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 26, 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 April 26, 2022, Farmers and Merchants Bancshares, Inc. (the “Company”) issued a press release describing its financial results for the three-month period ended March 31, 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 7.01. Regulation FD Disclosure.
On April 26, 2022, 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, 2021 and the first quarter of 2022. 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 26, 2022 (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: April 26, 2022 | By: | /s/ James R. Bosley, Jr. |
| James R. Bosley, Jr. | ||
| President & CEO |
HTML Editor
Exhibit 99.1
| FOR IMMEDIATE RELEASE | FOR FURTHER INFORMATION CONTACT: | |
|---|---|---|
| April 26, 2022 | ||
| 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 $2,050,802 OR $0.68 PER SHARE FOR THE THREE MONTHS ENDED
MARCH 31, 2022
HAMPSTEAD, MARYLAND (April 26, 2022) – 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, 2022 was $2,050,802, or $0.68 per common share (basic and diluted), compared to $2,029,575, or $0.67 per common share, for the same period in 2021. The Company’s return on average equity during the three months ended March 31, 2022 was 14.55% compared to 15.37% for the same period in 2021. The Company’s return on average assets during the three months ended March 31, 2022 was 1.15% compared to 1.19% for the same period in 2021. Income from Paycheck Protection Program (“PPP”) loans added approximately $105,000 to net income for the three months ended March 31, 2022 compared to $369,000 for the same period in 2021. As of March 31, 2022, $91,000 of deferred PPP fees, net of income taxes, have not been recognized.
Net interest income for the three months ended March 31, 2022 was $390,634 higher than for the same period in 2021 due to a $19.3 million increase in average interest earning assets to $674.7 million for the three months ended March 31, 2022 as compared to $655.4 million for the same period in 2021, and an increase in the taxable equivalent net yield on interest earning assets to 3.56% for the three months ended March 31, 2022 from 3.43% for the three months ended March 31, 2021. The taxable equivalent yield on total average interest-earning assets decreased 5 basis points to 3.87% for the three months ended March 31, 2022 from 3.92% for the same period in 2021. This decrease was offset by a 23 basis point decrease in the cost of deposits and borrowings to 0.40% for the three months ended March 31, 2022 from 0.63% for the same period in 2021. There was no provision for loan losses for the three months ended March 31, 2022, compared to $120,000 for the same period in 2021.
Noninterest income decreased by $61,138 for the three months ended March 31, 2022 when compared to the same period in 2021 primarily as a result of a $133,579 decrease in mortgage banking revenue reflecting a decline in refinancings due to rising interest rates, offset by a $93,600 increase in the gain on sale of SBA loans. Noninterest expense was $404,474 higher in the three months ended March 31, 2022 when compared to the same period in 2021 due primarily to $152,961 increase in salaries and benefits and a $255,366 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 $23,880 during the three months ended March 31, 2022 when compared to the same period in 2021 due to higher income before taxes. The effective tax rate increased to 22.9% during the three months ended March 31, 2022 compared to 22.4% during the same period last year.
Total assets increased slightly to $718 million at March 31, 2022 from $717 million at December 31, 2021. Loans increased to $484 million at March 31, 2022 from $482 million at December 31, 2021 despite a $5 million decrease in PPP loans. Investments in debt securities decreased to $167 million at March 31, 2022 from $171 million at December 31, 2021. Deposits increased to $634 million at March 31, 2022 from $626 million at December 31, 2021. The book value of the Company’s common stock decreased to $17.19 per share at March 31, 2022, compared to $18.64 per share at December 31, 2021, despite the Company’s strong earnings 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 three 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 are anticipated and the declines in market value are considered temporary. There is no impact on regulatory capital since 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.
During the COVID-19 pandemic, the Company provided relief to 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 March 31, 2022, 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. $56 million of PPP loans have been forgiven as of March 31, 2022. The Company expects that the majority of the remaining $4 million will be forgiven in 2022.
James R. Bosley, Jr., President and CEO, commented “Fiscal 2022 is off to a great start with the best first quarter earnings in the Company’s history and a strong return on equity. In addition, the loan portfolio had net growth for the first time since 2020 and continues to perform very well.”
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 | 26,506,362 | $ | 25,258,932 | ||
| Federal funds sold and other interest-bearing deposits | 632,831 | 1,203,174 | |||
| Cash and cash equivalents | 27,139,193 | 26,462,106 | |||
| Certificates of deposit in other banks | 350,000 | 350,000 | |||
| Securities available for sale, at fair value | 145,716,434 | 149,237,916 | |||
| Securities held to maturity, at cost | 21,343,559 | 21,851,975 | |||
| Equity security, at fair value | 518,092 | 543,605 | |||
| Restricted stock, at cost | 695,000 | 675,400 | |||
| Mortgage loans held for sale | 285,000 | 126,500 | |||
| Loans, less allowance for loan losses of 3,654,318 and 3,650,268 | 483,908,857 | 482,011,334 | |||
| Premises and equipment, net | 6,268,709 | 6,259,421 | |||
| Accrued interest receivable | 1,562,014 | 1,609,063 | |||
| Deferred income taxes, net | 4,632,138 | 2,177,450 | |||
| Other real estate owned, net | 1,242,365 | 1,242,365 | |||
| Bank owned life insurance | 11,609,153 | 11,556,163 | |||
| Goodwill and other intangibles, net | 7,048,998 | 7,051,080 | |||
| Other assets | 5,604,129 | 5,522,877 | |||
| 717,923,641 | $ | 716,677,255 | |||
| Liabilities and Stockholders' Equity | |||||
| Deposits | |||||
| Noninterest-bearing | 132,629,508 | $ | 124,175,615 | ||
| Interest-bearing | 501,151,145 | 502,239,055 | |||
| Total deposits | 633,780,653 | 626,414,670 | |||
| Securities sold under repurchase agreements | 4,083,707 | 5,414,026 | |||
| Federal Home Loan Bank of Atlanta advances | 5,000,000 | 5,000,000 | |||
| Long-term debt, net of issuance costs | 16,553,090 | 16,978,905 | |||
| Accrued interest payable | 276,573 | 295,910 | |||
| Other liabilities | 6,023,131 | 5,952,286 | |||
| 665,717,154 | 660,055,797 | ||||
| Stockholders' equity | |||||
| Common stock, par value .01 per share, authorized 5,000,000 shares; issued and outstanding 3,037,137 shares in 2021 and 2020 | 30,372 | 30,372 | |||
| Additional paid-in capital | 28,857,422 | 28,857,422 | |||
| Retained earnings | 31,179,402 | 29,128,600 | |||
| Accumulated other comprehensive loss | (7,860,709 | ) | (1,394,936 | ) | |
| 52,206,487 | 56,621,458 | ||||
| 717,923,641 | $ | 716,677,255 |
All values are in US Dollars.
Farmers and Merchants Bancshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
| Three Months Ended March 31, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| Interest income | ||||||
| Loans, including fees | $ | 5,683,362 | $ | 5,984,657 | ||
| Investment securities - taxable | 644,461 | 211,224 | ||||
| Investment securities - tax exempt | 149,487 | 160,574 | ||||
| Federal funds sold and other interest earning assets | 12,415 | 14,137 | ||||
| Total interest income | 6,489,725 | 6,370,592 | ||||
| Interest expense | ||||||
| Deposits | 338,560 | 595,520 | ||||
| Securities sold under repurchase agreements | 3,251 | 13,511 | ||||
| Federal Home Loan Bank advances and other borrowings | 183,825 | 188,106 | ||||
| Total interest expense | 525,636 | 797,137 | ||||
| Net interest income | 5,964,089 | 5,573,455 | ||||
| Provision for loan losses | - | 120,000 | ||||
| Net interest income after provision for loan losses | 5,964,089 | 5,453,455 | ||||
| Noninterest income | ||||||
| Service charges on deposit accounts | 181,466 | 159,191 | ||||
| Mortgage banking income | 122,688 | 256,267 | ||||
| Bank owned life insurance income | 52,990 | 70,119 | ||||
| Fair value adjustment of equity security | (26,817 | ) | (8,669 | ) | ||
| Gain on premium call of debt security | - | 8,569 | ||||
| Gain on sale of SBA loans | 93,600 | - | ||||
| Other fees and commissions | 71,880 | 71,468 | ||||
| Total noninterest income | 495,807 | 556,945 | ||||
| Noninterest expense | ||||||
| Salaries | 1,740,395 | 1,626,338 | ||||
| Employee benefits | 511,792 | 472,888 | ||||
| Occupancy | 228,427 | 250,212 | ||||
| Furniture and equipment | 214,615 | 196,683 | ||||
| Other | 1,104,369 | 849,003 | ||||
| Total noninterest expense | 3,799,598 | 3,395,124 | ||||
| Income before income taxes | 2,660,298 | 2,615,276 | ||||
| Income taxes | 609,496 | 585,701 | ||||
| Net income | $ | 2,050,802 | $ | 2,029,575 | ||
| Earnings per share - basic and diluted | $ | 0.68 | $ | 0.67 |