Net interest income was $6.8 million for the quarter ended March 31, 2026, an increase of $1.3 million, or 23%, over the $5.5 million reported for the same period in 2025. The increase was due to a 34 basis point increase in the yield on earning assets to 5.37% for the three months ended March 31, 2026 compared to 5.03% for the same period in 2025. Average earning assets increased $44.5 million to $835.0 million for the quarter ended March 31, 2026. Average loans increased to $637.9 million for the quarter ended March 31, 2026, an increase of $44.2 million over the $593.7 million for the quarter ended March 31, 2025. The combination of higher yields on earning assets plus higher average earning asset balances was the primary reason for the increase. Also contributing to the increase in net interest income was the lower cost of funds in 2026. The average interest rate paid on interest bearing liabilities was 2.65% for the three months ended March 31, 2026, compared to 2.70% for the same period in 2025. Average interest bearing liabilities increased to $659.9 million, an increase of $9.9 million when compared to the $650.0 million reported for the three months ended March 31, 2025.
There was no provision for credit losses for the quarter ended March 31, 2026 versus a $30 thousand provision for credit losses for the quarter ended March 31, 2025. The Company's loan portfolio continues to perform at a high level with zero non-accrual loans at March 31, 2026.
Noninterest income decreased to $431 thousand for the quarter ended March 31, 2026 compared to $514 thousand for the same period in 2025. The majority of the decrease was due to the non-recurring gain on the settlement of a fair value hedge in 2025 of $94 thousand.
Noninterest expense was $244 thousand higher for the quarter ended March 31, 2026 when compared to the same period in 2025. This increase was due primarily to a $312 thousand increase in employee benefits, a $147 thousand increase in occupancy and furniture and equipment costs, and a $39 thousand increase in other real estate owned expenses. These increases were offset by a $98 thousand decrease in Federal Deposit Insurance Corporation premiums and a $30 thousand decrease in professional services.
Income taxes increased by $320 thousand during the quarter ended March 31, 2026 when compared to the same period in 2025 due to higher earnings before taxes. The effective tax rate increased to 25.8% for the quarter ended March 31, 2026 from 21.3% for the same period last year due to a lower amount of tax exempt income year over year.
Total assets were $863.4 million at March 31, 2026 compared to $872.0 million at December 31, 2025. The decrease is attributable to a net decrease in loans of $4.8 million and a decrease in securities available for sale ("AFS") of $6.3 million. The decrease was offset by a $2.1 million increase in cash and cash equivalents.
Deposits decreased by $9.2 million to $711.3 million at March 31, 2026 from $720.5 million at December 31, 2025. The decrease is attributed to the repayment of $8.5 million in brokered CDs.
The book value of the Company's common stock increased to $20.43 per share at March 31, 2026 from $20.02 per share at December 31, 2025. Book value per share at March 31, 2026 was inclusive of the $13.2 million unrealized loss, net of income taxes, on the Bank's AFS investment portfolio. Changes in the market value of the AFS investment portfolio, net of income taxes, are reflected in the Company's equity, but are not included in the income statement. The Company's tangible equity was $59.1 million at March 31, 2026 compared to $57.6 million at December 31, 2025.
Our Federal Home Loan Bank facility, other borrowing lines available, unpledged securities, brokered deposit access, and cash and cash equivalents provided us with access to approximately $360 million of liquidity as of March 31, 2026.
Gary A. Harris, President and CEO, commented, "After coming off of a strong 2025, we are pleased to have carried that momentum into the first quarter of 2026. Year over year, our first quarter earnings increased 57%; reflecting improving yields on earning assets and widening interest margins. Asset quality remains high with zero non-accrual loans as of March 31, 2026. We are making meaningful investments in the future of the Bank, including modernizing our technology, equipping our team with stronger tools, and attracting top talent to help lead our next chapter of growth. We are confident that 2026 will be another strong year for our shareholders, customers, and communities."
About the Company
The Company is the financial holding company for Farmers and Merchants Bank, a Maryland-chartered community bank headquartered in Hampstead, Maryland. Founded in 1919, the Bank has served the deposit, lending, and financial needs of consumers and businesses across Carroll and Baltimore Counties for more than a century. The Bank operates eight locations along Route 30, 795, 140, 26, and 45 corridors, including offices in Hampstead, Upperco, Owings Mills, Reisterstown, Westminster, Eldersburg, Greenmount, and Towson. Certain broker-dealers make a market in the common stock of Farmers and Merchants Bancshares, Inc., and trades are reported through the OTCID Basic Market under the symbol "FMFG". For more information, visit fmb1919.bank.
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 SubsidiariesConsolidated Balance Sheets(Unaudited)Dollars in thousands except per share data
March 31,
December 31,
2026
2025 *
Assets
Cash and due from banks
$
48,162
$
46,113
Federal funds sold and other interest-bearing deposits
571
566
Cash and cash equivalents
48,733
46,679
Certificates of deposit in other banks
100
100
Securities available for sale, at fair value
112,456
118,730
Securities held to maturity, at amortized cost less allowance for credit
losses of $88 and $79
21,227
21,055
Equity security, at fair value
551
550
Restricted stock, at cost
3,713
3,693
Mortgage loans held for sale
344
714
Loans, less allowance for credit losses of $4,458 and $4,361
628,298
633,144
Premises and equipment, net
7,042
7,141
Accrued interest receivable
2,467
2,535
Deferred income taxes, net
6,510
6,277
Other real estate owned, net
1,673
1,673
Bank owned life insurance
15,453
15,353
Goodwill and other intangibles, net
7,016
7,018
Other assets
7,811
7,296
Total Assets
$
863,394
$
871,958
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing
$
122,965
$
117,098
Interest-bearing
588,331
603,361
Total deposits
711,296
720,459
Securities sold under repurchase agreements
3,452
4,317
Federal Home Loan Bank of Atlanta advances
62,700
62,700
Long-term debt, net of issuance costs
12,048
12,036
Accrued interest payable
762
1,278
Other liabilities
7,035
6,508
Total liabilities
797,293
807,298
Stockholders' equity
Common stock, par value $.01 per share,
authorized 5,000,000 shares; issued and outstanding
3,235,707 shares in 2026 and 3,229,795 shares in 2025
32
32
Additional paid-in capital
32,253
32,148
Retained earnings
47,035
45,210
Accumulated other comprehensive loss
(13,219
)
(12,730
)
Total Stockholders' equity
