Farmers and Merchants Bancshares, Inc. (OTCPK:FMFG) signed a letter of intent to acquire Carroll Bancorp, Inc. (OTCPK:CROL) for $25.1 million on February 4, 2020. Farmers and Merchants Bancshares, Inc. entered into an agreement to acquire Carroll Bancorp, Inc. on March 6, 2020. Under the transaction, Farmers and Merchants Bancshares, Inc. will acquire the shares of Carroll Bancorp, Inc. at $21.63 per share in cash. The consideration is subject to a dollar-for-dollar reduction if and to the extent that Carroll Bancorp, Inc.'s tangible book value prior to the closing does not equal or exceed $18.2 million. Pursuant to the agreement and the related agreements, Carroll Bancorp, Inc. will merge with and into Farmers and Merchants Bancshares, Inc., with Farmers and Merchants Bancshares, Inc. as the surviving company, and Carroll Community Bank, subsidiary of Carroll Bancorp, Inc., will merge with and into Farmers and Merchants Bank, subsidiary of Farmers and Merchants Bancshares, Inc., with Farmers and Merchants Bank as the surviving Maryland commercial bank. The combined bank will operate under the name of Farmers and Merchants Bank of Fowblesburg, Maryland. The deal will be financed through a combination of a third-party loan to the Company in an amount up to $17 million and a $8 million cash dividend to be paid by Farmers and Merchants Bank. The agreement contains termination rights of Farmers and Merchants Bancshares, Inc. and Carroll Bancorp, Inc. and further provides that Carroll Bancorp, Inc. will be required to pay Farmers and Merchants Bancshares, Inc. a termination fee of $1 million if the agreement is terminated under specified circumstances set forth therein.

The transaction is subject to customary closing conditions as well as approval by Carroll Bancorp, Inc.'s stockholders, third party consents, obtaining of funding and approval by applicable bank regulatory authorities. The transaction has been unanimously approved by the Boards of Directors of both Farmers and Merchants Bancshares, Inc. and Carroll Bancorp, Inc. Board of Carroll Bancorp recommends the shareholders to vote in favor of the transaction. Carroll Bancorp's shareholder's meeting is scheduled on June 22, 2020. The Board of Governors of the Federal Reserve System approved the transaction on May 26, 2020, which approval was renewed on August 24, 2020. At a special meeting held on June 22, 2020, the stockholders of Carroll approved the merger. The Maryland Commissioner of Financial Regulation approved the transaction on August 26, 2020, and the Federal Deposit Insurance Corporation approved the transaction on August 31, 2020. The transaction is expected to be completed in the third quarter of 2020. As on August 31, 2020, the transaction is expected to close on September 30, 2020. The transaction is expected to close in between July 1, 2020 to September 30, 2020. The transaction will be immediately accretive to Farmers and Merchants Bancshares, Inc.'s earnings per share, before the impact of one-time transaction expenses.

Olsen Palmer LLC acted as exclusive financial advisor and Andrew Bulgin of Gordon Feinblatt LLC acted as legal advisor to Farmers and Merchants Bancshares, Inc. Piper Sandler Companies (NYSE:PIPR) acted as financial advisor and fairness opinion provider and Tom Hutton, Michael Brown, Eric Luse and Ned Quint of Luse Gorman, PC acted as legal advisors to Carroll Bancorp, Inc. Computershare Trust Company, NA acted as transfer agent/registrar to Carroll Bancorp. Piper Sandler shall receive an amount equal to 1.5% of the aggregate purchase price for its services. At the time of announcement of the transaction, Piper Sandler's fee was approximately $375,000 and it also received a $75,000 fee from Carroll Bancorp upon rendering its opinion.

Farmers and Merchants Bancshares, Inc. (OTCPK:FMFG) completed the acquisition of Carroll Bancorp, Inc. (OTCPK:CROL) on October 1, 2020. With the transaction finalized, the combined Farmers and Merchants team will continue to work diligently to successfully integrate the former Carroll Community Bank with the systems conversion planned for December 2020, at which point Carroll Community's branding will change to Farmers and Merchants. Carroll Community Bank customers and staff will join the Farmers and Merchants Bank family.