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Farmers & Merchants Bancshares, Inc. (FMFG)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered modest YoY improvement: net income rose to $1.20M and diluted EPS to $0.38 vs $1.08M and $0.35 in Q2 2024, supported by net interest margin expansion to 3.03% and higher earning-asset yields .
  • Net interest income increased to $5.99M (vs $5.13M in Q2 2024) while noninterest expense rose to $4.73M; provision for credit losses of $0.24M reflected a specific loan write-down earlier in 2025 .
  • Balance sheet mix improved with gross loans up to $619.7M and securities down to $142.8M; deposits were $748.9M with book value per share up to $18.97 .
  • Capital return resumed: the Board declared a $0.34 cash dividend payable July 25, 2025; FMFG also advanced its 2025 DRIP registration and briefly delayed its semi-annual dividend to align with DRIP onboarding .
  • No earnings call transcript was available for Q2; consensus estimate coverage via S&P Global was unavailable for EPS and revenue, limiting beat/miss analysis (values retrieved from S&P Global).

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expanded to 3.03% (Q2 2025) from 2.71% (Q2 2024) and 2.81% (Q1 2025), aided by rising asset yields and moderating cost of funds; management noted “our net interest margin has continued to grow over the past year” .
  • Loan growth remained strong, with gross loans at $619.7M at period end and management highlighting “over $32.5 million in net loans being booked in the first half of 2025” .
  • Book value per share increased to $18.97, with tangible equity rising and management reiterating no expected credit losses in the AFS portfolio despite unrealized losses, given intent to hold to maturity and lack of credit deterioration .

What Went Wrong

  • Noninterest expense increased YoY (Q2 2025: $4.73M vs $4.12M in Q2 2024), reflecting higher salaries/benefits, occupancy/equipment and FDIC assessments; efficiency ratio (lower is better) deteriorated YoY vs 2023 levels .
  • Provision for credit losses of $0.24M in Q2 and $0.27M YTD was tied to a foreclosed loan write-down; nonperforming assets rose vs Q2 2024 (to $3.03M and 0.36% of assets) though improved from Q1 2025 .
  • Deposits decreased YTD vs Dec-2024 ($748.9M vs $758.8M); deposit trends remain a watchpoint despite liquidity access and management emphasis on strong position .

Financial Results

Income Statement (Quarterly Comparison: oldest → newest)

MetricQ2 2024Q1 2025Q2 2025
Total Interest Income ($)$9,180,000 $9,886,000 $10,293,000
Total Interest Expense ($)$4,047,000 $4,391,000 $4,302,000
Net Interest Income ($)$5,133,000 $5,495,000 $5,991,000
Provision for Credit Losses ($)$0 $30,000 $238,000
Noninterest Income ($)$374,000 $514,000 $456,000
Noninterest Expense ($)$4,123,000 $4,498,000 $4,730,000
Pretax Income ($)$1,384,000 $1,481,000 $1,479,000
Net Income ($)$1,079,000 $1,165,000 $1,199,000
Diluted EPS ($)$0.35 $0.37 $0.38

Interest Income Breakdown (Quarterly)

ComponentQ2 2024Q1 2025Q2 2025
Loans incl. fees ($)$7,238,000 $8,366,000 $8,899,000
Investment Securities – Taxable ($)$1,592,000 $1,051,000 $1,070,000
Investment Securities – Tax Exempt ($)$138,000 $156,000 $153,000
Fed Funds & Other Interest-Earning Assets ($)$212,000 $313,000 $171,000

Key Profitability Ratios (Quarterly)

RatioQ2 2024Q1 2025Q2 2025
ROAA (%)0.55% 0.57% 0.58%
ROAE (%)8.23% 8.22% 8.15%
Net Yield on Interest-Earning Assets (NIM) (%)2.71% 2.81% 3.03%
Efficiency Ratio (%)74.86% 75.23% 73.37%
Tier 1 Capital Leverage Ratio (%)9.58% 9.48% 9.51%

Balance Sheet and Asset Quality (At Period End)

MetricQ2 2024Q1 2025Q2 2025
Total Assets ($)$798,556,000 $817,558,000 $842,218,000
Gross Loans ($)$550,118,000 $604,352,000 $619,702,000
Securities ($)$177,661,000 $145,569,000 $142,762,000
Deposits ($)$651,209,000 $735,598,000 $748,898,000
Cash & Cash Equivalents ($)$24,510,000 $22,697,000 $31,283,000
Stockholders’ Equity ($)$54,543,000 $58,548,000 $60,246,000
Book Value per Share ($)$17.77 $18.44 $18.97
Nonperforming Assets ($)$1,646,000 $3,789,000 $3,028,000
NPA / Total Assets (%)0.21% 0.46% 0.36%
ACL / Total Loans (%)0.87% 0.71% 0.68%

Estimates vs Actuals (Q2 2025)

  • Consensus EPS and revenue estimates were unavailable via S&P Global for FMFG; analysis anchored to reported actuals (values retrieved from S&P Global).

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per ShareSemi-annual (Q2 timing)Timing delayed pending DRIP effectiveness Declared $0.34; payable Jul 25, 2025; record Jul 11, 2025 Maintained policy; resumed payout
Net Interest Margin Outlook2H 2025Expected improvement with rate cuts and repricing (qualitative) “NIM has continued to grow… positioned to improve” (qualitative) Maintained (positive bias)
Liquidity CapacityQ1–Q2 2025~$337.8M access at Mar 31, 2025 Liquidity position “remains strong” (qualitative) Maintained
Capital/EquityQ2 2025BVPS $17.77 at Dec-24 BVPS increased to $18.97; tangible equity $53.2M Improved
DRIP (Dividend Reinvestment Plan)Q2 2025S-1 filed; dividend declaration delayed to allow enrollment Proceeding post-declaration; no quantitative share guidance Implementing

Earnings Call Themes & Trends

(No Q2 2025 earnings call transcript available; themes derived from press releases.)

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Net Interest MarginFed cuts in late 2024 expected to aid NIM in 2025 ; Yield on earning assets up; NIM 2.81% in Q1 NIM 3.03%; rising asset yields, moderating cost of funds Improving
Loan Growth+$60M in 2024; Towson office contributing +$32.5M net loans booked in 1H 2025 Strong
Asset QualityMinimal non-accruals at YE 2024 ; NPA $3.79M in Q1 (0.46%) NPA $3.03M (0.36%); ACL/loans 0.68% Mixed but stable
Liquidity~$332M access at YE 2024 ; ~$337.8M at Mar 31, 2025 “Liquidity position remains strong” (qualitative) Stable
Technology/Core SystemsConversion completed Oct-2024; efficiency gains expected Ongoing security enhancements increased ATM/debit costs Implementation tail
Regulatory/FDIC AssessmentsHigher FDIC rates increased expense in 2024 FDIC assessment +$124k YoY (1H); higher rates persisted Headwind
Capital Return/DRIPDRIP S-1 filed; dividend declaration delayed $0.34 dividend declared; DRIP progressing Resumed capital return
Management/CFOCFO retirement effective Jun 30, 2025; successor identified Transition completed during Q2 timing window Transition executed

Management Commentary

  • “Our net interest margin has continued to grow over the past year… loans are renewing at higher interest rate levels… moderating cost of funds has improved our net interest income. Loan growth is strong with over $32.5 million in net loans being booked in the first half of 2025… liquidity position remains strong… we believe we are well positioned to improve on the gains we have made thus far.” — Gary A. Harris, President & CEO .
  • “Our loan growth remains strong… Towson Commercial Banking Office… produced over $29 million in new commercial loans and $8 million in new relationship deposits… asset quality remains high and our liquidity position remains strong.” — Gary A. Harris (Q1) .
  • “The 2024 [rate] cuts should provide for improvement in our net interest margin in 2025.” — Gary A. Harris (FY 2024) .

Q&A Highlights

  • No Q2 2025 earnings call transcript was available; the company held its Annual Meeting in April with a public presentation link, but no Q2 call Q&A was published through our sources .

Estimates Context

  • Wall Street consensus estimates (EPS, revenue) for FMFG were unavailable via S&P Global for Q2 2025; as a result, beat/miss analysis cannot be determined (values retrieved from S&P Global).
  • Reported actuals used in this recap come directly from company filings and press releases .

Key Takeaways for Investors

  • Net interest margin inflected positively to 3.03%, with further potential improvement as commercial real estate loans reprice and C&I mix diversifies; watch cost of funds trajectory and rate path .
  • Loan growth momentum continued; balance sheet shows loans up and securities down, reinforcing spread income and NIM tailwinds .
  • Asset quality is healthy though NPA remains above prior-year levels; credit costs normalized from zero last year to modest provisions in 1H 2025 tied to specific resolution .
  • Operating expenses remain elevated vs prior year due to salaries, occupancy/equipment, FDIC assessments, and security enhancements; efficiency ratio improvement is incremental but limited .
  • Capital return resumed with $0.34 dividend; DRIP implementation should support shareholder participation while maintaining flexibility .
  • Liquidity and capital are adequate, with BVPS rising to $18.97 and tangible equity higher; AFS unrealized losses are rate-driven and excluded from regulatory capital, mitigating capital volatility .
  • Near-term trading implications: NIM momentum and dividend resumption are positives; monitor deposit flows and expense run-rate. Medium-term thesis: earnings leverage from repricing loans and balance-sheet mix, tempered by regulatory cost pressures and credit normalization .