Farmers & Merchants Bancshares, Inc. SEC 10-Q Report

Farmers & Merchants Bancshares, Inc., a prominent player in the banking industry, has released its Form 10-Q report for the third quarter of 2025. The report showcases the company's robust financial performance and strategic business initiatives, reflecting its commitment to growth and stability in a competitive market.

Financial Highlights

• Total Interest Income: $31.1 million, an increase of $3.0 million or 11.0% compared to the same period in 2024, driven by higher interest income on loans.
• Total Interest Expense: $13.3 million, an increase of $600 thousand or 4.7% compared to the same period in 2024, due to a $33.3 million increase in the average balance of interest-bearing liabilities.
• Net Interest Income: $17.8 million, up from $15.4 million for the same period of 2024, with a net yield on interest-earning assets rising to 2.98% from 2.67%.
• Net Income: $4.1 million, compared to $3.4 million for the same period of 2024, reflecting improved financial performance.
• Provision for Credit Losses: $595 thousand, compared to $0 for the same period in 2024, indicating a more cautious approach to potential credit risks.
• Noninterest Income: $1.5 million, an increase of $191 thousand or 14.4% from the same period in 2024, primarily due to gains on the settlement of a fair value hedge and increased mortgage banking income.
• Noninterest Expense: $13.6 million, an increase of $1.3 million or 10.8% from the same period in 2024, largely due to higher staffing levels and increased Federal Deposit Insurance Corporation premiums.
• Income Tax Expense: $1.1 million, an increase of $65 thousand from the same period in 2024, with a decrease in the effective tax rate to 20.6% from 22.5%.

Business Highlights

• Loan Portfolio Growth: The company experienced a significant increase in its loan portfolio, with net loans rising by $39.5 million, or 6.8%, primarily due to increases in commercial real estate loans, construction loans, and commercial loans. This growth was attributed to the addition of new lending staff and stabilizing interest rates.
• Credit Risk Management: The company has implemented policies and procedures to mitigate credit risk and maintain loan portfolio quality. These include underwriting standards, continuous monitoring, and reporting of asset quality, as well as the adequacy of the allowance for credit losses.
• Watch List Loans: As of September 30, 2025, the company had $35.9 million of loans on a watch list, indicating potential financial difficulties for borrowers. This is a significant increase from $8.1 million at the end of 2024, highlighting a focus on managing credit risk.
• Investment Securities: Investments in debt securities decreased by $3.9 million, or 2.7%, with 85% of the investment portfolio classified as available for sale. The company manages its investment portfolio to achieve liquidity, manage interest rate sensitivity, and meet earnings objectives.
• Other Real Estate Owned (OREO): The company reported an increase in OREO, with properties including a strip shopping center, an apartment building, and a land parcel. These properties are actively being marketed for sale.
• Deposit Trends: Total deposits decreased by $24.7 million, or 3.3%, primarily due to a reduction in brokered CDs and interest-bearing checking accounts. However, there were increases in CDARS deposits, demand deposits, and money market accounts.
• Liquidity Management: The company maintains a strong liquidity position through short-term investments, loan repayments, and income from earning assets. It has secured lines of credit with the Federal Home Loan Bank and the Federal Reserve Bank, ensuring adequate liquidity to meet financial obligations.
• Borrowings: The company repaid a $10.0 million Merger Loan using proceeds from the issuance of $12.5 million in Subordinated Notes. These notes are intended to qualify as Tier 2 capital for regulatory purposes.
• Operational Efficiency: The company reported an increase in noninterest income by 14.4% and noninterest expense by 10.8% for the nine months ended September 30, 2025, reflecting higher staffing levels and increased operational costs.
• Future Outlook: Management believes that the company has adequate liquidity sources to meet anticipated needs over the next 12 months and is not aware of any trends or events likely to impact its ability to maintain satisfactory liquidity levels.

SEC Filing: Farmers & Merchants Bancshares, Inc. [ FMFG ] - 10-Q - Nov. 14, 2025