | |||||||
| Total noninterest expense | 5,648,085 | 2,828,397 | 15,582,408 | 10,875,814 | |||||||
| Income before income taxes | 444,255 | 1,315,612 | 3,169,214 | 5,600,138 | |||||||
| Income taxes | 26,861 | 254,826 | 487,211 | 1,039,334 | |||||||
| Net income | $ | 417,394 | $ | 1,060,786 | $ | 2,682,003 | $ | 4,560,804 | |||
| Earnings per share - basic and diluted | $ | 0.14 | $ | 0.36 | $ | 0.90 | $ | 1.54 |