Farmers & Merchants Bancshares, Inc. (FMFG)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 EPS was $0.37 on net income of $1.165M; net interest income rose to $5.495M on higher earning-asset yields and balances, while higher FDIC premiums and occupancy/equipment costs lifted noninterest expense to $4.498M .
• Deposits fell $23.2M sequentially to $735.6M, cash/cash equivalents declined $42.0M as the bank funded $17.1M of net loan growth and repaid $5.0M of FHLB borrowings; liquidity remained strong at ~$337.8M .
• Management highlighted positive net interest margin gains following three Fed cuts over seven months and strong production from the new Towson Commercial Banking Office ($29M new commercial loans; $8M relationship deposits since inception) .
• Dividend timing was delayed in May pending SEC effectiveness of a new DRIP registration, then resumed June 9 with a declared $0.34/share payable July 25, 2025—a potential near-term stock reaction catalyst for income-focused holders .

What Went Well and What Went Wrong

What Went Well

• Loan growth remained robust: net loans increased $17.1M in the quarter to $600.0M; CEO emphasized Towson office contributions and expected loan/deposit growth in 2025 .
• Net interest income increased $321K YoY to $5.495M on a 35 bps higher earning-asset yield (5.03%) and $10.6M higher average earning assets, with average loans up $59.1M YoY .
• Liquidity strength was reiterated with ~$337.8M accessible across FHLB lines, unpledged securities, brokered deposits, and cash/ equivalents .

What Went Wrong

• Noninterest expense rose $386K YoY, driven by FDIC premiums (+$101K), occupancy/equipment (+$175K, including depreciation on Upperco renovations and Towson opening), ATM costs (+$33K), and legal/captive insurance costs (+$96K) .
• Deposits decreased $23.2M sequentially to $735.6M, contributing to a $42.0M decline in cash/cash equivalents while the bank funded loan growth and repaid $5.0M FHLB advances .
• Nonperforming assets increased to $3.789M (0.46% of total assets), and the allowance/loans ratio declined to 0.71% versus 0.80% a year earlier; management still reports strong asset quality (four non-accrual loans totaling $2.6M; two >30 days delinquent totaling $577K) .

Financial Results

EPS and Net Income vs Prior Periods

Revenue Composition (Operating Revenue = NII after provision + Noninterest income)

Margins and Efficiency (YoY)

Balance Sheet and Asset Quality

Note: Q3 2024 “Securities” references management narrative indicating ~$180M debt securities at 9/30/2024 (AFS + HTM) .

Guidance Changes

Earnings Call Themes & Trends

(Company did not furnish an earnings call transcript for Q1 2025; themes below track narrative across recent quarterly disclosures.)

Management Commentary

• “Our loan growth remains strong with a $17.1 million increase in net loans over the past quarter… Towson Commercial Banking Office… produced over $29 million in new commercial loans and $8 million in new relationship deposits… Federal Reserve’s three interest rate decreases over the past seven months have led to positive gains in our net interest margin… we… are well positioned to grow earnings in 2025.” — Gary A. Harris, President & CEO .
• “Core system conversion was completed in October 2024… while it increased our expenses in 2024, the new system will be a substantial digital upgrade… position the bank for future growth… efficiency gains and an enhanced customer experience… cuts should provide improvement in our net interest margin in 2025.” — Gary A. Harris .
• “Loan portfolio has grown at an annualized rate of 12.5%… core system conversion will occur on October 28, 2024… cuts… expected over the remainder of 2024 and 2025… too late in 2024 to have any significant impact… should provide for improvement in 2025.” — Gary A. Harris .

Q&A Highlights

• No Q1 2025 earnings call transcript was furnished; the company held its Annual Meeting on April 29, providing a public presentation link for 2024 and Q1 2025 trends .
• Guidance clarifications were provided through press releases and 8-Ks; dividend timing was specifically addressed relative to the new DRIP registration .

Estimates Context

• S&P Global consensus: No EPS or revenue consensus available for Q1 2025; therefore, no beat/miss determination against Street estimates can be made for EPS or revenue*.
• Actual “operating revenue” calculation from company disclosures indicates $5.979M in Q1 2025; absent consensus, investors should benchmark internally versus prior periods *.

Values retrieved from S&P Global.*

Key Takeaways for Investors

• Margin tailwinds: Net yield on interest-earning assets improved to 2.81% (from 2.69% YoY), with management citing positive NIM gains following three Fed cuts—supporting 2025 earnings momentum .
• Growth execution: Towson office is scaling ($29M loans; $8M deposits since inception), contributing to $17.1M net loan growth in Q1; watch for continued commercial production .
• Balance sheet shifts: Sequential deposit decline (-$23.2M) and cash drawdown (-$42.0M) funded loan growth and FHLB repayment; liquidity remained robust (~$337.8M), mitigating funding risk .
• Cost pressures: FDIC premiums and occupancy/equipment costs elevated the efficiency ratio to 75.23%; monitor normalization post core conversion ramp and vendor cost resets .
• Credit quality: NPA rose to $3.789M (0.46% of assets), but non-accruals remain modest (four loans, $2.6M) and allowance coverage is stable (0.71% of loans) .
• Capital and book value: Book value per share increased to $18.44 despite $15.6M net unrealized AFS losses; regulatory capital unaffected by AOCI election—rate sensitivity remains a valuation variable .
• Shareholder returns: Dividend resumed at $0.34/share (June declaration), with a new DRIP pending SEC effectiveness—could broaden participation and support capital flexibility .