FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION CONTACT:January 16, 2014

Farmers and Merchants Bank

Contact:

Mr. James R. Bosley, Jr.

15226 Hanover Pike

President

Upperco, Maryland 21155

(410) 833-6600

FARMERS AND MERCHANTS BANK REPORTS FOURTH CONSECUTIVE YEAR OF RECORD EARNINGS FOR 2013

UPPERCO, MARYLAND (January 16, 2014) -Farmers and Merchants Bank (the "Bank") announced that net income for the year ended December 31, 2013 was $3,260,951 or $2.05 per share compared to $3,157,991 or $2.01 per share in 2012 - the fourth consecutive year that the Bank has set a record for net income. The increase in net income was due primarily to a $124,245 increase in net interest income as a result of the continued growth in interest-earning assets and a decrease of $280,000 in the provision for loan losses from 2012 to 2013 due to lower loan losses. Average interest- earning assets increased to $261 million for the year ended December 31, 2013 from $245 million during 2012. The increase in assets was offset by a decrease in the net yield to 4.57% in 2013 from 4.82% in 2012. These favorable variances were offset by a decrease in noninterest income of $71,853, an increase of $152,162 in noninterest expense, and an increase of $77,270 in income tax expense. Return on average equity was 11.42% in 2013 compared to 12.10% in
2012. Return on average assets was 1.16% in 2013 compared to 1.19% in 2012. Cash dividends paid to shareholders in
2013 increased to $0.54 per common share from $0.49 per common share in 2012.
Net income for the three months ended December 31, 2013 was $813,776 or $.51 per share compared to $812,834 or $.52 per share for the same period in 2012. The slight increase was due to a $133,717 increase in net interest income offset by a decrease in noninterest income of $98,649, an increase of $30,274 in noninterest expense, and an increase of $3,852 in income tax expense.
Assets totaled $300 million at December 31, 2013, a 9% increase from $276 million at December 31, 2012. Loans outstanding increased 14% to $242 million at December 31, 2013 from $213 million at the end of 2012. Deposits increased of 7%, growing to $239 million at December 31, 2013 from $224 million at December 31, 2012. Stockholders' Equity increased $2,123,365 or 8% to $29,309,236 at December 31, 2013 from $27,185,871 at the end of 2012. The book value of the common stock of the Bank was $18.22 per share at December 31, 2013, compared to $17.12 per share at December 31, 2012.
James R. Bosley, Jr., President and CEO, commented "We are proud to have record earnings for the fourth consecutive year and to reach $300 million in total assets. We are also pleased to have double digit loan growth again in 2013, and, more importantly, that our loan portfolio maintains its high level of performance and quality."

Farmers and Merchants Bank was chartered in Maryland in 1919, and is currently celebrating over 90 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 six additional branches in Owings Mills, Hampstead, Greenmount, Reisterstown, and Westminster. Shares

of the Bank's common stock are traded through NASDAQ's Over-The-Counter Bulletin Board under the symbol "FMFG.OB".

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