Farmers and Merchants Bancshares, Inc.

What they do

The Company is a Maryland corporation registered with the Federal Reserve as a bank holding company and financial holding company, formed to hold Farmers and Merchants Bank, a Maryland commercial bank chartered in 1919. The Bank takes deposits and makes commercial and consumer loans from a main office in Upperco, Maryland and six additional full-service branches, serving communities along the Route 30, 795, 140 and 26 corridors. The Company also holds a protected cell captive insurance investment (Series FCB-4 of First Community Bankers Insurance Co., LLC) and had total assets of approximately $872.0 million and stockholders' equity of approximately $64.7 million at December 31, 2025.

Revenue drivers

• Net interest income — The core earnings engine: interest on loans and securities less interest paid on deposits and borrowings. Net interest income rose $2.1 million for the six months ended June 30, 2026 versus the prior-year period, with a net yield on interest-earning assets of 3.27%.
• Commercial and consumer loan portfolio — Loans, net of allowance, were $636.5 million at June 30, 2026, up from $633.1 million at December 31, 2025. At December 31, 2025 the Bank reported $633.1 million in net loans, equal to 73% of total assets.
• Deposit franchise — Deposits were $725.1 million at June 30, 2026 versus $720.5 million at December 31, 2025. At December 31, 2025 the Bank had approximately 18,800 deposit accounts representing $720.5 million in deposits.
• Noninterest income — Includes mortgage banking revenue, service charges on deposit accounts, bank owned life insurance income, fees and commissions, and fair value adjustments on an equity security. Noninterest income decreased $15 thousand for the six months ended June 30, 2026 versus 2025.

Recent performance

Net income for the six months ended June 30, 2026 was $3.7 million, or $1.14 per share, versus $2.4 million, or $0.74 per share, in the same 2025 period; second-quarter 2026 net income was $1.9 million, or $0.58 per share. Annualized return on average assets was 0.87% for the first half of 2026 versus 0.58% in 2025, and annualized return on average equity was 11.23% versus 8.18%. Net interest income rose $2.1 million on a widening net yield of 3.27% versus 2.92%, with gross interest income up $2.0 million to $22.2 million. No provision for credit losses was recorded in the first half of 2026, compared with a $268 thousand provision in 2025 tied to a loan write-down that was ultimately foreclosed. Noninterest expense rose $306 thousand, primarily a $391 thousand increase in salaries and benefits from new staffing additions.

Strategy

The Company's stated primary role for the foreseeable future is acting as holding company of the Bank, with profitability dependent on the Bank's success and growth. Management has historically focused on organic growth but states it may consider acquisition and expansion opportunities in financial services. The Bank operates through its branch network in Carroll and Baltimore Counties, Maryland. The Insurance Subsidiary was formed to manage risk programs, retain insurance premiums within the affiliated group and realize captive insurance tax benefits. A June 16, 2026 8-K reported a material agreement and a modification of rights of security holders, details of which are not supported by the excerpts provided.

Risks

• Dependence on bank subsidiary — The Company's future profitability depends on the success and growth of the Bank, which is its primary business activity for the foreseeable future.
• Acquisition and expansion risk — Any future acquisition could bring increased capital needs, new regulatory and compliance requirements, integration and remediation of controls, and diversion of management time.
• Credit quality — The Bank held a $4.518 million allowance for credit losses on $641.1 million of gross loans at June 30, 2026, and took a $268 thousand provision in the first half of 2025 tied to a loan ultimately foreclosed.
• Concentrated market area — The Bank's lending and deposit base is concentrated in Carroll and Baltimore Counties, Maryland, leaving results sensitive to local economic and real estate conditions.

Outlook

The company reported higher first-half 2026 earnings with a wider net interest margin, driven by a higher yield on earning assets of 5.35% and a lower cost of interest-bearing liabilities of 2.57%. Management noted no provision for credit losses was recorded in the first half of 2026, and asset quality metrics reflected the prior-year foreclosed loan. The earnings release does not include forward guidance beyond the reported results and the factors behind them.