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|FOR IMMEDIATE RELEASE||FOR FURTHER INFORMATION CONTACT:|
|February 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 FOR 2017 OF $2.28 PER SHARE
HAMPSTEAD, MARYLAND (February 1, 2018) – Farmers and Merchants Bancshares, Inc. (the “Company”), the parent of Farmers and Merchants Bank (the “Bank”), announced that net income for the year ended December 31, 2017 was $3,789,241, or $2.28 per common share compared to $3,909,129, or $2.37 per common share in 2016. Net income for 2017 was significantly affected by $410,391, or $0.25 per common share in additional income tax expense recognized in the quarter ended December 31, 2017 as a result of the Tax Cuts and Jobs Act enacted in December 2017. While a permanent reduction of the federal corporate income tax rate from 34% to 21% will take effect in 2018, the enactment of the law during 2017 required the Company to revalue its net deferred tax asset in 2017. Without the additional tax expense, the Company’s net income would have been $4,199,632, or $2.53 per common share.
Return on average equity was 9.26% in 2017 compared to 10.26% in 2016. Return on average assets was 0.96% in 2017 compared to 1.08% in 2016. Excluding the additional tax expense noted above, the return on equity would have been 10.26% and the return on assets would have been 1.06%. Cash dividends paid to stockholders in 2017 increased 9% to $0.76 per common share from $0.70 per common share in 2016.
Net income before taxes in 2017 decreased $144,394 from the amount recorded in 2016 due to an increase in noninterest expense of $488,477, an increase in the provision for loan losses of $410,000, and a decrease in noninterest income of $128,103, offset by an increase in net interest income of $882,186.
The primary reasons for the increase in noninterest expense were higher compensation and benefit costs as a result of several new positions and normal salary increases, higher legal and professional costs due to the SEC registration process and the implementation of the new dividend reinvestment plan as well as delinquent loan collection costs, and expenses of the captive insurance subsidiary. The provision for loan losses increased due to a larger loan portfolio and a delinquent commercial real estate loan that management identified as impaired during 2017. The decrease in noninterest income was due primarily to decreases in mortgage banking income and service charges, and an increase in REO losses, offset by an increase in the gain on sale of loans. The increase in net interest income was due to an increase in average interest earning assets of $37 million, offset by a decline in the net yield of 17 basis points. The net yield continues to decline as deposit rates have begun to rise and loan pricing remains flat as a result of intense competition and the flattening yield curve.
Total assets at December 31, 2017 were $403 million, an increase of 6% from the $380 million recorded at December 31, 2016. The loan portfolio increased 13% to $333 million at December 31, 2017 from $295 million at December 31, 2016. Deposits increased 6% to $320 million at December 31, 2017 from $303 million at the end of 2016. The book value of the common stock of the Company was $25.06 per share at December 31, 2017, compared to $23.55 per share at the end of 2016.
James R. Bosley, Jr., President and CEO, commented "We are very pleased with our strong results for 2017, especially the 13% increase in the loan portfolio which, along with the lower federal income tax rate, has the Company positioned for a very successful 2018.”
The following information was filed by Farmers Merchants Bancshares, Inc. on Thursday, February 1, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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