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Farmers & Merchants Bancshares, Inc. (FMFG)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 EPS was $0.27, down vs $0.36 in Q3 2024 and $0.46 in Q4 2023 as higher funding costs and elevated expenses weighed on profitability .
  • Net interest income (NII) improved sequentially to $5.44M in Q4 from $5.08M in Q3, while total interest income rose to $10.27M; interest expense also increased to $4.83M, keeping margins tight .
  • Management expects 2024 Fed cuts to support net interest margin improvement in 2025; BTFP borrowings ($54M) were fully repaid in December, ending the year with ~$332M of available liquidity .
  • Loan growth remained robust (+11.4% YoY to $583M), asset quality stayed strong (one non-accrual loan of $404K), and deposits finished at $759M (+$77.8M vs Sep 30), setting up a constructive 2025 NIM narrative despite 2024 earnings pressure .

What Went Well and What Went Wrong

  • What Went Well
    • Double‑digit loan growth: Loans increased 11.4% in 2024 (+$60M), supported by commercial production and footprint expansion (Towson office) .
    • Strong asset quality and reserve stability: One non‑accrual loan ($403,853) and one >30 days past due ($269,852) at year‑end; modest $150K 2024 provision after a $570K recovery in 2023 .
    • Liquidity and execution: ~$332M year‑end liquidity and full BTFP repayment in December; core system conversion completed in October to drive efficiency gains and enhanced customer experience .
  • What Went Wrong
    • Margin compression persisted: Net yield on interest‑earning assets fell to 2.68% in 2024 from 2.97% in 2023; efficiency ratio rose to 74.95% from 65.81% .
    • Funding cost headwinds: Cost of deposits and borrowings rose 102 bps YoY to 2.76% (despite late‑year cuts), pushing interest expense to $17.53M for 2024 (vs $9.91M) and pressuring earnings .
    • Higher operating expenses: Noninterest expense rose $1.79M YoY on core conversion, facilities, staffing, FDIC assessments, ATM and legal costs; Q4 EPS of $0.27 declined sequentially vs $0.36 in Q3 .

Financial Results

  • Quarterly P&L comparison
MetricQ4 2023Q3 2024Q4 2024
Total interest income ($)8,884,690 9,846,452 10,271,181
Interest expense ($)3,583,564 4,761,607 4,827,564
Net interest income ($)5,301,126 5,084,845 5,443,617
Provision (recovery) for credit losses ($)0 0 150,000
Noninterest income ($)422,610 451,020 423,052
Noninterest expense ($)3,952,896 4,071,223 4,622,805
Income before taxes ($)1,770,840 1,464,642 1,093,864
Net income ($)1,415,230 1,123,127 856,080
Diluted EPS ($)0.46 0.36 0.27
ROAA (quarter) (%)0.72 0.56 0.41
  • Full‑year trends
MetricFY 2023FY 2024
Net income ($)6,418,337 4,277,703
Diluted EPS ($)2.08 1.37
Net yield on interest‑earning assets (NIM) (%)2.97 2.68
Efficiency ratio (%)65.81 74.95
ROAA (%)0.86 0.53
ROAE (%)13.08 7.83
Dividends per share ($)0.66 0.67
Period‑end total assets ($)799,940,826 844,643,087
Period‑end deposits ($)680,962,851 758,806,728
Period‑end gross loans ($)528,166,501 587,978,965
  • KPIs and balance sheet (period‑end)
KPIDec 31, 2023Sep 30, 2024Dec 31, 2024
Total assets ($)799,940,826 817,530,981 844,643,087
Loans, net ($)523,308,044 571,562,379 582,993,314
Deposits ($)680,962,851 673,744,722 758,806,728
AFS securities ($)164,084,673 159,499,031 125,712,926
HTM securities ($)20,163,622 20,197,994 20,498,502
FRB advances ($)33,000,000 54,000,000 0
FHLB advances ($)5,000,000 5,000,000 5,000,000
Repurchase agreements ($)6,760,493 2,885,496 5,564,103
Long‑term debt ($)13,212,378 11,799,931 11,329,115
Stockholders’ equity ($)52,178,291 59,162,348 56,271,790
Liquidity available ($)—~332,000,000 ~332,000,000
Book value per share ($)16.74 18.81 17.77
  • Segment breakdown: Not applicable; the company reports as a community bank without separate operating segments in these materials .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net interest margin (NIM) outlookRemainder 2024 vs 2025“No significant improvement in NIM… remainder of 2024” (post‑Sep cut) “2024 cuts should provide for improvement in our NIM in 2025; additional cuts not expected until 2H 2025” Near‑term cautious; 2025 improvement signaled
Core system conversion2024 implementationConversion scheduled for Oct 28, 2024 Conversion completed in Oct 2024; expected efficiency gains and CX improvements Completed
Liquidity/BTFPQ4 2024BTFP borrowings $54M outstanding at 9/30/24; liquidity ~ $332M BTFP borrowings repaid in Dec 2024; liquidity ~ $332M at 12/31/24 Improved profile; reduced borrowings
DividendQ4 2024Prior quarterly dividend $0.33 (June 2024) $0.34 declared (payable Dec 17, 2024); 2024 annual $0.67 vs $0.66 in 2023 Raised

Earnings Call Themes & Trends

Note: No Q4 2024 earnings call transcript was available in our document catalog; themes are drawn from company press releases.

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
NIM / rate environmentQ2: No significant NIM improvement expected in 2024; cost of funds up with prior hikes . Q3: Same message post‑Sep cut; still no material 2024 improvement expected .2024 cuts should improve NIM in 2025; additional cuts likely in 2H25 .Turning constructive for 2025
Loan growth / mixEmphasis on C&I diversification; robust production; Towson office opened . Q3 loan growth +$49M YTD .2024 loan growth +$60M (+11.4% YoY); continued focus on C&I to add adjustable‑rate exposure .Strong growth; mix shifts to support NIM
Asset quality“Asset quality remains high” (Q2/Q3 messaging) .One non‑accrual ($403,853) and one >30 days past due ($269,852) at YE; minimal provision .Stable/strong
Liquidity / BTFPLiquidity ~$343M at 6/30; ~$332M at 9/30; BTFP $54M outstanding at 9/30 .BTFP fully repaid in December; liquidity ~$332M at 12/31 .Improved balance‑sheet flexibility
Technology / core platformConversion projected for Q4 (Oct 28) .Conversion completed in Oct; expected efficiency gains and better CX .Execution achieved
DepositsDecreased to $651M at 6/30 and $674M at 9/30 .Increased to $759M at 12/31 .Rebound in Q4

Management Commentary

  • “We are pleased that our loan portfolio grew $60 million, or 11.4%, during 2024, demonstrating that our investment in additional loan production staff and facilities is paying off. Our asset quality remains high and our liquidity position remains strong.”
  • “Our core system conversion was completed in October 2024… the new system will be a substantial digital upgrade that will position the bank for future growth, provide for significant efficiency gains and an enhanced customer experience.”
  • “The 2024 cuts should provide for improvement in our net interest margin in 2025.”

Q&A Highlights

  • No Q4 2024 earnings call transcript was available in our document catalog; therefore, no Q&A themes to report.

Estimates Context

  • We attempted to retrieve Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue but were unable to access estimates due to an S&P Global daily request limit during this session; consequently, we cannot provide vs‑consensus comparisons for Q4 2024 at this time. We will update when accessible.
  • Actuals (for reference):
MetricQ4 2024 Actual
Diluted EPS ($)0.27
Total interest income ($)10,271,181
Net interest income ($)5,443,617

Key Takeaways for Investors

  • 2024 earnings reset appears largely rate‑ and cost‑driven; with 2024 Fed cuts and adjustable‑rate C&I mix strategy, management sees NIM recovery potential in 2025 .
  • Sequential NII improvement in Q4 alongside deposit inflows (deposits +$85M vs 9/30 to $758.8M) provides a constructive base entering 2025 .
  • Balance sheet flexibility improved: $54M BTFP fully repaid in December; year‑end liquidity ~$332M supports funding stability and growth .
  • Asset quality remains a clear positive (minimal non‑accruals/late loans), limiting credit cost volatility into 2025 .
  • Operating expense normalization is a watch item post‑conversion; management cites efficiency gains from new core system as a 2025 lever .
  • Securities AFS unrealized losses (~$17M after tax) continue to depress book value but do not impact regulatory capital; intent to hold to maturity mitigates realized loss risk .
  • Dividend momentum intact ($0.34 in December; 2024 DPS $0.67 vs $0.66), signaling confidence despite 2024 profit pressure .

Citations:

  • Q4/FY 2024 press release and Form 8‑K with full financials and commentary
  • Q3 2024 press release and 8‑K
  • Q2 2024 press release and 8‑K
  • Dividend press release (Nov 19, 2024)