Farmers & Merchants Bancshares Reports Mixed Q3 Results, Net Income Down 21.6% Amid Rising Interest Rates and Expenses

Farmers & Merchants Bancshares, Inc. reported its financial results for the third quarter and nine months ended September 30, 2024, reflecting notable changes in revenue, profitability, and strategic initiatives compared to the previous fiscal period.

For the three months ended September 30, 2024, the company recorded net income of $1.1 million, a decrease of 21.6% from $1.4 million in the same period of 2023. This decline was primarily attributed to a $102,144 decrease in net interest income and a $325,275 increase in noninterest expenses. Net interest income for the quarter was $5.1 million, down from $5.2 million a year earlier, while total interest income rose to $9.8 million from $8.0 million, reflecting a 23.1% increase. The increase in interest income was driven by a higher average loan balance and improved loan yields.

For the nine months ended September 30, 2024, net income totaled $3.4 million, down 31.6% from $5.0 million in the same period of 2023. The decrease was influenced by a reduction in net interest income, which fell to $15.4 million from $16.1 million, alongside a significant increase in total interest expense, which more than doubled to $12.7 million due to rising interest rates. The net yield on interest-earning assets decreased to 2.67% from 3.04% year-over-year.

Total assets increased by 2.2% to $817.5 million, while total liabilities rose by 1.4% to $758.4 million. Stockholders’ equity saw a significant increase of 13.4%, reaching $59.2 million. The company’s loan portfolio grew by 9.2% to $571.6 million, with notable increases in commercial real estate and commercial loans, attributed to the hiring of new loan officers and the opening of a new loan production office.

On the strategic front, Farmers & Merchants Bancshares has focused on diversifying its commercial loan portfolio to reduce reliance on commercial real estate loans. The company has also implemented policies to mitigate credit risk, including enhanced underwriting standards and continuous monitoring of asset quality.

In terms of deposits, total deposits decreased by 1.1% to $673.7 million, influenced by competitive pressures in the market due to rising interest rates. The company reported a significant increase in certificates of deposit, which partially offset declines in other account types.

Overall, while Farmers & Merchants Bancshares experienced growth in certain areas, the financial results indicate challenges in profitability and increased costs associated with rising interest rates and operational expenses.