Farmers and Merchants Bancshares (FMFG) 8-K Results of Operations and Financial Condition

Exhibit 99.1

FOR IMMEDIATE RELEASE	FOR FURTHER INFORMATION CONTACT:
October 20, 2017
Farmers and Merchants Bancshares, Inc.	Contact:	Mr. James R. Bosley, Jr.
4510 Lower Beckleysville Rd, Suite H		President
Hampstead, Maryland 21074		(410) 374-1510, ext.104

FARMERS AND MERCHANTS BANCSHARES, INC. REPORTS EARNINGS OF $1.89 PER SHARE FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017

HAMPSTEAD, MARYLAND (October 20, 2017) –Farmers and Merchants Bancshares, Inc., the parent of Farmers and Merchants Bank (collectively the “Bank”), announced that net income for the nine months ended September 30, 2017 was $3,132,902, or $1.89 per common share, compared to $2,893,028, or $1.75 per common share, for the same period in 2016. Net interest income for the nine months ended September 30, 2017 was $707,182 higher than the same period in the prior year due to a $38,061,801 increase in average interest earning assets, offset by a decline in the net yield on interest earning assets to 3.95% in 2017 from 4.12% in 2016. The net yield continues to decline as deposit rates have begun to rise and loan pricing remains flat as a result of intense competition and the flattening yield curve. The provision for loan losses increased $350,000 for the nine months ended September 30, 2017 when compared to the same period in 2016 due to a larger loan portfolio and one delinquent loan that was identified as impaired.

Noninterest expense was $542,981 higher in the nine months ended September 30, 2017 when compared to the same period last year. The primary reasons for the increase were higher compensation and benefit costs as a result of several new positions and normal salary increases, higher legal and professional costs due to the SEC registration process and the implementation of the new dividend reinvestment plan as well as collection costs, and expenses of the captive insurance subsidiary. Income taxes declined by $420,498 during the nine months ended September 30, 2017 when compared to the same period of 2016 due to higher tax exempt revenue.

The Bank’s return on average equity during the nine months ended September 30, 2017 was 10.29% compared to 10.19% during the same period in 2016. The Bank’s return on average assets was 1.06% for the nine months ended September 30, 2017 compared to 1.08% for the same period of 2016.

Net income for the three months ended September 30, 2017 was $1,014,456, or $0.61 per common share, compared to $1,040,372, or $0.63 per common share, for the same period in 2016.

Total assets of $398 million at September 30, 2017 increased from $380 million at December 31, 2016. Loans increased to $320 million at September 30, 2017 compared to $295 million at December 31, 2016, an increase of 8%. Deposits increased to $314 million at September 30, 2017 compared to $303 million at December 31, 2016. The book value of the common stock of Farmers and Merchants Bancshares, Inc. was $25.14 per share at September 30, 2017, compared to $23.55 per share at December 31, 2016.

James R. Bosley, Jr., President and CEO, commented “We are very pleased with the growth of our loan portfolio in 2017 – an annualized rate of 11.1%. This growth continues to fuel very strong core earnings and we are on pace to have one of the most profitable years in Bank history despite continuing pressure on our interest margin and higher overhead costs.”

Farmers and Merchants Bank was chartered in Maryland in 1919, and is currently celebrating 98 years of service to the community. The Bank serves the deposit and financing needs of both consumers and businesses in Carroll and Baltimore Counties along the Route 30 and Route 795 corridors from Owings Mills, Maryland to the Pennsylvania State line. The main office is located in Upperco, Maryland, with six additional branches in Owings Mills, Hampstead, Greenmount, Reisterstown, and Westminster. Shares of the Farmers and Merchants Bancshares, Inc. common stock are traded through NASDAQ’s Over-The-Counter Bulletin Board under the symbol “FMFG.OB”.

Farmers and Merchants Bancshares, Inc. and Subsidiaries

Consolidated Balance Sheets

	September 30,		December 31,
	2017		2016
	(Unaudited)
Assets
Cash and due from banks	$	10,984,438	$	12,334,358
Federal funds sold and other interest-bearing deposits		992,209		978,557
Cash and cash equivalents		11,976,647		13,312,915
Certificate of deposit in other bank		100,000		100,000
Securities available for sale		30,154,317		34,385,939
Securities held to maturity		18,758,541		17,987,628
Federal Home Loan Bank stock, at cost		1,021,100		778,300
Mortgage loans held for sale		833,900		884,500
Loans, less allowance for loan losses of$2,716,514 and $2,363,086		319,849,043		295,286,572
Premises and equipment		5,227,031		5,449,678
Accrued interest receivable		923,035		956,963
Deferred income taxes		962,231		1,029,019
Other real estate owned		414,000		414,000
Bank owned life insurance		6,850,343		6,721,003
Other assets		885,715		2,524,842
	$	397,955,903	$	379,831,359

Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing	$	59,642,920		$	62,791,835
Interest-bearing		254,426,818			239,923,301
Total deposits		314,069,738			302,715,136
Securities sold under repurchase agreements		23,562,409			27,226,159
Federal Home Loan Bank of Atlanta advances		16,000,000			9,000,000
Accrued interest payable		189,214			141,903
Other liabilities		2,386,894			1,735,884
		356,208,255			340,819,082
Stockholders' equity
Common stock, par value $.01 per share,
authorized 5,000,000 shares; issued and outstanding
1,660,703 shares in 2017 and 1,656,390 in 2016		16,607			16,564
Additional paid-in capital		26,675,679			26,562,919
Retained earnings		15,233,137			12,713,099
Accumulated other comprehensive income		(177,775	)		(280,305	)
		41,747,648			39,012,277
	$	397,955,903		$	379,831,359

Farmers and Merchants Bancshares, Inc. and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Interest income
Loans, including fees	$	3,863,788	$	3,524,587	$	11,245,018	$	10,373,255
Investment securities - taxable		189,096		188,818		558,648		577,960
Investment securities - tax exempt		152,519		129,865		454,626		359,787
Federal funds sold and other interest earning assets		26,614		13,296		72,097		48,304
Total interest income		4,232,017		3,856,566		12,330,389		11,359,306
Interest expense
Deposits		357,200		280,173		1,000,884		805,722
Securities sold under repurchase agreements		37,208		35,791		121,495		96,690
Federal Home Loan Bank advances and other borrowings		48,397		24,135		118,757		74,823
Total interest expense		442,805		340,099		1,241,136		977,235
Net interest income		3,789,212		3,516,467		11,089,253		10,382,071
Provision for loan losses		225,000		-		350,000		-
Net interest income after provision for loan losses		3,564,212		3,516,467		10,739,253		10,382,071
Noninterest income
Service charges on deposit accounts		172,107		191,999		525,107		563,061
Mortgage banking income		76,916		185,806		185,649		347,943
Bank owned life insurance income		43,096		46,182		129,340		134,726
Gain on sale of loans		-		-		217,563		-
Other fees and commissions		20,873		24,461		80,115		86,869
Total noninterest income		312,992		448,448		1,137,774		1,132,599
Noninterest expense
Salaries		1,278,741		1,150,391		3,670,613		3,362,672
Employee benefits		317,231		290,996		996,398		925,670
Occupancy		152,157		155,945		503,578		486,552
Furniture and equipment		156,700		169,207		491,356		474,810
Other		594,879		586,066		1,916,018		1,785,278
Total noninterest expense		2,499,708		2,352,605		7,577,963		7,034,982
Income before income taxes		1,377,496		1,612,310		4,299,064		4,479,688
Income taxes		363,040		571,938		1,166,162		1,586,660
Net income	$	1,014,456	$	1,040,372	$	3,132,902	$	2,893,028
Earnings per share - basic and diluted	$	0.61	$	0.63	$	1.89	$	1.75