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Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2018
Accounting Policies [Abstract]  
Consolidation, Policy [Policy Text Block]
Principles of consolidation
The consolidated financial statements include the accounts of Farmers and Merchants Bancshares, Inc. and its wholly owned subsidiaries, Farmers and Merchants Bank (the “Bank”), and Series Protected Cell FCB-
4
(the “Insurance Subsidiary”), and
one
subsidiary of the Bank, Reliable Community Financial Services, Inc. (collectively the “Company”, “we”, “us”, or “our”). The Insurance Subsidiary is a series investment,
100%
owned by the Company, in First Community Bankers Insurance Co., LLC, a Tennessee “series” limited liability company and licensed property and casualty insurance company. Intercompany balances and transactions have been eliminated.
Business Description, Policy [Policy Text Block]
Business
Farmers and Merchants Bank provides banking services to individuals and businesses located in Baltimore County, Maryland, Carroll County, Maryland and surrounding areas of northern Maryland. The Insurance Subsidiary is a captive insurance entity that provides insurance coverage for Farmers and Merchants Bank. Reliable Community Financial Services, Inc. is licensed to provide a wide range of investment and insurance products to its customers, but is inactive.
Reclassification, Policy [Policy Text Block]
Reclassifications
Certain reclassifications have been made to the
2017
financial statements to conform to the current year presentation. These reclassifications had
no
effect on net income.
Cash and Cash Equivalents, Policy [Policy Text Block]
Cash and cash equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, money market funds, and federal funds sold. Generally, federal funds are purchased and sold for
one
-day periods.
Comprehensive Income, Policy [Policy Text Block]
Comprehensive income
Comprehensive income includes net income and the unrealized gains or losses on investment securities available for sale, net of income taxes.
Investment, Policy [Policy Text Block]
Investment securities
As securities are purchased, management determines if the securities should be classified as held to maturity or available for sale. Securities which management has the intent and ability to hold to maturity are recorded at amortized cost, which is cost adjusted for amortization of premiums and accretion of discounts. Discounts are accreted through maturity. Premiums are amortized through the earliest call date. Securities held to meet liquidity needs or which
may
be sold before maturity are classified as available for sale and carried at fair value with unrealized gains and losses included in stockholders' equity on an after-tax basis. Gains and losses on disposal are determined using the specific-identification method. The Company amortizes premiums and accretes discounts using the interest method.
Equity Securities, Policy [Policy Text Block]
Equity security at fair value
On
January 1, 2018,
the Company adopted the new accounting standard for financial instruments, which requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. The adoption of this guidance resulted in a
$10,416
decrease to retained earnings and a
$10,416
increase to accumulated other comprehensive loss during the year ended
December 31, 2018.
Federal Home Loan Bank stocks [Policy Text Block]
Federal Home Loan Bank stock
As a member of the Federal Home Loan Bank of Atlanta (the “FHLB”), the Bank is required to purchase FHLB stock in an amount that is based on the Bank’s total assets. Additional stock is purchased and redeemed based on the outstanding FHLB advances to the Bank. The stock is recorded at cost on the balance sheet. 
Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]
Loans and allowance for loan losses
Loans are stated at the current amount of unpaid principal, adjusted for deferred origination costs, deferred origination fees, and the allowance for loan losses. Interest on loans is accrued based on the principal amounts outstanding. Origination fees and costs are amortized to income over the terms of loans.
 
Past due status is based on the contractual terms of the loan. Management
may
make an exception to reporting a loan as past due, if the past due status is solely due to the loan being past maturity, the Company intends to extend the loan, and the borrower is making principal and interest payments in accordance with the terms of the matured note. The accrual of interest is discontinued when any portion of the principal or interest is
90
days past due and collateral is insufficient to discharge the debt in full. If collection of principal is evaluated as doubtful, all payments are applied to principal. Loans are considered impaired when, based on current information, management considers it unlikely that the collection of principal and interest payments will be made according to contractual terms. Generally, loans are
not
reviewed for impairment until the accrual of interest has been discontinued or the loans are included on the watch list.
 
The allowance for loan losses represents an amount which, in management’s judgment, will be adequate to absorb probable losses on existing loans and other extensions of credit that
may
become uncollectible. The Company’s allowance for loan losses consists of
three
elements: (i) specific valuation allowances determined based on probable losses on impaired loans; (ii) historical valuation allowances determined based on historical loan loss experience for impaired loans with similar characteristics; and (iii) adjustments to the historical valuation allowances based on general economic conditions and other qualitative risk factors both internal and external to the Company.
 
The allowances established for probable losses on impaired loans are based on a regular analysis and evaluation of problem loans. Management maintains a watch list of problem loans. Loans are classified based on an internal credit risk grading process that evaluates, among other things: (i) the obligor's ability to repay; (ii) the underlying collateral, if any; (iii) the economic environment; and (iv) for commercial borrowers, the industry in which the borrower operates. Specific valuation allowances are determined when the collateral value, if the loan is collateral dependent, or the discounted cash flows of the impaired loan is lower than the carrying value.
 
Historical valuation allowances are calculated based on the historical loss experience of specific types of loans. The Company calculates historical loss ratios for pools of similar loans with similar characteristics based on the proportion of actual charge-offs experienced to the total population of loans in the pool over the prior
eight
to
twenty
quarters. As of
December 31, 2018
and
2017,
management used a
twenty
quarter period for the historical loss ratio. The historical loss ratios are updated quarterly based on actual charge-off experience. A historical valuation allowance is established for each pool of similar loans based upon the product of the historical loss ratio and the total dollar amount of the loans in the pool.
 
Adjustments to the historical valuation allowances are based on general economic conditions and other qualitative risk factors both internal and external to the Company. In general, such adjustments are determined by evaluating, among other things: (i) the impact of economic conditions on the portfolio; (ii) changes in asset quality, including delinquency trends; (iii) the impact of changing interest rates on portfolio risk; (iv) changes in legislative and regulatory policy; (v) the composition and concentrations of credit; and (vi) the effectiveness of the internal loan review function as well as changes to policies and experience of loan personnel. Management evaluates these qualitative factors on a quarterly basis. Each factor could result in an adjustment that is positive, negative, or
no
impact.
 
Loan losses are charged to the allowance when management believes that collection is unlikely. Collections of loans previously charged off are added to the allowance at the time of recovery. 
Loans and Leases Receivable, Mortgage Banking Activities, Policy [Policy Text Block]
Mortgage l
oans held for sale
and mortgage banking income
Mortgage loans held for sale are carried at the lower of aggregate cost or fair value based on the current fair value of each outstanding loan. Sales of loans are recorded when the proceeds are received, with any gain or loss recorded in mortgage banking income.
 
The Company sells its mortgage loans to
third
party investors servicing released. Upon sale and delivery, loans are legally isolated from the Company and the Company has
no
ability to restrict or constrain the ability of
third
party investors to pledge or exchange the mortgage loans. The Company does
not
have the entitlement or ability to repurchase the mortgage loans or unilaterally cause
third
party investors to put the mortgage loans back to the Company.
Property, Plant and Equipment, Policy [Policy Text Block]
Premises and equipment
Land is carried at cost. Premises and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation on buildings and equipment is computed over the estimated useful lives of the assets using the straight-line method. Leasehold improvements are amortized using the straight-line method over the term of the lease or the estimated useful lives of the asset, whichever is shorter.
Real Estate Owned, Valuation Allowance, Policy [Policy Text Block]
Other real estate owned
Real estate acquired through foreclosure or by deed in lieu of foreclosure is recorded at the lower of cost or fair value less estimated costs to sell on the date acquired. Losses incurred at the time of acquisition of the property are charged to the allowance for loan losses. Subsequent reductions in the estimated value of the property are included with any gains or losses on sale in noninterest income.
Bank Owned Life Insurance, Policy [Policy Text Block]
Bank owned life insurance
The Company has purchased life insurance policies on certain key executives. Company owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.
Revenue from Contract with Customer [Policy Text Block]
Revenue Recognition
On
January 1, 2018,
the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”)
2014
-
09
Revenue from Contracts with Customers and all subsequent amendments to the standard which (i) creates a single framework for recognizing revenue from contracts with customers that fall within its scope and (ii) revises when it is appropriate to recognize a gain (loss) from the transfer of nonfinancial assets, such as other real estate owned. The majority of the Company’s revenues come from interest income and other sources, including loans and securities, that are outside the scope of the standard. The Company’s services that fall within the scope of standard are presented within noninterest revenue and are recognized as revenue as the Company satisfies its obligation to the customer. Services within the scope of the standard include service charges on deposits, interchange income, and the sale of other real estate owned. The implementation of the standard had
no
significant impact on our financial statements.
Income Tax, Policy [Policy Text Block]
Income taxes
The provision for income taxes includes income taxes payable for the current year and deferred income taxes. Deferred tax assets and liabilities are determined based on the difference between the financial statement bases and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
 
A tax position is recognized as a benefit only if it is “more likely than
not”
that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than
50%
likely of being realized on examination. For tax positions
not
meeting the “more likely than
not”
test,
no
tax benefit is recorded. 
Earnings Per Share, Policy [Policy Text Block]
Per share data
Earnings per share are determined by dividing net income by the weighted average number of shares of common stock outstanding, giving retroactive effect to any stock dividends. Weighted average shares were
1,671,789
and
1,658,384
for
2018
and
2017,
respectively. Diluted earnings per share is derived by dividing net income available by the weighted-average number of shares outstanding, adjusted for the dilutive effect of outstanding common stock equivalents. There are
no
potentially dilutive stock equivalents outstanding at
December 31, 2018
or
2017.
Subsequent Events, Policy [Policy Text Block]
Subsequent events
The Company has evaluated events and transactions occurring subsequent to the statement of financial condition date of
December 31, 2018
for items that should potentially be recognized or disclosed in these financial statements as prescribed by FASB Accounting Standards Codification Topic
855,
Subsequent Events.