Farmers & Merchants Bank : AND MERCHANTS BANCSHARES, INC. REPORTS EARNINGS FOR 2019 OF $4,560,804 OR $1.54 PER SHARE

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	[phone], 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

Securities sold under repurchase agreements

Federal Home Loan Bank advances and other borrowings Total interest expense

Net interest income

Provision for loan losses
Net interest income after provision for loan losses
Noninterest income
Service charges on deposit accounts
Mortgage banking income
Bank owned life insurance income
Unrealized gain (loss) on equity security
Write down of other real estate owned
Gain on sale of SBA loans
Other fees and commissions
Total noninterest income
Noninterest expense
Salaries
Employee benefits
Occupancy
Furniture and equipment
Other
Total noninterest expense
Income before income taxes
Income taxes
Net income	$
Earnings per share - basic and diluted	$

942,731		682,593			3,519,960		2,225,616
31,729		32,639			114,641		144,881
2,835		11,317			45,352		136,744
977,295		726,549			3,679,953		2,507,241
3,799,039		3,873,342			15,022,385		15,261,092
40,000		450,000			40,000		475,000
3,759,039		3,423,342			14,982,385		14,786,092
168,923		174,260			663,675		670,653
147,843		51,962			397,710		271,767
42,888		40,490			364,729		161,764
(2,489)		3,919			16,232		(11,429)
-		-			(210,150)		(55,350)
-		162,201			139,535		226,026
27,805		28,409			121,836		101,842
384,970		461,241			1,493,567		1,365,273
1,478,611		1,301,900			5,472,609		5,194,871
343,974		295,112			1,352,202		1,313,392
177,351		170,745			771,917		706,193
154,272		156,377			614,543		632,330
674,189		553,109			2,664,543		2,485,694
2,828,397		2,477,243			10,875,814		10,332,480
1,315,612		1,407,340			5,600,138		5,818,885
254,826		270,535			1,039,334		1,106,209
1,060,786	$	1,136,805	$	4,560,804	$	4,712,676
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%