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Farmers & Merchants Bancshares, Inc. (FMFG)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered higher profitability: net income of $1.706M ($0.53/share) vs $1.199M ($0.38) in Q2 and $1.123M ($0.36) in Q3 2024, driven by net interest margin expansion and stable funding costs .
  • Net interest income improved to $6.353M with efficiency ratio improving to 67.0% (from 73.4% in Q2), while NIM rose to 3.15% (from 3.03% in Q2 and 2.62% YoY) .
  • Balance sheet mix shifted: deposits declined YTD while FHLB advances and sub debt rose; the company used FHLB to retire $40M of maturing brokered CDs and issued $12.5M of subordinated debt to refinance a ~$10M term loan and bolster capital .
  • Asset quality commentary remained constructive (zero non‑accrual loans at 9/30), though reported nonperforming assets differ between documents ($2.775M in the 8‑K exhibit vs $4.049M in GlobeNewswire) and warrant clarification .
  • Potential stock catalysts: continued NIM expansion as assets reprice, Towson office momentum (>$44M deposits), and capital actions that reduce funding costs and support growth .

What Went Well and What Went Wrong

  • What Went Well

    • Net interest margin expanded to 3.15% with management citing lower rates, asset repricing, and proactive refinancing of funding, lifting earnings power .
    • Sequential and YoY profit growth: Q3 net income of $1.706M ($0.53) vs $1.199M ($0.38) in Q2 and $1.123M ($0.36) a year ago, alongside a better efficiency ratio (67.0%) .
    • Towson Commercial Banking office outperformed expectations: >$44M in deposits by quarter‑end with strong loan growth supporting production .

  • What Went Wrong

    • Provision for credit losses increased to $327K in Q3 (nine‑month provision $595K) tied to foreclosed loans—an earnings headwind vs 2024 when provision was nil .
    • Funding mix tightened: deposits declined to $734.1M vs $758.8M YE’24; FHLB advances rose to $50.2M and total long‑term/FHLB/FRB borrowings to $62.2M to retire $40M brokered CDs and refinance holding company debt .
    • Reported NPAs inconsistent across releases ($2.775M vs $4.049M), creating uncertainty in external comparisons despite management’s “zero non‑accrual loans” comment .

Financial Results

  • Quarterly P&L (USD thousands, except per‑share)
MetricQ3 2024Q1 2025Q2 2025Q3 2025
Total interest income$9,847 $9,886 $10,293 $10,959
Total interest expense$4,762 $4,391 $4,302 $4,606
Net interest income$5,085 $5,495 $5,991 $6,353
Provision for credit losses$0 $30 $238 $327
Noninterest income$451 $514 $456 $551
Noninterest expense$4,071 $4,498 $4,730 $4,409
Pre‑tax income$1,465 $1,481 $1,479 $2,168
Net income$1,123 $1,165 $1,199 $1,706
EPS (basic/diluted)$0.36 $0.37 $0.38 $0.53
  • Margins and Efficiency
MetricQ1 2025Q2 2025Q3 2025
Net yield on interest‑earning assets (NIM)2.81% 3.03% 3.15%
Efficiency ratio75.23% 73.37% 67.04%
Return on average assets (ROA)0.57% 0.58% 0.80%
Return on average equity (ROE)8.22% 8.15% 11.23%
Tier 1 leverage ratio9.48% 9.51% 9.29%
Book value per share$18.44 $18.97 $19.72
  • Balance Sheet and Credit KPIs (period‑end, USD thousands unless noted)
KPIQ1 2025Q2 2025Q3 2025
Total assets$817,558 $842,218 $869,632
Gross loans$604,352 $619,702 $626,714
Deposits$735,598 $748,898 $734,096
Cash & cash equivalents$22,697 $31,283 $52,187
Securities$145,569 $142,762 $142,266
Long‑term debt, FRB & FHLB borrowings$10,858 (“Borrowings”) $20,388 $62,224
Stockholders’ equity$58,548 $60,246 $63,163
Nonperforming assets (8‑K exhibit)$3,789 $3,028 $2,775
Nonperforming assets (press release)——$4,049
ACL / total loans0.71% 0.68% 0.68%

  • Additional qualitative balance sheet details: AFS portfolio unrealized loss (AOCI) was ~$13.0M net of tax at 9/30; portfolio composition: 62% agency MBS, 20% investment‑grade non‑agency MBS, 14% IG corporate/muni, 4% community bank sub debt; management does not expect credit losses and elected to exclude AFS swings from regulatory capital .

  • Management commentary highlights: “zero non‑accrual loans” at 9/30; net yield expansion aided by rate declines and asset repricing; Towson office deposits >$44M; focus on cost control and income growth .

  • Segment breakdown: not applicable—no reportable operating segments disclosed in the quarter’s materials.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal financial guidance (revenue/margins/OpEx)Q4 2025+Not providedNot providedMaintained (no guidance)
Dividend per shareQ3 2025 vs Q2 2025$0.00 (Q2 2025) $0.34 (Q3 2025) Raised/Resumed

Note: No explicit forward guidance ranges were issued for earnings drivers (NIM, loan growth, OpEx, tax, etc.) in the Q3 materials .

Earnings Call Themes & Trends

No earnings call transcript was available; themes reflect management commentary in the Q1–Q3 press releases.

TopicPrevious Mentions (Q‑2 and Q‑1)Current Period (Q3 2025)Trend
Net interest margin (NIM) and yieldsQ1: NIM tailwind from higher asset yields; Q2: NIM continued to grow to 3.03% as loan yields rose and cost of funds moderated .NIM 3.15%; management cites lower rates, repricing, and refinancing costlier funding .Improving
Loan growthQ1: +$17.1M net QoQ; Towson opened in 2024 supporting growth . Q2: +$32.5M net 1H’25; “strong” production .Net loan growth >$39.5M YTD with continued robust production .Strong/continuing
Funding mix and deposit trendsQ1: Deposits down to $735.6M; liquidity sources ~$337.8M . Q2: Deposits $748.9M; borrowings $20.4M .Deposits $734.1M; FHLB $50.2M; used to retire $40M brokered CDs; sub debt $12.5M issued .Mix shifting to wholesale/sub debt
Asset qualityQ1: Few delinquencies; NPAs $3.789M; ACL/loans 0.71% . Q2: Asset quality remains high; NPAs $3.028M; ACL/loans 0.68% .CEO: zero non‑accrual loans; NPAs reported variably ($2.775M vs $4.049M) .Mixed signals (quality solid, reported NPAs inconsistent)
Capital & AOCIQ1: BVPS $18.44; AFS unrealized loss $15.6M net of tax; excluded from regulatory capital . Q2: BVPS $18.97; AFS unrealized loss $15.1M .BVPS $19.72; AFS unrealized loss ~$13.0M net of tax; comp as disclosed .Improving BVPS; AOCI less negative
Regional expansion (Towson)Q1: Towson contributed $29M loans, $8M deposits since launch . Q2: “Well positioned” heading into H2; continued momentum .Deposits >$44M with strong loan growth; exceeding expectations .Positive

Management Commentary

  • Strategic focus: “We have strategically taken advantage of the lower interest rates by exercising call options on certain funding sources and replacing them with lower cost funds… Investments made over the past two years in talent and infrastructure are beginning to yield positive returns, positioning us well for continued growth.” — Gary A. Harris, President & CEO .
  • Growth and asset quality: “Loan production is robust with over $39.5 million in net loan growth through September 30, 2025. Our asset quality remains strong with zero non‑accrual loans as of September 30, 2025.” .
  • Market footprint: Towson Commercial Banking office “exceeded our expectations with total deposits over $44 million… coupled with strong loan growth.” .

Q&A Highlights

  • No Q3 2025 earnings call transcript was available; analysis relies on management commentary in press releases .

Estimates Context

  • Sell‑side coverage appears limited: S&P Global did not return consensus EPS or revenue estimates for Q3 2025, so beat/miss vs Street cannot be determined. Actual EPS was $0.53 and net interest/operating metrics are disclosed above from company filings .
  • Implication: With limited coverage, estimate revisions are unlikely near‑term; investors should track internal drivers (NIM trajectory, loan growth, funding costs) until broader coverage emerges.
  • Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Earnings momentum: Sequential and YoY EPS growth with NIM at 3.15% and efficiency ratio at 67% suggest improving core profitability as assets reprice and funding is optimized .
  • Funding actions de‑risked near‑term maturities: FHLB advances replaced $40M brokered CDs; $12.5M sub debt refinanced ~$10M term loan and added interest reserve/capital, supporting capacity to lend .
  • Asset quality tone constructive: management reports zero non‑accrual loans despite foreclosure‑related provisioning; monitor NPAs given conflicting totals across documents ($2.775M vs $4.049M) .
  • Capital and book value improving: BVPS rose to $19.72 while AOCI remains sizable but excluded from regulatory capital by election, limiting capital ratio volatility .
  • Growth engine: Towson office is a notable deposit/loan contributor (>$44M deposits), offering organic growth in a competitive market .
  • Watch list into Q4/FY: deposit trends (stability vs pricing), wholesale funding levels/cost, incremental NIM expansion, and pace of credit costs after recent foreclosures .

Appendix: Nine‑month context and structural drivers

  • YTD net income $4.069M ($1.28/share) vs $3.421M in 2024; NII +$2.4M YoY on wider net yield (2.98% vs 2.67%), higher asset yields (5.19% vs 4.86%), and stable interest‑bearing liability cost (2.70% vs 2.71%) .
  • YTD noninterest expense +$1.33M YoY (salaries/benefits, occupancy/equipment, higher FDIC assessments), partially offset by higher mortgage banking, BOLI, hedge gains, and fee income .

Disclosures and discrepancies

  • NPAs are reported as $2.775M in the 8‑K exhibit versus $4.049M in the GlobeNewswire press release for Q3 2025; investors should seek clarification in subsequent filings .
  • AFS portfolio unrealized losses (AOCI) do not affect regulatory capital due to the Bank’s longstanding capital calculation election .

Footnote:
*Values retrieved from S&P Global.