Farmers and Merchants Bancshares, Inc. Reports Earnings of $4,277,703 or $1.37 Per Share for the Year Ended December 31, 2024

Rhea-AI Summary

Farmers and Merchants Bancshares (FMFG) reported net income of $4.28 million or $1.37 per share for 2024, down from $6.42 million or $2.08 per share in 2023. The decline was primarily due to higher interest expenses resulting from Federal Reserve rate increases.

Key financial metrics for 2024 include:

• Return on average equity decreased to 7.83% from 13.08%
• Return on average assets fell to 0.53% from 0.86%
• Loan growth of $60 million (11.4%)
• Net interest margin declined to 2.68% from 2.97%

Total assets increased to $845 million from $800 million, while deposits grew to $758 million from $681 million. The company's book value per share improved to $17.77 from $16.74. Asset quality remained strong with only one non-accrual loan totaling $403,853.

Positive

• Loan portfolio growth of $60 million (11.4%) in 2024
• Total deposits increased by $77 million to $758 million
• Book value per share increased to $17.77 from $16.74
• Strong asset quality with minimal non-performing loans
• Access to $332 million in liquidity

Negative

• Net income decreased 33.4% to $4.28 million from $6.42 million
• Net interest margin declined to 2.68% from 2.97%
• Return on average equity fell to 7.83% from 13.08%
• Return on average assets decreased to 0.53% from 0.86%
• Noninterest expenses increased by $1.79 million

HAMPSTEAD, Md., Feb. 10, 2025 (GLOBE NEWSWIRE) -- Farmers and Merchants Bancshares, Inc. (the “Company”), the parent company of Farmers and Merchants Bank (the “Bank” and, together with the Company, “we”, “us” and “our”), announced that net income for the year ended December 31, 2024 was $4,277,703, or $1.37 per common share (basic and diluted), compared to $6,418,337, or $2.08 per common share (basic and diluted), for the same period in 2023. Higher interest expense as a result of the Federal Reserve rate increases over the last several years was the primary reason for the decline in net income. The Company’s return on average equity during the year ended December 31, 2024 was 7.83% compared to 13.08% for the same period in 2023. The Company’s return on average assets during the year ended December 31, 2024 was 0.53% compared to 0.86% for the same period in 2023. Loan growth for the year ended December 31, 2024 was $60 million, a growth rate of 11.4%.

Net income for the three months ended December 31, 2024 was $856,080, or $0.27 per common share (basic and diluted), compared to $1,415,230, or $0.46 per common share (basic and diluted), for the fourth quarter of 2023. The Company’s return on average equity during the three months ended December 31, 2024 was 5.96% compared to 11.92% for the same period in 2023. The Company’s return on average assets during the three months ended December 31, 2024 was 0.41% compared to 0.72% for the same period in 2023.          

Net interest income for the year ended December 31, 2024 was $579,928 lower when compared to the same period in 2023 due to a decrease in the net interest margin to 2.68% for the year ended December 31, 2024 from 2.97% for the same period in 2023. The decline in the net interest margin was partially offset by a $56.6 million increase in average interest earning assets to $784.6 million for the year ended December 31, 2024 from $728.0 million for the same period in 2023. Higher interest expense was the driving factor in the lower net interest income. The Federal Reserve interest rate decreased by 1.00% over the last four months of 2024 after aggregate increases of 5.25% from March 2022 through August 2023. The net aggregate increase of 4.25% caused the cost of deposits and borrowings to increase by 102 basis points to 2.76% for the year ended December 31, 2024 from 1.74% for the same period in 2023. In addition, average interest bearing liabilities increased by $64.3 million to $634.7 million for the year ended December 31, 2024 from $570.4 million for the same period in 2023. The taxable equivalent yield on total average interest-earning assets increased 59 basis points to 4.92% for the year ended December 31, 2024 from 4.33% for the same period in 2023, partially offsetting the higher cost of funds.

The Bank entered into several interest rate swaps structured as fair value hedges during 2023 and 2024, some in combination with the purchase of mortgage backed securities, which are intended to offset the impact of higher interest expense by improving interest income on debt securities. During the fourth quarter of 2024, a swap with a notional amount of $22 million was unwound and the related $28 million of mortgage backed securities was sold, resulting in a net gain of $18,708. The notional amount of interest rate swaps outstanding at December 31, 2024 was approximately $75 million.

Our loan portfolio is comprised primarily of commercial real estate loans with fixed rates for five-year terms. As those loans reprice, our net interest margin should improve. In addition, our current strategy is to increase the diversification of our portfolio with commercial and industrial loans, which are typically adjustable rate loans and would provide an immediate higher yield in today’s interest rate environment.

A provision for credit losses of $150,000 was recorded for the year ended December 31, 2024. For the year ended December 31, 2023, we recorded a $570,000 recovery. The Company’s loan portfolio continues to perform at a high level with just one non-accrual loan totaling $403,853 and one loan more than 30 days delinquent totalling $269,852 at December 31, 2024.

Noninterest income increased by $160,947 for the year ended December 31, 2024 when compared to the same period in 2023, primarily as a result of a $138,388 increase in the gain on insurance proceeds for our Upperco location and a $48,252 increase in bank owned life insurance income, offset by a decrease of 19,392 in the gain on sale of SBA loans. Noninterest expense was $1,787,830 higher in the year ended December 31, 2024 when compared to the same period in 2023, due primarily to a $475,241 increase in other expenses, a $505,322 increase in occupancy and furniture and equipment costs, a $495,733 increase in salaries and benefits, and a $311,534 increase in other real estate owned expenses. The increase in other expenses was due primarily to costs associated with our core system conversion that was completed in the fourth quarter of 2024, ATM related expenses, and legal fees incurred for stockholder matters. Also, the Bank’s FDIC assessment expense increased due to higher FDIC assessment rates. The increase in occupancy and furniture and equipment was due primarily to the renovations and new equipment for the Upperco location which was placed in service at the end of the first quarter and the new Towson location that was placed in service during the second quarter. The increase in salaries and benefits was due to normal annual salary increases as well as the hiring of several new employees primarily in the commercial loan production department. The increase in other real estate owned expenses is due primarily to a $249,217 gain that was realized in 2023.

Income taxes decreased by $786,177 during the year ended December 31, 2024 when compared to the same period in 2023 due to lower earnings before taxes. The effective tax rate decreased to 22.3% for the year ended December 31, 2024 from 23.9% for the same period last year due to an increase in the amount of nontaxable income included in pretax income year over year.

Total assets increased to $845 million at December 31, 2024 from $800 million at December 31, 2023. Loans increased by 11.4% to $583 million at December 31, 2024 from the $523 million recorded at December 31, 2023. Investments in debt securities decreased to $146 million at December 31, 2024 from $184 million at December 31, 2023. Deposits increased to $758 million at December 31, 2024 from $681 million at December 31, 2023.   The Company’s tangible equity was $49 million at December 31, 2024 compared to $45 million at December 31, 2023.

The book value of the Company’s common stock increased to $17.77 per share at December 31, 2024 from to $16.74 per share at December 31, 2023. Book value per share at December 31, 2024 was reflective of the $17 million unrealized loss, net of income taxes, on the Bank’s available for sale (“AFS”) investment portfolio as a result of the significant rise in interest rates over the last 30 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. The AFS investment portfolio is comprised of 72% government agency mortgage backed securities which are fully guaranteed, 23% investment grade non agency mortgage backed securities, 1% investment grade corporate and municipal bonds, and 4% subordinated debt of other community banks. There is no indication of credit deterioration in any of the bonds and we intend to hold these investments to maturity, so no actual losses are anticipated. There is no 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.

The Bank utilized the Federal Reserve Bank’s Bank Term Funding Program during 2024 and had borrowings of $54,000,000 outstanding for most of 2024, but the borrowings were repaid during December 2024 ahead of the maturity date of January 15, 2025. Our Federal Home Loan Bank facility, other borrowing lines available, unpledged securities, brokered deposit access, and cash provided us with access to approximately $332 million of liquidity at December 31, 2024.

Gary A. Harris, President and CEO, commented “We are pleased that our loan portfolio grew $60 million, or 11.4%, during 2024, demonstrating that our investment in additional loan production staff and facilities is paying off. Our asset quality remains high and our liquidity position remains strong. Due to the sunsetting of our existing core operating system, after an almost year long effort, our core system conversion was completed in October 2024.  While it increased our expenses in 2024, the new system will be a substantial digital upgrade that will position the bank for future growth, provide for significant efficiency gains and an enhanced customer experience moving forward. The Federal Reserve interest rate decreased an additional 50 basis points in the fourth quarter after the 50 basis point reduction in September. Additional cuts are now not expected to occur until the second half of 2025. The 2024 cuts should provide for improvement in our net interest margin in 2025.”

About the Company

The Company is a financial holding company and the parent company 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, Route 26, and Route 45 corridors. The main office is located in Upperco, Maryland, with seven additional branches in Owings Mills, Hampstead, Greenmount, Reisterstown, Westminster, Eldersburg, and Towson. 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,			December 31, *
	2024			2023
Assets
Cash and due from banks	$	63,962,047		$	44,404,473
Federal funds sold and other interest-bearing deposits		697,066			285,864
Cash and cash equivalents		64,659,113			44,690,337
Certificates of deposit in other banks		100,000			100,000
Securities available for sale, at fair value		125,712,926			164,084,673
Securities held to maturity, at amortized cost less allowance for credit
losses of $60,009 and $35,627		20,498,502			20,163,622
Equity security, at fair value		517,550			507,130
Restricted stock, at cost		921,000			863,500
Mortgage loans held for sale		157,200			-
Loans, less allowance for credit losses of $4,260,189 and $4,285,247		582,993,314			523,308,044
Premises and equipment, net		7,348,800			6,583,452
Accrued interest receivable		2,439,108			2,180,734
Deferred income taxes, net		7,606,241			8,312,482
Other real estate owned, net		1,176,245			1,242,365
Bank owned life insurance		15,324,417			14,930,754
Goodwill and other intangibles, net		7,026,096			7,034,424
Other assets		8,162,575			5,939,309
	$	844,643,087		$	799,940,826
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing	$	107,197,478		$	115,284,706
Interest-bearing		651,609,250			565,678,145
Total deposits		758,806,728			680,962,851
Securities sold under repurchase agreements		5,564,103			6,760,493
Federal Home Loan Bank of Atlanta advances		5,000,000			5,000,000
Federal Reserve Bank advances		-			33,000,000
Long-term debt, net of issuance costs		11,329,115			13,212,378
Accrued interest payable		1,002,525			1,482,773
Other liabilities		6,668,826			7,344,040
		788,371,297			747,762,535
Stockholders' equity
Common stock, par value $.01 per share,
authorized 5,000,000 shares; issued and outstanding
3,166,653 in 2024 and 3,116,966 shares in 2023		31,667			31,170
Additional paid-in capital		31,135,552			30,398,080
Retained earnings		41,612,654			39,433,185
Accumulated other comprehensive loss		(16,508,083	)		(17,684,144	)
		56,271,790			52,178,291
	$	844,643,087		$	799,940,826
* - Derived from audited consolidated financial statements

Farmers and Merchants Bancshares, Inc. and Subsidiaries Consolidated Statements of Income (Unaudited)
	Three Months Ended December 31,						Year Ended December 31,
	2024			2023			2024			2023
Interest income
Loans, including fees	$	8,316,953		$	6,707,414		$	30,338,189		$	25,730,722
Investment securities - taxable		1,468,905			1,770,413			6,263,400			4,299,206
Investment securities - tax exempt		143,501			137,770			559,130			554,396
Federal funds sold and other interest earning assets		341,822			269,093			1,202,744			738,814
Total interest income		10,271,181			8,884,690			38,363,463			31,323,138
Interest expense
Deposits		4,274,980			2,960,470			14,518,632			7,971,094
Securities sold under repurchase agreements		16,222			17,924			65,335			41,873
Federal Home Loan Bank advances and other borrowings		13,433			33,614			122,663			485,886
Federal Reserve Bank advances		402,775			431,556			2,313,186			823,319
Long-term debt		120,154			140,000			507,562			584,953
Total interest expense		4,827,564			3,583,564			17,527,378			9,907,125
Net interest income		5,443,617			5,301,126			20,836,085			21,416,013
Provision for (recovery of) credit losses		150,000			-			150,000			(570,000	)
Net interest income after provision for (recovery of) credit losses		5,293,617			5,301,126			20,686,085			21,986,013
Noninterest income
Service charges on deposit accounts		189,094			205,942			810,273			792,941
Mortgage banking income		41,484			4,483			107,846			96,997
Bank owned life insurance income		106,050			83,817			393,664			345,412
Gain (loss) on sale of debt securities		18,708			5,445			(13,214	)		-
Fair value adjustment of equity security		(18,183	)		15,343			(4,346	)		5,445
Loss on disposition of furniture and equipment		-			-			(5,157	)		-
Gain on sale of SBA loans		-			19,392			-			19,392
Gain on insurance proceeds		-			4,406			142,794			4,406
Other fees and commissions		85,899			83,782			320,587			326,907
Total noninterest income		423,052			422,610			1,752,447			1,591,500
Noninterest expense
Salaries		2,006,144			1,901,031			7,854,322			7,544,773
Employee benefits		590,365			517,654			2,187,116			2,000,932
Occupancy		271,859			229,377			1,070,456			874,775
Furniture and equipment		395,264			243,579			1,292,767			983,126
Other real estate owned, net		75,996			(235,538	)		75,996			(235,538	)
Other		1,283,177			1,296,793			4,449,099			3,973,858
Total noninterest expense		4,622,805			3,952,896			16,929,756			15,141,926
Income before income taxes		1,093,864			1,770,840			5,508,776			8,435,587
Income taxes		237,784			355,610			1,231,073			2,017,250
Net income	$	856,080		$	1,415,230		$	4,277,703		$	6,418,337
Earnings per share - basic	$	0.27		$	0.46		$	1.37		$	2.08
Earnings per share - diluted	$	0.27		$	0.46		$	1.37		$	2.08

Farmers and Merchants Bancshares, Inc.
Selected Consolidated Financial Data
	2024			2023			2022
OPERATING DATA
Interest income	$	38,363,463		$	31,323,138		$	26,269,653
Interest expense		17,527,378			9,907,125			2,146,158
Net interest income		20,836,085			21,416,013			24,123,495
Provision for (recovery of) loan losses		150,000			(570,000	)		475,000
Net interest income after provision for credit losses		20,686,085			21,986,013			23,648,495
Noninterest income		1,752,447			1,591,500			2,293,938
Noninterest expense		16,929,756			15,141,926			15,367,280
Income before income taxes		5,508,776			8,435,587			10,575,153
Income taxes		1,231,073			2,017,250			2,485,026
Net income	$	4,277,703		$	6,418,337		$	8,090,127
PER SHARE DATA
Net income (Basic)	$1.37			$2.08			$2.66
Dividends	$0.67			$0.66			$0.63
Book value	$17.77			$16.74			$15.56
KEY RATIOS
Return on average assets		0.53	%		0.86	%		1.13	%
Return on average equity		7.83	%		13.08	%		16.03	%
Efficiency ratio		74.95	%		65.81	%		58.17	%
Dividend payout ratio		48.91	%		31.73	%		23.68	%
Net yield on interest-earning assets		2.68	%		2.97	%		3.54	%
Tier 1 capital leverage ratio		9.12	%		9.42	%		9.83	%
AT PERIOD END
Total assets	$	844,643,087		$	799,940,826		$	718,210,672
Gross loans		587,978,965			528,166,501			521,679,143
Cash and cash equivalents		64,659,113			44,690,337			7,263,537
Securities		146,211,428			184,248,295			146,823,446
Deposits		758,806,728			680,962,851			623,611,124
Borrowings		10,564,103			57,972,871			40,270,945
Stockholders' equity		56,271,790			52,178,291			47,774,963
SELECTED AVERAGE BALANCES
Total assets	$	810,042,767		$	745,478,612		$	714,115,497
Gross loans		557,861,624			528,910,091			498,427,308
Cash and cash equivalents		27,564,076			18,497,261			20,015,477
Securities		177,742,677			182,159,701			174,776,879
Deposits		672,492,752			642,039,185			631,809,943
Borrowings		72,287,329			48,040,853			26,042,874
Stockholders' equity		54,609,886			49,063,426			50,457,994
ASSET QUALITY
Nonperforming assets	$	1,580,098		$	1,897,775		$	1,897,775
Nonperforming assets/total assets		0.19	%		0.24	%		0.26	%
Allowance for credit losses on loans/total loans		0.72	%		0.81	%		0.80	%

Contact:	Mr. Gary A. Harris
	President and Chief Executive Officer
	(410) 374-1510, ext. 1104

FAQ

What was FMFG's net income for the full year 2024?

FMFG reported net income of $4,277,703 or $1.37 per share for the year ended December 31, 2024.

How much did FMFG's loan portfolio grow in 2024?

FMFG's loan portfolio grew by $60 million, representing an 11.4% growth rate in 2024.

What caused the decline in FMFG's net income for 2024?

The decline in net income was primarily due to higher interest expenses resulting from Federal Reserve rate increases over the past several years.

What was FMFG's book value per share at the end of 2024?

FMFG's book value per share increased to $17.77 as of December 31, 2024, up from $16.74 at the end of 2023.

How much liquidity did FMFG have available at the end of 2024?

FMFG had access to approximately $332 million of liquidity as of December 31, 2024.