Farmers and Merchants Bancshares (FMFG) 8-K Farmers and Merchants Bancshares, Inc. Reports Earnings for 2019 of $4,560,804 or $1.54 Per Share

Exhibit 99.1

FOR IMMEDIATE RELEASE	FOR FURTHER INFORMATION CONTACT:
January 23, 2020
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 FOR 2019 OF $4,560,804 OR $1.54 PER SHARE

HAMPSTEAD, MARYLAND (January 23, 2020) – Farmers and Merchants Bancshares, Inc. (the “Company”), the parent of Farmers and Merchants Bank (the “Bank”), announced that net income for the year ended December 31, 2019 was $4,560,804, or $1.54 per common share, compared to $4,712,676, or $1.61 per common share, in 2018. This was the second highest net income in the history of the Company and the Bank. The Company’s return on average equity during 2019 was 9.52% compared to 10.77% during 2018. The Company’s return on average assets during 2019 was 1.06% compared to 1.14% during 2018.

Net interest income for 2019 was $238,707 lower than 2018 due to a decline in the taxable equivalent net yield on interest earning assets to 3.67% in 2019 from 3.88% in 2018, offset by a $18.0 million increase in interest earning assets to $414.7 million for 2019 as compared to $396.7 million for 2018. Despite the recent Federal Reserve rate cuts, the net yield continues to decline as our cost of deposits and borrowings has increased 33 basis points to 1.15% for 2019 from 0.82% for 2018 while the yield on loans and investments has increased only 4 basis points to 4.55% for 2019 from 4.51% for 2018.

Noninterest income increased by $128,294 during 2019 when compared 2018 primarily as a result of a $125,943 increase in mortgage banking income and a $202,965 increase in bank owned life insurance income due to proceeds received from a policy, offset by a $86,491 decrease in the gain on the sale of SBA loans and a $154,800 write-down of other real estate owned (“OREO”) that was required by law due to the length of time that the OREO has been held. Noninterest expense was $543,334 higher during 2019 when compared 2018 due primarily to usual salary and benefit increases of $316,548, an increase in occupancy costs of $65,724, and an increase in other expenses of $178,849. Income taxes declined by $66,875 during 2019 when compared to 2018 due to lower income before taxes and a higher percentage of tax exempt revenue.

Net income for the three months ended December 31, 2019 was $1,060,786, or $0.36 per common share, compared to $1,136,805, or $0.39 per common share, for the same period in 2018. The decrease of $76,019 was due to a decrease in net interest income of $74,303, a decrease in noninterest income of $76,271, and an increase in noninterest expenses of $351,154, offset by a decrease in the provision for loan losses of $410,000 and a decrease in income taxes of $15,709.

Total assets increased 6% to $442 million at December 31, 2019 from $417 million at December 31, 2018. Loans increased 5% to $359 million at December 31, 2019 from $341 million at December 31, 2018. Investment in debt securities increased 25% to $56 million at December 31, 2019 from $45 million at December 31, 2018. Deposits increased 6% to $377 million at December 31, 2019 from $355 million at December 31, 2018. The book value of the common stock of Farmers and Merchants Bancshares, Inc. was $16.63 per share at December 31, 2019, compared to $15.41 per share at December 31, 2018.

James R. Bosley, Jr., President and CEO, commented “We are pleased to have such strong results during 2019 as we celebrated the Bank’s 100 year anniversary. In addition to the second highest net income in our history, we achieved solid growth in assets, loans, and deposits. As we end our 100 year celebration we would like to thank those who made it possible: our customers, shareholders, employees, and directors.”

About the Company

Farmers and Merchants Bancshares, Inc. is a financial holding company and the parent of Farmers and Merchants Bank. The Bank was chartered in Maryland in 1919, and is currently celebrating 100 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 seven additional branches in Owings Mills, Hampstead, Greenmount, Reisterstown, and Westminster. Certain broker-dealers make a market in the common stock of Farmers and Merchants Bancshares, Inc., and trades are reported through the OTC Markets Group’s Pink Market under the symbol “FMFG”.

Forward-Looking Statements

The statements contained herein that are not historical facts are forward-looking statements (as defined by the Private Securities Litigation Reform Act of 1995) based on management's current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. These statements are evidenced by terms such as “anticipate,” “estimate,” “should,” “will,” “expect,” “believe,” “intend,” and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the section of the periodic reports filed by Farmers and Merchants Bancshares, Inc. with the Securities and Exchange Commission entitled “Risk Factors”.

Farmers and Merchants Bancshares, Inc. and Subsidiaries

Consolidated Balance Sheets

	December 31,		December 31,
	2019		2018
	(Unaudited)
Assets
Cash and due from banks	$	6,664,307	$	11,480,608
Federal funds sold and other interest-bearing deposits		2,457,045		3,137,629
Cash and cash equivalents		9,121,352		14,618,237
Certificate of deposit in other bank		100,000		100,000
Securities available for sale		36,531,774		26,591,991
Securities held to maturity		19,510,018		18,127,067
Equity security at fair value		532,321		503,827
Federal Home Loan Bank stock, at cost		376,200		575,800
Mortgage loans held for sale		242,000		573,638
Loans, less allowance for loan losses of $2,593,715 and $2,509,334		359,382,843		340,900,635
Premises and equipment		5,036,851		5,075,310
Accrued interest receivable		1,019,540		990,529
Deferred income taxes		1,036,078		1,179,454
Other real estate owned		-		210,150
Bank owned life insurance		7,145,477		7,053,354
Other assets		2,180,644		657,885
	$	442,215,098	$	417,157,877
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing	$	60,659,015	$	62,717,520
Interest-bearing		315,954,299		291,995,483
Total deposits		376,613,314		354,713,003
Securities sold under repurchase agreements		10,958,118		11,012,000
Federal Home Loan Bank of Atlanta advances		-		3,000,000
Accrued interest payable		346,214		311,489
Other liabilities		4,843,936		2,726,678
		392,761,582		371,763,170
Stockholders' equity
Common stock, par value $.01 per share, authorized 5,000,000 shares; issued and outstanding 2,974,019 shares in 2019 and 1,682,997 shares in 2018		29,740		16,830
Additional paid-in capital		27,812,991		27,324,794
Retained earnings		21,568,161		18,621,382
Accumulated other comprehensive income		42,624		(568,299	)
		49,453,516		45,394,707
	$	442,215,098	$	417,157,877

Farmers and Merchants Bancshares, Inc. and Subsidiaries

Consolidated Statements of Income

	Three Months Ended December 31,					Year Ended December 31,
	2019			2018		2019			2018
	(Unaudited)			(Unaudited)		(Unaudited)
Interest income
Loans, including fees	$	4,312,265		$	4,229,789	$	16,894,657		$	16,401,554
Investment securities - taxable		238,075			160,302		869,457			610,951
Investment securities - tax exempt		149,030			142,474		580,384			570,529
Federal funds sold and other interest earning assets		76,964			67,326		357,840			185,299
Total interest income		4,776,334			4,599,891		18,702,338			17,768,333
Interest expense
Deposits		942,731			682,593		3,519,960			2,225,616
Securities sold under repurchase agreements		31,729			32,639		114,641			144,881
Federal Home Loan Bank advances and other borrowings		2,835			11,317		45,352			136,744
Total interest expense		977,295			726,549		3,679,953			2,507,241
Net interest income		3,799,039			3,873,342		15,022,385			15,261,092
Provision for loan losses		40,000			450,000		40,000			475,000
Net interest income after provision for loan losses		3,759,039			3,423,342		14,982,385			14,786,092
Noninterest income
Service charges on deposit accounts		168,923			174,260		663,675			670,653
Mortgage banking income		147,843			51,962		397,710			271,767
Bank owned life insurance income		42,888			40,490		364,729			161,764
Unrealized gain (loss) on equity security		(2,489	)		3,919		16,232			(11,429	)
Write down of other real estate owned		-			-		(210,150	)		(55,350	)
Gain on sale of SBA loans		-			162,201		139,535			226,026
Other fees and commissions		27,805			28,409		121,836			101,842
Total noninterest income		384,970			461,241		1,493,567			1,365,273
Noninterest expense
Salaries		1,478,611			1,301,900		5,472,609			5,194,871
Employee benefits		343,974			295,112		1,352,202			1,313,392
Occupancy		177,351			170,745		771,917			706,193
Furniture and equipment		154,272			156,377		614,543			632,330
Other		674,189			553,109		2,664,543			2,485,694
Total noninterest expense		2,828,397			2,477,243		10,875,814			10,332,480
Income before income taxes		1,315,612			1,407,340		5,600,138			5,818,885
Income taxes		254,826			270,535		1,039,334			1,106,209
Net income	$	1,060,786		$	1,136,805	$	4,560,804		$	4,712,676
Earnings per share - basic and diluted	$	0.36		$	0.39	$	1.54		$	1.61

Farmers and Merchants Bancshares, Inc.

Selected Consolidated Financial Data

	2019			2018			2017			2016			2015
	(unaudited)
OPERATING DATA
Interest income	$	18,702,338		$	17,768,333		$	16,594,803		$	15,351,497		$	14,705,401
Interest expense		3,679,953			2,507,241			1,707,240			1,346,120			1,189,646
Net interest income		15,022,385			15,261,092			14,887,563			14,005,377			13,515,755
Provision for loan losses		40,000			475,000			410,000			-			-
Net interest income after provision for loan losses		14,982,385			14,786,092			14,477,563			14,005,377			13,515,755
Noninterest income		1,493,567			1,365,273			1,337,094			1,465,197			1,986,260
Noninterest expense		10,875,814			10,332,480			10,023,102			9,534,625			8,703,588
Income before income taxes		5,600,138			5,818,885			5,791,555			5,935,949			6,798,427
Income taxes		1,039,334			1,106,209			2,002,314			2,026,820			2,530,205
Net income	$	4,560,804		$	4,712,676		$	3,789,241		$	3,909,129		$	4,268,222
PER SHARE DATA
Net income (Basic)	$	1.54		$	1.61		$	1.30		$	1.35		$	1.49
Dividends	$	0.51		$	0.47		$	0.43		$	0.40		$	0.37
Book value	$	16.63		$	15.41		$	14.32		$	13.46		$	12.57
KEY RATIOS
Return on average assets		1.06	%		1.14	%		0.96	%		1.08	%		1.29	%
Return on average equity		9.52	%		10.77	%		9.26	%		10.26	%		12.26	%
Net yield on interest-earning assets		3.67	%		3.88	%		4.04	%		4.21	%		4.40	%
Efficiency ratio		65.85	%		62.15	%		61.78	%		61.63	%		56.14	%
Average equity to average assets		11.10	%		10.60	%		10.32	%		10.56	%		10.50	%
Dividend payout ratio		33.12	%		29.43	%		33.33	%		29.58	%		24.52	%
AT PERIOD END
Total assets	$	442,215,098		$	417,157,877		$	402,904,469		$	379,831,359		$	345,309,996
Gross loans		362,494,703			343,940,842			335,595,916			298,126,919			271,263,338
Cash and cash equivalents		9,121,352			14,618,237			7,237,385			13,312,915			20,192,839
Debt securities		56,041,792			44,719,058			46,133,692			52,373,567			40,248,651
Deposits		376,613,314			354,713,003			319,796,424			302,715,136			275,964,737
Borrowings		10,958,118			14,012,000			38,768,507			36,226,159			31,490,619
Stockholders' equity		49,453,516			45,394,707			41,798,932			39,012,277			36,223,361
SELECTED AVERAGE BALANCES
Total assets	$	431,595,287		$	412,586,954		$	396,454,271		$	361,005,005		$	331,522,302
Gross loans		344,793,736			343,573,784			319,825,707			284,804,975			273,626,511
Cash and cash equivalents		20,124,328			12,054,442			12,428,778			13,271,319			15,227,040
Debt securities		53,049,768			44,471,457			50,251,527			48,301,835			31,041,271
Deposits		367,570,825			339,624,630			315,159,559			284,921,811			265,634,314
Borrowings		11,975,017			26,524,352			38,627,588			36,175,989			29,363,070
Stockholders' equity		47,927,778			43,748,434			40,926,674			38,115,746			34,810,159
ASSET QUALITY
Nonperforming assets	$	-		$	1,209,468		$	2,657,702		$	1,166,889		$	1,429,313
Nonperforming assets/total assets		0.00	%		0.29	%		0.66	%		0.31	%		0.41	%
Allowance for loan losses/total loans		0.72	%		0.73	%		0.73	%		0.79	%		0.95	%