HAMPSTEAD, Md., Oct. 20, 2022 (GLOBE NEWSWIRE) -- 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)

Farmers and Merchants Bancshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Unaudited)

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