8-K

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): August 1, 2018

Farmers and Merchants Bancshares, Inc.

(Exact name of registrant as specified in its charter)

Maryland	000-55756	81-3605835
(State or other jurisdiction of incorporation or organization)	(Commission file number)	(IRS Employer  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))

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 August 1, 2018, Farmers and Merchants Bancshares, Inc. issued a press release describing its financial results for the three- and six-month periods ended June 30, 2018. 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, 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 August 1, 2018 (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: August 2, 2018	By:	/s/ James R. Bosley, Jr.
		James R. Bosley, Jr. President & CEO

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE	FOR FURTHER INFORMATION CONTACT:
August 1, 2018
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 $1.36 PER SHARE FOR THE SIX MONTHS ENDED JUNE 30, 2018

HAMPSTEAD, MARYLAND (August 1, 2018) – 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, 2018 was $2,267,183, or $1.36 per common share, compared to $2,118,446, or $1.28 per common share, for the same period in 2017. The Company’s return on average equity during the six months ended June 30, 2018 was 10.58% compared to 10.75% during the same period in 2017. The Company’s return on average assets was 1.11% in 2018 compared to 1.09% in 2017.

Net interest income for the six months ended June 30, 2018 was $226,537 higher than the same period last year due to a $22 million increase in average interest earning assets, offset by a slight decline in the taxable equivalent net yield on interest earning assets to 4.44% in 2018 from 4.46% in 2017. The net yield continues to decline as deposit rates have risen more quickly than yields on loans and investments. Noninterest income decreased by $193,171 primarily as a result of $157,055 lower gain on the sale of an SBA loans, a decrease of $17,272 in service charges, and a $11,479 increase in the unrealized loss on the investment in an equity security. Noninterest expense was $179,915 higher in the six months ended June 30, 2018 when compared to the same period last year due to usual salary increases and higher employee benefit costs. Income taxes declined by $295,286 during the first half of 2018 when compared to the first half of 2017 due to the lower federal tax rate as a result of the Tax Cuts and Jobs Act enacted in December 2017.

Net income for the three months ended June 30, 2018 was $1,145,247, or $0.69 per common share, compared to $1,134,889, or $0.69 per common share, for the same period in 2017.

Total assets of $412 million as of June 30, 2018 increased from $403 million at December 31, 2017. Loans increased to $344 million at June 30, 2018 compared to $333 million at December 31, 2017, an increase of 3.4%. Deposits increased to $340 million at June 30, 2018 compared to $320 million at December 31, 2017. The book value of the common stock of Farmers and Merchants Bancshares, Inc. was $25.85 per share at June 30, 2018, compared to $25.06 per share at December 31, 2017.

James R. Bosley, Jr., President and CEO, commented “We continued our consistent performance in the second quarter with steady loan growth and increased net income despite rising funding costs and downward pressure on our net interest margin.”

About the Company

Farmers and Merchants Bancshares, Inc. is a registered bank holding company and the parent of Farmers and Merchants Bank. Farmers and Merchants Bank was chartered in Maryland in 1919, and is currently celebrating over 98 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 and Route 795 corridors from Owings Mills, Maryland to the Pennsylvania State line. The main office is located in Upperco, Maryland, with seven additional branches in Owings Mills, Hampstead, Greenmount, Reisterstown, and Westminster. Certain broker-dealers make a market in the common stock of Farmers and Merchants Bancshares, Inc., and trades are reported through NASDAQ’s Over-The-Counter Bulletin Board under the symbol “FMFG.OB.

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

	June 30,			December 31,
	2018			2017
	(Unaudited)
Assets
Cash and due from banks	$	6,564,122		$	6,235,186
Federal funds sold and other interest-bearing deposits		1,011,658			1,002,199
Cash and cash equivalents		7,575,780			7,237,385
Certificates of deposit in other banks		342,000			100,000
Securities available for sale		24,755,317			27,929,510
Securities held to maturity		18,215,244			18,204,182
Equity security at fair value		497,883			503,881
Federal Home Loan Bank stock, at cost		682,100			1,063,600
Mortgage loans held for sale		1,265,165			327,700
Loans, less allowance for loan losses of $2,731,955 and $2,458,911		343,874,046			332,533,706
Premises and equipment		5,176,739			5,206,271
Accrued interest receivable		1,038,809			1,020,256
Deferred income taxes		1,113,451			998,032
Other real estate owned		265,500			265,500
Bank owned life insurance		6,971,984			6,891,590
Other assets		649,327			622,856
	$	412,423,345		$	402,904,469
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing	$	62,921,659		$	64,403,133
Interest-bearing		277,354,227			255,393,291
Total deposits		340,275,886			319,796,424
Securities sold under repurchase agreements		18,521,862			21,768,507
Federal Home Loan Bank of Atlanta advances		7,500,000			17,000,000
Accrued interest payable		262,413			180,620
Other liabilities		2,551,252			2,359,986
		369,111,413			361,105,537
Stockholders' equity
Common stock, par value $.01 per share, authorized 5,000,000 shares; issued and outstanding 1,675,201 shares in 2018 and 1,667,813 shares in 2017		16,752			16,678
Additional paid-in capital		27,086,704			26,869,796
Retained earnings		16,896,247			15,306,625
Accumulated other comprehensive income		(687,771	)		(394,167	)
		43,311,932			41,798,932
	$	412,423,345		$	402,904,469

Farmers and Merchants Bancshares, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Three Months Ended June 30				Six Month Ended June 30
	2018		2017		2018		2017
Interest income
Loans, including fees	$	4,048,984	$	3,765,062	$	7,982,139	$	7,381,230
Investment securities - taxable		149,998		173,807		304,858		369,552
Investment securities - tax exempt		142,799		154,853		285,562		302,107
Federal funds sold and other interest earning assets		43,725		28,038		70,693		45,483
Total interest income		4,385,506		4,121,760		8,643,252		8,098,372
Interest expense
Deposits		499,916		332,879		938,326		643,684
Securities sold under repurchase agreements		35,012		37,772		69,401		84,287
Federal Home Loan Bank advances and other borrowings		45,985		41,967		108,947		70,360
Total interest expense		580,913		412,618		1,116,674		798,331
Net interest income		3,804,593		3,709,142		7,526,578		7,300,041
Provision for loan losses		75,000		75,000		125,000		125,000
Net interest income after provision for loan losses		3,729,593		3,634,142		7,401,578		7,175,041
Noninterest income
Service charges on deposit accounts		173,888		176,110		335,728		353,000
Mortgage banking income		60,468		50,952		114,661		108,733
Bank owned life insurance income		40,489		43,328		80,394		86,244
Gain on sale of loans		-		217,563		60,508		217,563
Other fees and commissions		15,651		33,785		40,320		59,242
Total noninterest income		290,496		521,738		631,611		824,782
Noninterest expense
Salaries		1,264,702		1,232,977		2,548,212		2,391,872
Employee benefits		322,568		323,626		690,022		679,167
Occupancy		189,156		167,618		366,689		351,421
Furniture and equipment		165,392		169,887		327,008		334,656
Other		687,062		680,879		1,326,239		1,321,139
Total noninterest expense		2,628,880		2,574,987		5,258,170		5,078,255
Income before income taxes		1,391,209		1,580,893		2,775,019		2,921,568
Income taxes		245,962		446,004		507,836		803,122
Net income	$	1,145,247	$	1,134,889	$	2,267,183	$	2,118,446
Earnings per share - basic and diluted	$	0.69	$	0.69	$	1.36	$	1.28