On November 22, 2023, the Board of Directors approved the Farmers and Merchants Bancshares, Inc. 2023 Equity Compensation Plan (the “Equity Plan”). The Equity Plan allows the Board of Directors or its Compensation Committee to grant awards that may be payable in shares of common stock or the cash equivalent thereof.

The Company complies with the provisions of ASC Topic 718, Compensation-Stock Compensation, in measuring and disclosing stock compensation cost. The measurement objective in ASC Paragraph 718-10-30-6 requires public companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The cost is recognized in expense over the period in which an employee is required to provide service in exchange for the award (the vesting period).

During the year ended December 31, 2023, 2,000 fully vested shares of common stock and RSUs relating to 3,000 shares of common stock were granted to one executive officer. The RSUs contemplate the issuance of shares of common stock of Farmers and Merchants Bancshares, Inc. if and when the RSUs vest. One-third of the RSUs vested on September 22, 2024, one-third will vest on September 22, 2025 and one-third will vest on September 22, 2026 provided that the grantee is employed and in good standing with the Company on the applicable vesting date.

A summary of the Company’s RSU activity during the six months ended June 30, 2025 is shown below:

The compensation cost charged to income in respect of awards granted under the Equity Plan was $4.5 thousand and $9.1 thousand for both the three- and six- months ended June 30, 2025 and 2024. As of June 30, 2025, there was $22.7 thousand of unrecognized compensation cost related to the unvested RSUs, which is expected to be recognized over a period of 15 months.

During the three months ended June 30, 2025, the Company paid bonuses in the aggregate amount of $37.3 thousand to certain employees in the form of common stock. To effect this, the Company issued 1,963 shares having a grant date fair value of $19.00 per share. Additionally, certain directors elected to have some or all of their 2024 fees paid in common stock. The Company paid $116.1 thousand of board fees in the form of common stock by issuing 6,731 shares having a grant date fair value of $17.25 per share. There was no other stock based compensation during the thee and six-month periods ended June 30, 2024.