v3.26.1
Note 11 - Borrowed Funds
 6 Months Ended
Jun. 30, 2026
Notes to Financial Statements  
Debt Disclosure [Text Block]

11.

Borrowed Funds

 

Borrowed funds may consist of securities sold under repurchase agreements, which represent overnight or term borrowings from customers, advances from the Federal Home Loan Bank of Atlanta (“FHLB”), advances from the Federal Reserve Bank of Richmond (the “Reserve Bank”), term borrowings from a commercial bank, and overnight borrowings from commercial banks.

 

Additional information is as follows:

 

     

June 30,

    

December 31,

  

(Dollars in thousands)

    

2026

    

2025

  

Amount outstanding at period end:

                  

Securities sold under repurchase agreements

   $ 4,559     $ 4,317  

Federal Home Loan Bank advances

     57,700       62,700  

Federal Home Loan Bank advances mature in

2026

   $ 40,200     $ 50,200  
 

2027

   $ 17,500     $ 12,500  
                   

Subordinated Debt (net of issuance costs) matures in

2035

   $ 12,060     $ 12,036  
                   

Average rate paid during the period ended:

                  

Securities sold under repurchase agreements

     1.25 %     1.25 %

Federal Home Loan Bank advances

     3.78 %     3.80 %

Subordinated Debt

     7.88 %     7.88 %

 

The Bank is approved to borrow 75% of eligible pledged single-family residential loans and 50% of eligible pledged commercial loans as well as investment securities, or approximately $105.4 million under a secured line of credit with the FHLB. The Bank also has a facility with the Reserve Bank, which has been in place for over 10 years and is collateralized by loans. Under this facility, the Bank can borrow approximately $31.9 million. Additionally, the Bank has $23.5 million ($14.5 million unsecured and $9.0 million secured) of overnight federal funds lines of credit available from commercial banks.

 

FHLB advances of $57.7 million and $62.7 million were outstanding as of June 30, 2026 and December 31, 2025, respectively.

 

On September 25, 2025, Farmers and Merchants Bancshares, Inc. issued and sold $12.5 million in aggregate principal amount of its Subordinated Notes. The Subordinated Notes were issued by the Company at a price equal to 100% of their face amounts. The Subordinated Notes have stated maturity dates of September 25, 2035 (the “Maturity Date”). From and including the original issue date of the Subordinated Notes (the “Issue Date”) to but excluding September 26, 2030 or the date of earlier redemption, the Company will pay interest on the Subordinated Notes semi-annually in arrears on March 26th and September 26th of each year at a fixed interest rate of 7.875% per annum, computed on the basis of a 360-day year consisting of twelve 30-day months, beginning on March 26, 2026. From and including September 26, 2030, to, but excluding, the Maturity Date or the date of earlier redemption (the “Floating Rate Period”), the Company will pay interest on the Subordinated Notes at a floating interest rate at the Three-Month Term SOFR (as defined in the Subordinated Notes), reset quarterly, plus 458 basis points, computed on the basis of a 360-day year and the actual number of days elapsed. During the Floating Rate Period, the Company will pay interest on the Subordinated Notes quarterly in arrears on March 26th, June 26th, September 26th, and December 26th of each year, beginning on December 26, 2030. Notwithstanding the foregoing, if the Three-Month Term SOFR rate is less than zero, then the Three-Month Term SOFR rate shall be deemed to be zero.

 

Securities sold under agreements to repurchase represent overnight borrowings from customers. Securities owned by the Company which are used as collateral for these borrowings are primarily U.S. government agency securities.