Farmers and Merchants Bancshares, Inc. Reports Record Earnings of $4,061,794 or $1.35 Per Share for the Six Months Ended June 30, 2021
07/22/2021 - 04:00 PM
HAMPSTEAD, Md., July 22, 2021 (GLOBE NEWSWIRE) -- Farmers and Merchants Bancshares, Inc. (the “Company”), the parent of Farmers and Merchants Bank (the “Bank”), announced that net income for the six months ended June 30, 2021 was $4,061,794, or $1.35 per common share, both all-time semi-annual records, compared to $1,879,362, or $0.63 per common share, for the same period in 2020. The primary driver of the significant increase in net income was the acquisition of Carroll Bancorp, Inc. and its subsidiary, Carroll Community Bank (collectively, “Carroll”), that was completed in the fourth quarter of 2020. Also, income from Paycheck Protection Program (“PPP”) loans added approximately $507,000 t o net income.
Net income for the three months ended June 30, 2021 was $2,032,219, or $0.67 per share, which was a new quarterly record, compared to $1,036,055, or $0.35 per common share, for the second quarter of 2020 and $2,029,575, or $0.67 per common share, for the first quarter of 2021.
The Company incurred significant one-time costs during 2020 in connection with the acquisition of Carroll. The table below provides a comparison of the Company’s results for the three and six months ended June 30, 2021 versus the same periods of the prior year with and without $165,096 and $344,920 of acquisition costs incurred during the three and six month periods ended June 30, 2020, respectively.
Three Months Ended Six Months Ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Excluding Excluding As Reported As Reported Acquisition Costs As Reported As Reported Acquisition Costs Income before taxes $ 2,601,944 $ 1,266,626 $ 1,431,722 $ 5,217,220 $ 2,262,849 $ 2,607,769 Income taxes 569,725 230,571 276,001 1,155,426 383,487 478,400 Net income $ 2,032,219 $ 1,036,055 $ 1,155,721 $ 4,061,794 $ 1,879,362 $ 2,129,369 Earnings per share $ 0.67 $ 0.35 $ 0.39 $ 1.35 $ 0.63 $ 0.72 Return on average assets 1.16 % 0.85 % 0.94 % 1.18 % 0.80 % 0.91 % Return on average equity 15.02 % 8.05 % 8.98 % 15.18 % 7.39 % 8.38 %
Net interest income for the six months ended June 30, 2021 was $3,480,039 higher than for the same period in 2020 due to a $199.5 million increase in average interest earning assets to $650.3 million for the six months ended June 30, 2021 as compared to $450.8 million for the same period in 2020, and a slight increase in the taxable equivalent net yield on interest earning assets to 3.45% for the six months ended June 30, 2021 from 3.44% for the six months ended June 30, 2020. While the net yield remained flat, the taxable equivalent yield on total interest-earning assets decreased 32 basis points to 3.93% for the six months ended June 30, 2021 from 4.25% for the same period in 2020. This was offset by a 47 basis point decrease in the cost of deposits and borrowings to 0.60% for the six months ended June 30, 2021 from 1.07% for the six months ended June 30, 2020. The provision for loan losses totaled $100,000 for the six months ended June 30, 2021, compared to $475,000 for the same period in 2020.
Noninterest income increased by $195,273 for the six months ended June 30, 2021 when compared to the same period in 2020 primarily as a result of an $84,566 increase in mortgage banking income, a $67,818 increase in bank owned life insurance revenue, a $59,461 increase in service charges, and a $37,613 gain on sale of Carroll’s Westminster, Maryland branch office, offset by a $63,635 decrease in the gain on sale of SBA loans. Noninterest expense was $1,095,941 higher in the six months ended June 30, 2021 when compared to the same period in 2020 due primarily to additional personnel, locations and customers added with the acquisition of Carroll. Salaries and benefits increased $924,344, other expenses increased $335,422, and occupancy, furniture and equipment costs increased $181,095. T hese increases were offset by a decrease of $344,920 in one-time acquisition costs related to the Carroll acquisition. Income taxes increased by $771,939 during the six months ended June 30, 2021 when compared to the same period in 2020 due to higher income before taxes. The effective tax rate increased to 22% during the six months ended June 30, 2021 compared to 17% during the same period last year due to a lower percentage of tax exempt income.
Total assets increased to $707 million at June 30, 2021 from $677 million at December 31, 2020. Loans decreased to $517 million at June 30, 2021 from $522 million at December 31, 2020 due to a $6 million decrease in PPP loans. Investments in debt securities increased to $120 million at June 30, 2021 from $78 million at December 31, 2020. Deposits increased to $612 million at June 30, 2021 from $573 million at December 31, 2020. The book value of the Company’s common stock was $18.00 per share at June 30, 2021, compared to $17.18 per share at December 31, 2020.
During the COVID-19 pandemic, the Company has provided relief to our 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 June 30, 2021, modified loans totaled $5.1 million , or 1% of the loan portfolio. In addition, the Company has originated $60 million of PPP loans to customers, $38 million in 2020 and $22 million in 2021. The Company increased its loan loss reserve significantly in 2020 due to the pandemic, but has yet to incur any actual losses. Management has chosen to maintain an elevated loan loss reserve in light of loans that had payment deferrals longer than six months and for which six full monthly principal and interest payments have not yet been received.
James R. Bosley, Jr., President and CEO, commented “We are first and foremost very happy to see the pandemic wind down although our thoughts go out to those permanently impacted by it. We will continue to be diligent about the health and safety of our employees and customers. It is gratifying that our record earnings have continued into the second quarter. The Carroll acquisition continues to contribute as planned and income from PPP loans remains a significant addition to the bottom line.”
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
June 30, December 31, 2021 2020 (Unaudited) Assets Cash and due from banks $ 31,687,027 $ 39,898,557 Federal funds sold and other interest-bearing deposits 769,123 1,077,113 Cash and cash equivalents 32,456,150 40,975,670 Certificates of deposit in other banks 350,000 850,000 Securities available for sale 98,251,607 54,477,286 Securities held to maturity 21,401,599 23,078,519 Equity security at fair value 547,914 552,566 Restricted stock, at cost 675,169 900,500 Mortgage loans held for sale 1,317,820 1,673,350 Loans, less allowance for loan losses of $3,404,168 and $3,296,538 517,356,334 521,690,514 Premises and equipment 6,304,771 7,736,556 Accrued interest receivable 1,777,967 2,057,491 Deferred income taxes, net 1,521,861 1,219,668 Other real estate owned 1,411,605 1,411,605 Bank owned life insurance 15,150,383 11,297,342 Goodwill and other intangibles 7,055,274 7,059,408 Other assets 1,908,201 2,336,607 $ 707,486,655 $ 677,317,082 Liabilities and Stockholders' Equity Deposits Noninterest-bearing $ 126,712,827 $ 103,155,113 Interest-bearing 485,417,230 470,246,434 Total deposits 612,130,057 573,401,547 Securities sold under repurchase agreements 13,686,564 24,753,972 Federal Home Loan Bank of Atlanta advances 5,000,000 5,000,000 Long-term debt 16,976,093 16,973,280 Accrued interest payable 154,780 409,622 Other liabilities 5,123,819 5,049,178 653,071,313 625,587,599 Stockholders' equity Common stock, par value $.01 per share, authorized 5,000,000 shares; issued and outstanding 3,023,487 shares in 2021 and 3,011,255 shares in 2020 30,235 30,113 Additional paid-in capital 28,557,249 28,294,139 Retained earnings 25,917,571 22,698,954 Accumulated other comprehensive (loss) income (89,713 ) 706,277 54,415,342 51,729,483 $ 707,486,655 $ 677,317,082 The accompanying notes are an integral part of these consolidated financial statements.
Farmers and Merchants Bancshares, Inc. and Subsidiaries
Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Interest income Loans, including fees $ 5,783,660 $ 4,393,267 $ 11,768,317 $ 8,715,921 Investment securities - taxable 329,731 191,255 540,955 401,761 Investment securities - tax exempt 152,412 154,699 312,986 298,783 Federal funds sold and other interest earning assets 15,308 16,007 29,445 48,799 Total interest income 6,281,111 4,755,228 12,651,703 9,465,264 Interest expense Deposits 533,437 832,464 1,128,957 1,738,663 Securities sold under repurchase agreements 14,972 39,496 28,483 77,690 Federal Home Loan Bank advances and other borrowings 190,181 12,865 378,287 12,974 Total interest expense 738,590 884,825 1,535,727 1,829,327 Net interest income 5,542,521 3,870,403 11,115,976 7,635,937 (Recovery of) provision for loan losses (20,000 ) 350,000 100,000 475,000 Net interest income after (recovery of)provision for loan losses 5,562,521 3,520,403 11,015,976 7,160,937 Noninterest income Service charges on deposit accounts 176,483 117,658 335,674 276,213 Mortgage banking income 240,666 350,110 496,933 412,367 Bank owned life insurance income 82,922 43,211 153,041 85,223 Gain on sale of premises and equipment - - 37,613 - Unrealized gain (loss) on equity security 511 4,535 411 13,045 Gain on premium call of debt security - - 8,569 - Gain on sale of SBA loans - 63,635 - 63,635 Other fees and commissions 47,974 29,077 73,260 59,745 Total noninterest income 548,556 608,226 1,105,501 910,228 Noninterest expense Salaries 1,844,736 1,296,278 3,471,074 2,651,197 Employee benefits 438,133 359,450 911,021 806,554 Occupancy 245,318 185,394 495,530 368,546 Furniture and equipment 183,689 165,812 380,372 326,261 Acquisition - 165,096 - 344,920 Other 797,257 689,973 1,646,260 1,310,838 Total noninterest expense 3,509,133 2,862,003 6,904,257 5,808,316 Income before income taxes 2,601,944 1,266,626 5,217,220 2,262,849 Income taxes 569,725 230,571 1,155,426 383,487 Net income $ 2,032,219 $ 1,036,055 $ 4,061,794 $ 1,879,362 Earnings per share - basic and diluted $ 0.67 $ 0.35 $ 1.35 $ 0.63
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