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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For fiscal year ended December 31, 2000 Commission file number: 0-13273
F & M Bank Corp.
(Exact name of registrant as specified in its charter)
Virginia 54-1280811
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box F, Timberville, Virginia 22853
(Address of principal executive offices) (Zip Code)
Issuer's telephone number including area code: (540) 896-8941
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - $5 Par
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ..X. No
....
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ]
Issuer's revenues for its most recent fiscal year: $17,317,000
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days: As of March 22, 2000 - $24.50 average bid price; $24.50 average ask price.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of March 22, 2000 -
2,431,801
DOCUMENTS INCORPORATED BY REFERENCE:
None
LOCATION OF EXHIBIT INDEX
The index of exhibits is contained in Part IV herein on page 46.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT YES NO X
2
TABLE OF CONTENTS
Part I
Page
Item 1. Description of Business 3
General
Competition
Regulation and Supervision
Item 2. Description of Property 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
Part II
Item 5. Market for Common Equity and Related Stockholder Matters 5
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 7. Financial Statements 21
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 44
Part III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the
Exchange Act 44
Item 10. Executive Compensation 45
Item 11. Security Ownership of Certain Beneficial Owners
and Management 46
Item 12. Certain Relationships and Related Transactions 47
Part IV
Item 13. Exhibits and Reports on Form 8-K 47
Signatures 48
3
Part I
Item 1. Description of Business
General
F & M Bank Corp., incorporated in Virginia in 1983, is a one-bank holding
company pursuant to section 3(a)(1) of the Bank Holding Company Act of 1956, and
owns 100% of the outstanding stock of its two affiliates, Farmers & Merchants
Bank (Bank) and TEB Life Insurance Company (TEB). Farmers & Merchants Financial
Services, Inc. (FMFS) is a wholly owned subsidiary of Farmers & Merchants Bank.
Farmers & Merchants Bank was chartered on April 15, 1908, as a state
chartered bank under the laws of the Commonwealth of Virginia. TEB was
incorporated on January 27, 1988, as a captive life insurance company under the
laws of the State of Arizona. FMFS is a Virginia chartered corporation and was
incorporated on February 25, 1993.
The Bank offers all services normally offered by a full-service commercial
bank, including commercial and individual demand and time deposit accounts,
repurchase agreements for commercial customers, commercial and individual loans,
trust services, and drive-in banking services. TEB was organized to re-insure
credit life and accident and health insurance currently being sold by the Bank
in connection with its lending activities. FMFS was organized to write title
insurance but now provides other financial services to customers of Farmers &
Merchants Bank.
The Bank makes various types of commercial and consumer loans and has a
heavy concentration of residential and agricultural real estate loans. The Bank
has continued to experience good loan demand throughout 2000 due to the strong
local and national economies. The local economy is relatively diverse with
strong employment in the agricultural, manufacturing, service and governmental
sectors.
The operations of F & M Bank Corp., the Bank, TEB, and FMFS are conducted in
Timberville, Virginia, in offices located at 205 South Main Street. The Bank has
branches at 127 West Rockingham Street, Elkton, Virginia, at the corner of Route
259 and 259 Alternate, Broadway, Virginia, at Highway 33 West at Elkton Plaza,
Elkton, Virginia, and at 100 Plaza Drive, Bridgewater, Virginia. As of February
23, 2001, the Bank acquired two branch offices from First Union National Bank
located at 120 South Main Street, Edinburg, Virginia and 161 South Main Street,
Woodstock, Virginia.
On December 31, 2000, F & M Bank Corp., the Bank, TEB and FMFS had
fifty-three full-time and twenty-one part-time employees. Staff in the two
offices acquired from First Union National Bank total eight full-time and five
part-time employees. No one employee devotes full-time services to F&M Bank
Corp.
Competition
The Bank's offices compete with approximately sixteen financial
institutions. These other institutions include state and nationally chartered
banks, as well as nationally chartered savings banks. The main office and the
Broadway branch serve the northern portion of Rockingham County, Virginia and
the southwestern portion of Shenandoah County. The Elkton branches serve the
town of Elkton, the eastern portion of Rockingham County, and the southern
portion of Page County. The Bridgewater office serves the Town of Bridgewater,
the southern portion of Rockingham County and the northwestern portion of
Augusta County. The newly acquired offices in Shenandoah County will serve the
towns of Edinburg and Woodstock and the surrounding areas. Bank competition in
the area of all offices is very strong.
4
Item 1. Description of Business (Continued)
Regulation and Supervision
The operations of F & M Bank Corp. and the Bank are subject to federal and
state statutes, which apply to state member banks of the Federal Reserve System.
The stock of F & M Bank Corp. is subject to the registration requirements of
the Securities Act of 1934. F & M Bank Corp. is subject to the periodic
reporting requirements of the Securities Exchange Act of 1934. These include,
but are not limited to, the filing of annual, quarterly and other current
reports with the Securities and Exchange Commission.
F & M Bank Corp., as a bank holding company, is subject to the provisions of
the Bank Holding Company Act of 1956, as amended (the "Act"). It is registered
as such and is supervised by the Federal Reserve Board. The Act requires F & M
Bank Corp. to secure the prior approval of the Federal Reserve Board before F &
M Bank Corp. acquires ownership or control of more than 5% of the voting shares,
or substantially all of the assets of any institution, including another bank.
As a bank holding company, F & M Bank Corp. is required to file with the
Federal Reserve Board an annual report and such additional information as it may
require pursuant to the Act. The Federal Reserve Board may also conduct
examinations of F & M Bank Corp. and any or all of its subsidiaries. Under
Section 106 of the 1970 Amendments to the Act and the regulations of the Federal
Reserve Board, a bank holding company and its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with an extension of
credit, provision of credit, sale, or lease of property or furnishing of
services.
Federal Reserve Board regulations permit bank holding companies to engage in
non-banking activities closely related to banking or to managing or controlling
banks. These activities include the making or servicing of loans, performing
certain data processing services, and certain leasing and insurance agency
activities. TEB Life acts as the primary re-insurer for credit life insurance
sold through the Bank. F & M Bank Corp. owns an interest in the Johnson Williams
Project in Berryville, Virginia which provides housing for the elderly and lower
income tenants. Since 1994, the Company has entered into agreements with the
Housing Equity Fund of Virginia to purchase equity positions in the Housing
Equity Fund of Virginia II, III, IV, V and Historic Equity Fund I. These funds
provide housing for low income persons throughout Virginia. Approval of the
Federal Reserve Board is necessary to engage in any of the other activities
described above or to acquire interests engaging in these activities.
The Bank as a state member bank is supervised and regularly examined by the
Virginia Bureau of Financial Institutions and the Federal Reserve Board. Such
supervision and examination by the Virginia Bureau of Financial Institutions and
the Federal Reserve Board is intended primarily for the protection of depositors
and not for the stockholders of F & M Bank Corp.
The information required by Guide 3 has been included under Item 6,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
5
Item 2. Description of Property
The main office of Farmers & Merchants Bank is located at 205 South Main
Street in Timberville, Virginia. The building is of brick veneer construction
and contains an automatic teller machine. This office is situated on 1.32 acres
of land. One branch office is situated at 127 West Rockingham Street in Elkton,
Virginia. This office is of brick veneer construction, includes drive in
facilities and has an automatic teller machine, and is situated on one acre of
land. The Broadway branch is located on the corner of Virginia Route 259 and
Route 259 Alternate in Broadway, Virginia. This office is constructed primarily
of concrete, steel and wood frame and contains an automatic teller machine. The
office is situated on one acre of land. The Bank established a branch in the
Elkton Plaza shopping center in 1989 and it is of brick veneer construction,
includes drive in facilities and has an automatic teller machine. The Bank
opened a facility in Bridgewater, Virginia, in 1995. The office is constructed
of brick veneer and is situated on a .6 acre lot at 100 Plaza Drive,
Bridgewater, VA. All properties are owned by the Bank and are in good condition.
Item 3. Legal Proceedings
Management is not aware of any pending or threatened litigation in which the
Company or its subsidiaries may be involved as a defendant. In the normal course
of business, the Bank periodically must initiate suits against borrowers as a
final course of action in collecting past due loans.
Item 4. Submission of Matters to a Vote of Security Holders
F & M Bank Corp. has not submitted any matters to the vote of security
holders for the last quarter ending December 31, 2000.
Part II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Market Information
Farmers & Merchants Bank acts as the transfer agent for F & M Bank Corp.
There have been sufficient inquiries on the National Stock Exchange so that the
Company is required to report on any stock or cash dividend to the National
Association of Security Dealers. The 'bid' and 'asked' price of the Company's
stock is not published in any newspaper. Scott & Stringfellow in Richmond,
Virginia, makes a market for the stock and the firm has provided market quotes
in recent years.
The prices presented are bid prices, which represent prices between
broker-dealers and don't include retail mark-ups and markdowns or any commission
to the dealer. The prices may not reflect actual transactions and other
transactions may have occurred which were not reported to the Company. Stock
quotes can also be found on financial websites on the Internet by using the
stock symbol "FMBM".
6
(a) Market Information (Continued)
The following schedule shows the range of reported trade prices and
dividends per share declared for 1998 through 2000:
Dividends
Declared High Low
1998
1st quarter .097 12.67 11.92
2nd quarter .103 16.25 12.83
3rd quarter .110 16.13 15.00
4th quarter .120 21.50 18.00
Special Dividend .300
1999
1st quarter .12 24.50 21.00
2nd quarter .13 26.50 21.00
3rd quarter .13 26.50 23.00
4th quarter .14 25.00 22.00
2000
1st quarter .14 24.25 18.50
2nd quarter .15 24.00 18.00
3rd quarter .15 22.88 19.50
4th quarter .15 33.00 20.00
All amounts reflect a three for one stock split declared in 1998.
(b) Stockholders
On December 31, 2000, there were 1,163 holders of F & M Bank Corp. common
stock.
(c) Dividends
The cash dividends declared are shown in the above table. The principal
sources of income of F & M Bank Corp. include dividends paid by its subsidiary
bank, dividends received on common and preferred stocks of other corporations
and securities gains. See Note 16 to the consolidated financial statements for a
discussion of the restrictions on the ability of the subsidiary bank to transfer
funds to F & M Bank Corp. in the form of cash dividends.
7
Item 6. Management's Discussion and Analysis of Financial Conditions
and Results of Operations
OPERATIONS ANALYSIS - 2000 Compared to 1999
Overview
The Company's net income for 2000 decreased $162,320 or 4.26% from 1999
earnings. Net income per share decreased from $1.55 in 1999 to $1.49 in 2000.
The Company's decline in earnings was the result of a combination of factors
summarized below. See Table I (page 17) for a five year summary of operations.
Net Interest Margin
The net weighted interest margin on earning assets on a tax equivalent basis
decreased from 4.52% in 1999 to 4.32% in 2000. An increase in the yield on
earning assets from 8.17% in 1999 to 8.22% in 2000 was more than offset by an
increase in the cost of funds from 4.40% in 1999 to 4.79% in 2000. The Company's
net yield on average earning assets of 4.32% is in line with its peer group.
Yields on loans increased from 8.81% in 1999 to 8.83% in 2000. A decrease in
average yields on real estate loans was offset by increases in rates on
commercial and installment loans. To balance its interest rate risk on fixed
rate loans, the Bank borrows from the Federal Home Loan Bank at fixed rates
which are determined by market conditions. This program has helped the Bank meet
the needs of its customers who might otherwise have gone to another financial
institution seeking fixed rate loans.
Tax equivalent yields on securities decreased to 6.15% in 2000 from 6.34% in
1999. This decrease was primarily a result of higher rate callable securities
being called and replaced with lower rate non-callable securities. Average
investments increased 4.38% from the previous year. The Company's philosophy of
investing only in securities with short to intermediate maturities allows it to
be responsive to interest rate movements within the market place.
The rates paid on interest bearing deposits increased to 4.62% in 2000 from
4.22% in 1999. Rates on interest bearing demand and savings accounts were
virtually unchanged from the prior year. Rates on time deposits increased 45
basis points from 5.20% to 5.65%. This increase was caused by strong competition
for deposits and the need to offer "specials" to attract and retain deposits.
Average time deposits increased $10,827,000 from 1999 levels and the additional
funds were used to support loan growth. Interest-bearing demand and savings
accounts decreased as customers moved to the more attractive pricing of the
"special" time deposits.
The cost of FHLB debt was virtually unchanged as the Bank only borrowed
$1,000,000 in 2000. Regularly scheduled payments resulted in a $2,973,000
decrease in average outstandings. All FHLB debt is at fixed rates for terms
ranging between five and ten years. Yields on short-term debt, which include
overnight federal funds purchased and commercial repurchase agreements,
increased 148 basis points. The cost of both these sources of funding are tied
to the federal funds rate as set by the Federal Open Market Committee of the
Board of Governors of the Federal Reserve.
Table II (page 18) contains a complete yield analysis for the last three
years and Table III (page 19) contains the rate/volume changes in these years.
8
NONINTEREST INCOME
The Company realized gains of $769,704 in 2000 and $1,179,683 in 1999 on
the sale of corporate stocks. The gains came from several market sectors
including telecommunications, biotechnology, paper products and electric
utilities. The sectors represented by these gains are representative of the
Company's efforts in recent years to diversify the portfolio away from an
over-concentration in regional banking franchises. Other noninterest income
increased 13.33% in 2000 from 1999 levels. The increase is attributed to an
increase in service charges on deposit accounts, fees generated from the Bank's
contract with its check vendor and interchange fees from increased use of its
debit cards.
NONINTEREST EXPENSES
Noninterest expense increased $339,862 or 7.88% in 2000 over 1999 levels.
Salaries and employee benefits increased 7.78% due to increased staffing, normal
salary increases, higher health insurance premiums and increased pension
expense. Other noninterest expenses increased $138,836 (8.02%). Depreciation
expense increased $39,452 and resulted from a full years use of the Operations
Center and related equipment which was placed in service in September 1999.
Professional fees increased $84,017, due primarily from a project conducted by a
firm of efficiency experts. This expense was offset in part by increases in
noninterest income from the enactment of recommendations resulting from the
study. Cost savings and increases to noninterest income from this study should
continue into the foreseeable future. The Company's overall cost of operations
relative to asset size compares favorably to its peer group.
PROVISION FOR LOAN LOSSES
Management evaluates the loan portfolio in light of national and local
economic trends, changes in the nature and value of the portfolio and industry
standards. Specific factors considered by management in determining the adequacy
of the level of the allowance for loan losses include internally generated loan
review reports, past due reports and historical loan loss experience. This
review also considers concentrations of loans in terms of geography, business
type or level of risk. Management evaluates nonperforming loans relative to
their collateral value and makes the appropriate adjustments to the allowance
for loan losses when needed. Based on the factors outlined above, the current
year provision for loan losses decreased from $140,000 in 1999 to $123,000 in
2000. Loan losses decreased from $211,914 in 1999 to $105,345 in 2000. Loan
losses as a percentage of total loans totaled .07% and continue to be
significantly below the Bank's peer group average.
BALANCE SHEET
Total assets increased 6.90% during the year to $208,817,894. Loan growth
was steady throughout the year with total loans increasing $11,717,083 or 8.35%.
Funding for the growth came from increases in short-term debt, noninterest
bearing deposits and time deposits. These funding sources were also was
sufficient to allow proceeds from securities sales and maturities to be
reinvested in additional securities.
9
LIQUIDITY
Liquid assets include cash, interest-bearing deposits, federal funds sold,
investments and loans maturing within one year. The Company's ability to obtain
deposits and purchase funds at favorable rates determines its liquidity
exposure. As a result of the Company's management of liquid assets and the
ability to generate liquidity through liability funding, management believes
that the Company maintains overall liquidity to satisfy depositors' requirements
and meet its customers' credit needs.
To further meet its liquidity needs, the Company maintains lines of credit
with correspondent financial institutions. The Company's subsidiary bank also
has a line of credit with the Federal Home Loan Bank of Atlanta that allows for
secured borrowings. Traditionally, growth in deposits and proceeds from maturing
investment securities have been sufficient to fund most of the net increase in
loans and investment securities.
1999 COMPARED TO 1998 OPERATIONS
Net income in 1999 increased 8.73% over net income in 1998.
Gains on securities transactions decreased $68,702 or 5.50%. The Company
continued its strategy of selectively selling common stocks that have shown
sizable long-term appreciation. Other noninterest income increased 48.60%. The
increase is attributed to an increase in service charges on deposit accounts and
increases in commissions generated from sales of insurance and investment
products.
Noninterest expense increased $433,012 or 11.16% in 1999 over 1998 levels.
Salaries and employee benefits increased 17.56% due to increased staffing,
normal salary increases, higher health insurance premiums and increased pension
expense. Other noninterest expenses increased $47,188 (2.80%). The increase was
spread over a variety of expense categories, with no single area increasing
significantly. The Company's overall cost of operations relative to asset size
compares favorably to its peer groups and to larger statewide institutions.
UNCERTAINTIES AND TRENDS
General
Management is of the opinion that loans classified for regulatory purposes
as loss, doubtful, substandard, or special mention do not (i) represent or
result from trends or uncertainties which are reasonably expected to materially
impact future operating results, liquidity, or capital resources, or (ii)
represent material credits which any available information causes serious doubts
as to the ability of such borrowers to comply with the loan repayment terms.
Management is not aware of any known trends, events or uncertainties that
will have or that are reasonably likely to have a material effect on the issuers
liquidity, capital resources or operations of the issuer. Additionally,
management is not aware of any current recommendations by the regulatory
authorities which, if they were to be implemented, would have such an effect.
10
BALANCE SHEET
INVESTMENT SECURITIES
Average balances in investment securities increased 4.38% in 2000 compared
to 1999. The Company maintains a high level of earning assets in investment
securities to provide for liquidity, as security for public indebtedness and to
secure repurchase agreements. A schedule of investment securities is shown in
note 4 of the consolidated financial statements.
The Company accounts for investments under Statement of Financial Accounting
Standard No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." This statement requires all securities to be classified at the
point of purchase as trading securities, available for sale or held to maturity.
See note 2d of the consolidated financial statements for a discussion of the
accounting policies for investments. The Company values its debt securities
based on information supplied by its correspondent banks for actively traded
obligations and by market comparison with similar obligations for non-rated
investments. Investments in common stocks are based on the last trades as
provided by the Wall Street Journal.
Yields and Maturities
The yields on taxable and nontaxable investments for 2000, 1999 and 1998 are
shown in the yield analysis in Table II (page 18). The carrying amount and
estimated market value of debt securities (in thousands of dollars) at December
31, 2000 by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
Securities Held to Maturity Carrying Fair Average
Amount Value Yield
Due after one year through five years $ 2,886 $ 2,860 6.03%
======= ======= ======
Securities Available for Sale Amortized Fair Average
Cost Value Yield
Due in one year or less $ 1,092 $ 1,091 6.64%
Due after one year through five years 25,573 25,647 6.27%
------- ------- ------
26,665 26,738 6.28%
Equity securities 10,854 11,942 5.93%
-------- -------- ------
Total $ 37,519 $ 38,680 6.18%
======== ======= ======
Yields on tax-exempt securities and equities are stated at tax equivalent
yields.
Management's philosophy is to keep the maturities of investments relatively
short which allows the Company to better match deposit maturities with
investment maturities and thus react more quickly to interest rate changes.
11
INVESTMENT SECURITIES (CONTINUED)
Mortgage-backed Securities
The Company's investment in mortgage-backed securities as of December 31,
2000, is shown in the following schedule:
Book Fair
Issuer Value Value
Pass through obligations
FNMA & FHLMC $ 135 $ 136
GNMA 2,449 2,435
-------- --------
Total $ 2,584 $ 2,571
======== ========
The mortgage-backed securities purchased by the Company are guaranteed by
the issuing agency and are all rated AAA. Obligations issued by the GNMA are
backed by FHA or VA insured mortgages and obligations issued by the FNMA or
FHLMC are backed by conventional mortgages. Bonds with fixed principal payments
have a market risk and interest rate risk similar to other federal agency
securities. The pass through obligations are sensitive to prepayment and
extension risk which affect the securities exposure to market risk. As interest
rates move higher, prepayments slow down and the average life increases. As
interest rates move lower, the prepayments increase and the average life
decreases. The Company's mortgage-backed securities were purchased at a premium
which will cause yields to rise as interest rates and average life increases.
Conversely, the yields will fall as interest rates fall and the average life
decreases.
Equity Investments
The Company has investments in common and preferred stock totaling
$10,853,533 at December 31, 2000, with an estimated market value of $11,941,891.
The investments include common stocks of other bank holding companies and other
common stocks which were purchased with the objective of realizing capital
gains. Preferred stocks of public utilities and other quality companies have
been purchased to obtain competitive yields after the 70% corporate dividend
exclusion. The market value of these investments is sensitive to general trends
in the stock market and fluctuations in interest rates.
Corporate Bonds
The Company has invested in high quality corporate debt obligations. The
estimated fair value at December 2000 of the Company's corporate bonds was
$9,479,850 compared with book value of $9,499,943. The bonds were purchased
primarily as short-term investments and maturities extend to 2004.
12
RISK ELEMENTS IN THE LOAN PORTFOLIO
The Company's loan portfolio totaled $152,034,979 at December 31, 2000
compared with $140,317,896 at the beginning of the year. The Company's policy
has been to make conservative loans that are held for future interest income.
Collateral required by the Company is determined on an individual basis
depending on the purpose of the loan and the financial condition of the
borrower.
The Company's commercial and agricultural loans increased 4.11% during 2000
to $32,987,085. The composition of the loans as of December 31, 2000 is shown in
the following schedule:
Commercial and Agricultural Loans
(In thousands)
Secured by
Real Estate Other Total
Commercial $ 17,715 $ 7,913 $ 25,628
Agricultural 5,354 1,302 6,656
Multi family residential 703 703
-------- ------- -------
$ 23,772 $ 9,215 $ 32,987
======== ======= =======
The majority of commercial loans are made to small retail, manufacturing
and service businesses.
The Company's mortgage loans increased 10.05% from $84,019,312 to
$92,463,872 at December 31, 2000. Residential real estate loans are generally
made for a period not to exceed 25 years and are secured by a first deed of
trust which does not exceed 95% of the appraised value. If the loan to value
ratio exceeds 90%, the Company requires additional collateral, guarantees or
mortgage insurance. On approximately 80% of the real estate loans, interest is
adjustable after each three or five year period. Fixed rate loans are generally
made for a fifteen-year or a twenty-year period with an interest rate adjustment
after ten years. Since 1992, fixed rate real estate loans have been funded with
fixed rate borrowings from the Federal Home Loan Bank, which allows the Company
to control its interest rate risk. In addition, the Company makes home equity
loans secured by second deeds of trust with total indebtedness not to exceed 90%
of the appraised value. Home equity loans are made for three, five or seven year
periods at a fixed rate or as a revolving line of credit.
The Company's consumer installment loans increased 15.73% to $20,927,176 at
December 31, 2000. Consumer loans are made for a variety of reasons, however,
approximately 60% of the loans are secured by automobiles and trucks.
The Company's market area has a stable economy, which tends to be less
cyclical than the national economy. Major industries in the market area include
agricultural production and processing, higher education, retail sales, services
and light manufacturing. The agricultural production and processing industry is
a major contributor to the local economy and its performance and growth tend to
be cyclical in nature, however, this cyclical nature is offset by other stable
industries in the trade area. In addition to direct agricultural loans, a large
percentage of residential real estate loans and consumer installment loans are
made to borrowers whose income is derived from the agricultural sector of the
economy. A large percentage of the agricultural loans are made to poultry
growers. During 2000, the poultry industry suffered from the Corona virus. This
virus results in a lack of weight gain in the poultry and reduced revenue to the
grower. If these conditions persist, the Company may expect higher delinquency
rates or a need to modify the repayment terms of some poultry related loans. To
this point delinquencies have not increased and the Company is continuously
monitoring the status of its portfolio.
During 2000, real estate values in the Company's market area for
commercial, agricultural and residential property increased, on the average,
between 2% and 5% depending on the location and type of property. Approximately
80% of the Company's loans are secured by real estate, however, policies
relating to appraisals and loan to value ratios are adequate to control the
related risk.
13
RISK ELEMENTS IN THE LOAN PORTFOLIO (CONTINUED)
Unemployment rates in the Company's market area tend to be below both the
national and state averages. The unemployment rate for the month of January 2000
for Rockingham County was 1.1% compared with 2.8% for Virginia and 4.2% for the
nation. The trend in employment in the area has a positive effect on the ability
of borrowers to repay loans.
The following table shows the Company's loan maturity distribution
(in thousands of dollars) as of December 31, 2000:
Maturity Range
Less Than 1-5 Over
Loan Type 1 Year Years 5 Years Total
--------- --------- ----- ------- -----
Commercial and
Agricultural Loans $ 9,411 $ 13,957 $ 9,619 $ 32,987
Real Estate - mortgage 2,246 2,738 87,480 92,464
Real Estate - construction 4,372 4,372
Consumer - installment/other 2,354 18,088 1,770 22,212
-------- ------- ------- -------
Total $ 18,383 $ 34,783 $ 98,869 $152,035
======== ======= ======= =======
Loans with predetermined
rates $ 2,684 $ 21,791 $ 12,051 $ 36,526
Loans with variable or
adjustable rates 15,699 12,992 86,818 115,509
-------- ------- ------- -------
Total $ 18,383 $ 34,783 $ 98,869 $152,035
======== ======= ======= =======
NONACCRUAL AND PAST DUE LOANS
The following table shows loans placed in a nonaccrual status and loans
contractually past due 90 days or more as to principal or interest payments (in
thousands):
December 31,
2000 1999 1998
---- ---- ----
Nonaccruing loans $ 664 $ None $ None
Loans past due 90 days or more 421 1,917 2,059
Percentage to total loans .71% 1.37% 1.56%
Interest accruals are continued on past due, secured loans until the
principal and accrued interest equal the value of the collateral and on
unsecured loans until the financial condition of the creditor deteriorates to
the point that any further accrued interest would be determined to be
uncollectible. At December 31, 2000 and 1999, there were no restructured loans
on which interest was accruing at a reduced rate or on which payments had been
extended.
POTENTIAL PROBLEM LOANS
At December 31, 2000, management had identified loans of $1,267,971 as
potential problem loans. These loans are not classified as nonaccrual or past
due and management does not anticipate losses on these loans as collateral is
considered adequate. The status of these loans is monitored closely and losses,
if any, would not be material.
Loans classified for regulatory purposes as loss, doubtful, substandard, or
special mention do not represent or result from trends or uncertainties which
management reasonably expects will materially impact future operating results,
liquidity or capital resources. Nor do they represent material credits about
which management is aware of any information which causes management to have
serious doubts as to the ability of such borrowers to comply with the loan
repayment terms.
LOAN CONCENTRATIONS
At December 31, 2000, no industry category exceeded ten percent of total
loans.
14
LOAN LOSSES AND ALLOWANCE FOR LOAN LOSSES
For each period presented, the provision for loan losses charged to
operations is based on management's judgment after taking into consideration all
factors connected with the collectibility of the existing portfolio. Management
evaluates the loan portfolio in light of economic conditions, changes in the
nature and value of the portfolio, industry standards and other relevant
factors. Specific factors considered by management in determining the amounts
charged to operations include internally generated loan review reports, past due
reports and historical loan loss experience. This review also considers
concentrations of loans in terms of geography, business type or level of risk.
Management evaluates nonperforming loans relative to their collateral value and
makes appropriate adjustments to the allowance for loan losses when needed.
The Bank has not experienced significant loan losses in any of the last
three years. While 1999 losses increased relative to prior years, the loss rate
of .16% of average loans outstanding is still below the Company's peer group.
During 2000, losses returned to historic levels and continue to be well below
peer average. The overall level of the allowance is well below peer group
averages. Management feels this is appropriate based on its loan loss history
and the composition of its loan portfolio. The current allowance for loan losses
is equal to approximately eight years average loan losses. Based on historical
losses, delinquency rates, a thorough review of the loan portfolio and after
considering the elements of the preceding paragraph, management is of the
opinion that the allowance for loan losses is adequate to absorb future losses
in the current portfolio.
A summary of the activity in the allowance for loan losses for 2000, 1999,
and 1998 follows:
2000 1999 1998
---- ---- ----
Balance at beginning of period $1,090,262 $1,162,176 $1,120,749
--------- --------- ---------
Provision charged to expenses 123,000 140,000 110,000
--------- -------- --------
Loan losses:
Commercial 20,852 107,280 3,551
Installment 125,037 149,357 169,866
Real estate 2,153 2,384
--------- --------
Total loan losses 148,042 259,021 173,417
--------- -------- --------
Recoveries:
Commercial 3,292 5,381 6,819
Installment 39,063 39,454 98,025
Real Estate 342 2,272
--------- --------
Total recoveries 42,697 47,107 104,844
--------- -------- --------
Net loan losses 105,345 211,914 68,573
--------- -------- --------
Balance at end of period $1,107,917 $1,090,262 $1,162,176
========= ========= =========
Allowance for loan losses
as a percentage of loans .73% .78% .88%
Ratio of net loan losses during the
period to average loans outstanding
during the period .07% .16% .05%
15
LOAN LOSSES AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The Company has allocated the allowance according to the amount deemed to be
reasonably necessary to provide for the possibility of losses being incurred
within each of the above categories of loans. The allocation of the allowance as
shown below should not be interpreted as an indication that loan losses in
future years will occur in the same proportions or that the allocation indicates
future loan loss trends. Furthermore, the portion allocated to each loan
category is not the total amount available for future losses that might occur
within such categories since the total allowance is a general allowance
applicable to the entire portfolio.
The following table shows the balance and percentage of the Company's
allowance for loan losses allocated to each major category of loans:
At December 31
--------------------------------------------------------------------------------------
2000 1999 1998
---------------------------- -------------------------- -------------------------
Percent Percent Percent
of of of
Loans Loans Loans
Percent in Percent in Percent in
of Category of Category of Category
Allow- to Total Allow- to Total Allow- to Total
Amount ance Loans Amount ance Loans Amount ance Loans
(Dollars in Thousands)
Commercial $ 332 30% 25% $ 327 30% 26% $ 392 34% 27%
Real estate
mortgage 277 25 61 327 30 60 350 30 59
Installment 333 30 14 273 25 14 260 22 14
Unallocated 166 15 163 15 160 14
----- ------ ---- ----- --- ---- --- ---- ----
Total $1,108 100% 100% $1,090 100% 100% $1,162 100% 100%
===== ==== ==== ===== === ====== ====== === ====
DEPOSITS
The Bank recognized an increase in yearend deposits in 2000 of 9.21%. The
Bank has traditionally avoided brokered and large deposits believing that they
were unstable and thus not desirable. This has proven to be a good strategy as
the local deposit base is considered very stable and small increases in rates
above the competition have resulted in deposit gains in past years.
Certificates of deposit over $100,000 totaled $12,574,718 at December 31,
2000. The maturity distribution of these certificates is as follows:
Less than 3 months $ 1,363,845
3 to 12 months 6,406,932
1 year to 5 years 4,803,941
----------
Total $ 12,574,718
===========
16
STOCKHOLDERS' EQUITY
Total stockholders' equity increased $1,911,834 or 7.56% in 2000. Earnings
retained from operations were the primary source of the increase. As of December
31, 2000, the book value per share was $11.18 compared to $10.30 as of December
31, 1999. Dividends are paid to the stockholders on a quarterly basis in uniform
amounts unless unexpected fluctuations in net income indicate a change to this
policy is needed.
Banking regulators have established a uniform system to address the adequacy
of capital for financial institutions. The rules require minimum capital levels
based on risk adjusted assets. Simply stated, the riskier an entity's
investment, the more capital it is required to maintain. The Bank, as well as
the holding company, is required to maintain these minimum capital levels. The
two types of capital guidelines are Tier I capital (referred to as core capital)
and Tier II capital (referred to as supplementary capital). At December 31,
2000, the Company had Tier I capital of 18.20% of risk weighted assets and
combined Tier I and II capital of 18.95% of risk weighted assets. Regulatory
minimums at this date were 4% and 8%, respectively. The Bank has maintained
capital levels far above the minimum requirements throughout the year. In the
unlikely event that such capital levels are not met, regulatory agencies are
empowered to require the Company to raise additional capital and/or reallocate
present capital.
In addition, the regulatory agencies have issued guidelines requiring the
maintenance of a capital leverage ratio. The leverage ratio is computed by
dividing Tier I capital by actual total assets. The regulators have established
a minimum of 3% for this ratio, but can increase the minimum requirement based
upon an institution's overall financial condition. At December 31, 2000, the
Company reported a leverage ratio of 13.02%. The Bank's leverage ratio was also
above the minimum.
SHORT-TERM BORROWINGS
The information concerning short-term borrowings is shown in Note 9 to the
financial statements.
LIQUIDITY AND INTEREST SENSITIVITY
Liquidity as of December 31, 2000 remains adequate. The Bank historically
has had a stable core deposit base and, therefore, does not have to rely on
volatile funding sources. Because of the stable core deposit base, changes in
interest rates should not have a significant effect on liquidity. During 2000,
the Bank used maturing investments, deposit growth and an increase in short-term
debt to meet its liquidity needs. The Bank's membership in the Federal Home Loan
Bank System also provides liquidity as the Bank borrows money that is repaid
over a ten year period and uses the money to make fixed rate loans. The matching
of the long-term receivables and liabilities helps the Bank reduce its
sensitivity to interest rate changes. The Company reviews its interest rate gap
periodically and makes adjustments as needed.
There are no off-balance-sheet items that will impair future liquidity.
Table IV (page 20) contains an analysis, which shows the repricing
opportunities of earning assets and interest bearing liabilities as of December
31, 2000.
At December 31, 2000, the Company had a cumulative Gap Rate Sensitivity
Ratio of (19.24)% for the one-year repricing period. This generally indicates
that earnings would improve in a declining interest rate environment as
liabilities reprice more quickly than assets. Conversely, earnings would
probably decrease in periods during which interest rates are increasing.
Management constantly monitors the Company's interest rate risk and has decided
that the current position is an acceptable risk for a well-capitalized community
bank operating in a rural environment.
17
Table I
F & M BANK CORP.
SELECTED OPERATING INFORMATION
Years Ending December 31,
(In Thousands, Except per Share Information)
2000 1999 1998 1997 1996
CONDENSED STATEMENTS OF
INCOME AND DIVIDENDS
Interest and Dividend
Income $ 15,509 $ 14,321 $ 14,147 $ 13,532 $ 12,505
Interest Expense 7,411 6,475 6,931 6,319 6,076
------- ------- ------- ------- -------
Net Interest Income 8,098 7,846 7,216 7,213 6,429
Provision for Loan
Losses 123 140 110 180 226
------- ------- ------- ------- -------
Net Interest Income
after Provision for
Loan Losses 7,975 7,706 7,106 7,033 6,203
Noninterest Income 1,808 2,095 1,865 873 661
Noninterest Expenses 4,653 4,313 3,880 3,568 3,410
------- ------- ------- ------- -------
Income before Income
Taxes 5,130 5,488 5,091 4,338 3,454
Income Tax Expense 1,486 1,682 1,590 1,330 1,013
------- ------- ------- ------- -------
Net Income $ 3,644 $ 3,806 $ 3,501 $ 3,008 $ 2,441
======= ======= ======= ======= =======
Total Assets at
Year End $208,818 $195,338 $191,495 $173,810 $166,511
======= ======= ======= ======= =======
PER SHARE INFORMATION
Net Income Per Share $ 1.49 $ 1.55 $ 1.43 $ 1.22 $ 1.00
Dividends Per Share $ .59 $ .52 $ .73 $ .35 $ .29
Book Value Per Share $ 11.18 $ 10.30 $ 9.80 $ 9.33 $ 7.79
FINANCIAL STATEMENT RATIOS
Return on Average
Assets2 1.76% 1.96% 1.94% 1.77% 1.54%
Return on Average
Equity2 13.88% 15.47% 15.00% 14.44% 13.58%
Dividend Payout Ratio 39.60% 33.55% 51.22% 28.89% 28.79%
Average Equity to Average
Assets Ratio2 12.70% 12.65% 12.97% 12.22% 11.34%
1 Reflects adjustments for three for one stock split declared in 1998.
2 Ratios are primarily based on daily average balances.
18
Table II
F & M BANK CORP.
NET INTEREST INCOME/RATES EARNED AND PAID
(On a fully taxable equivalent basis)
(In thousands of dollars)
2000 1999 1998
---- ---- ----
Average Average Average
Rates Rates Rates
Income/ Earned/ Income/ Earned/ Income/ Earned/
ASSETS Average Expense Paid Average Expense Paid Average Expense Paid
Loans:
Commercial 1 $ 37,770 $ 3,573 9.46 $ 35,799 $ 3,147 8.79% $33,921 $ 3,148 9.28%
Real estate 1 88,485 7,340 8.30 80,693 6,944 8.61 78,072 6,889 8.82
Installment 1 20,483 2,047 9.99 17,131 1,681 9.81 16,226 1,689 10.41
------- ------ ----- ------- ------- ----- ------ ------ -----
Total Loans 146,738 12,960 8.83 133,623 11,772 8.81 128,219 11,726 9.15
Investment securities:
Fully taxable 3 31,704 1,975 6.23 32,530 1,983 6.10 27,794 1,707 6.14
Partially Taxable 2,3 10,892 646 5.93 8,278 605 7.31 8,235 663 8.05
Nontaxable 2,3 320 20 6.25
------- ------ ----- ------- ------ ----- ------- ----- -----
Total Investment
Securities 42,596 2,621 6.15 40,808 2,588 6.34 36,349 2,390 6.58
Interest bearing deposits
in banks 659 37 5.61 893 38 4.26 1,777 82 4.61
Federal funds sold 322 19 5.90 2,135 105 4.92 3,415 182 5.33
------- ------ ----- ------- ------ ----- ------- ----- -----
Total Earning
Assets 190,315 15,637 8.22 177,459 14,503 8.17 169,760 14,380 8.47
------ ----- ------ ---- ------ ----
Allowance for loan
losses (1,129) (1,109) (1,174)
Nonearning assets 17,578 18,085 11,420
------ ------ ------
Total Assets $206,764 $194,435 $180,006
======= ========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand - Interest
bearing $ 20,378 466 2.29 $ 20,771 467 2.25 $ 19,552 485 2.48
Savings 28,264 944 3.34 29,532 975 3.30 27,286 953 3.49
All other time
deposits 80,791 4,565 5.65 69,964 3,637 5.20 68,362 3,713 5.43
------ ----- ----- ------ ----- ---- ------ ----- ----
Total Deposits 129,433 5,975 4.62 120,267 5,079 4.22 115,200 5,151 4.47
Short-term debt 8,379 499 5.96 6,726 301 4.48 5,159 252 4.88
Long-term debt 17,037 937 5.50 20,010 1,095 5.47 18,824 1,529 8.12
------ ----- ----- ------ ----- ---- ------ ----- ----
Total Interest Bearing
Liabilities 154,849 7,411 4.79 147,003 6,475 4.40 139,183 6,932 4.98
----- ----- ----- ---- ----- ----
Noninterest bearing
deposits 18,035 16,618 14,813
Other liabilities 7,622 6,211 2,668
----- ----- ------
Total Liabilities 180,506 169,832 156,664
Stockholders' equity 26,258 24,603 23,342
------ ------ ------
Total Liabilities
and Stockholders'
Equity $206,764 $194,435 $180,006
======= ======= =======
Net Interest
Earnings $8,226 $8,028 $7,448
===== ===== =====
Net Yield on Interest
Earning Assets 4.32 4.52% 4.39%
===== ===== =====
1 Interest income on loans includes loan fees.
2 An incremental income tax rate of 34% was used to calculate the tax
equivalent income on nontaxable and partially taxable investments.
3 Average balance information is reflective of historical cost and has not been
adjusted for changes in market value.
19
Table III
F & M BANK CORP.
EFFECT OF RATE-VOLUME CHANGES ON NET INTEREST INCOME
(On a fully taxable equivalent basis)
(In thousands of dollars)
2000 Compared to 1999 1999 Compared to 1998
-------------------------- ---------------------
Increase (Decrease) Increase (Decrease)
Due to Change in:Total Due to Change in: Total
Average Average Increase Average Average Increase
Volume Rate (Decrease) Volume Rate (Decrease)
Interest income:
Loans:
Commercial $ 173 $ 253 426 $ 174 $(175) (1)
Real estate 552 (156) 396 231 (176) 55
Installment 311 55 366 94 (102) (8)
---- ----- ----- ---- ----- ----
Total loans 1,036 152 1,188 499 (453) 46
Investment securities:
Fully taxable (50) 42 (8) 291 (15) 276
Partially taxable 163 (122) 41 3 (61) (58)
Nontaxable (20) (20)
---- ----- ----- ----- ---- ----
Total investment
securities 113 (80) 33 274 (76) 198
Interest bearing
deposits in banks (10) 9 (1) (41) (3) (44)
Federal funds sold (89) 3 (86) (68) (9) (77)
----- ----- ------ ----- ----- ----
Total Interest Income $1,050 $ 84 $1,134 $ 664 $(541) $ 123
===== ===== ===== ==== ===== ====
Interest expense:
Deposits:
Demand $ (9) $ 8 $ (1) $ 30 $ (48) $ (18)
Savings (42) 11 (31) 78 (56) 22
All other time
deposits 485 443 928 87 (163) (76)
---- ----- ----- ---- ----- ----
Total deposits 434 462 896 195 (267) (72)
Short-term debt 74 124 198 76 (27) 49
Long-term debt (163) 5 (158) 96 (530) (434)
----- ----- ------ ---- ----- ----
Total Interest
Expense $ 345 $ 591 $ 936 $ 367 $(824) $(457)
==== ===== ===== ==== ===== ====
NOTES: Volume changes have been determined by multiplying the prior years'
average rate by the change in average balances outstanding. The rate change is
the difference in the total change and the volume change.
20
Table IV
F & M BANK CORP.
INTEREST SENSITIVITY ANALYSIS
(In Thousands of Dollars)
December 31, 2000
1-90 91-365 1-5 Over 5 Not
Days Days Years Years Classified Total
Uses of Funds
Loans:
Commercial $18,251 $2,721 $11,729 $ 286 $ $32,987
Installment 148 957 18,088 1,770 20,963
Real estate 7,631 4,236 74,975 9,994 96,836
Credit cards 1,249 1,249
----- ----- ----- ----- ----- ------
Total Loans 27,279 7,914 104,792 12,050 152,035
Interest bearing
bank deposits 313 313
Federal Funds Sold 909 909
Investment Securities 1,000 92 28,533 15,698 45,323
----- ----- ------ ----- ------ ------
Total 29,501 8,006 133,325 12,050 15,698 198,580
------ ----- ------- ------ ------ -------
Sources of Funds
Deposits:
Interest bearing
demand deposits 5,863 8,738 5,748 20,349
Savings 5,281 10,562 10,563 26,406
Certificates of deposit
$100,000 and over 1,364 6,407 4,804 12,575
Other certificates
of deposit 10,550 34,495 29,365 74,410
------ ------ ------ ----- ----- ------
Total Deposits 11,914 52,046 53,469 16,311 133,740
Short-term debt 8,698 8,698
Long-term debt 819 2,246 10,555 2,766 16,386
----- ----- ------ ----- ----- ------
Total 21,431 54,292 64,024 19,077 158,824
------ ------ ------ ------ ----- -------
Discrete Gap 8,070 (46,286) 69,301 (7,027) 15,698 39,756
Cumulative Gap 8,070 (38,216) 31,085 24,058 39,756
Ratio of Cumulative Gap
to Total Earning Assets 4.06% (19.24)% 15.65% 12.12% 20.02%
Table IV reflects the earlier of the maturity or repricing dates for various
assets and liabilities at December 31, 2000. In preparing the above table, no
assumptions are made with respect to loan prepayments or deposit run offs. Loan
principal payments are included in the earliest period in which the loan matures
or can be repriced. Principal payments on installment loans scheduled prior to
maturity are included in the period of maturity or repricing. Proceeds from the
redemption of investments and deposits are included in the period of maturity.
Estimated maturities on deposits which have no stated maturity dates were
derived from guidance contained in FDICIA 305.
21
Item 7. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report 22
Consolidated Balance Sheets as of December 31, 2000 and 1999 23
Consolidated Statements of Income - Years Ended December 31,
2000, 1999, and 1998 24
Consolidated Statements of Changes in Stockholders' Equity -
Years Ended December 31, 2000, 1999, and 1998 25
Consolidated Statements of Cash Flows -
Years Ended December 31, 2000, 1999, and 1998 26
Notes to Consolidated Financial Statements 27 - 43
22
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
F & M Bank Corp.
Timberville, Virginia
We have audited the accompanying consolidated balance sheets of F & M Bank Corp.
and subsidiaries as of December 31, 2000 and 1999, and the related consolidated
statements of income, changes in stockholders' equity, comprehensive net income
and cash flows for each of the years in the three year period ended December 31,
2000. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of F & M Bank Corp. and
subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the years in the three year period
ended December 31, 2000, in conformity with generally accepted accounting
principles.
S. B. Hoover & Company, L.L.P.
January 26, 2001
Harrisonburg, Virginia
23
F & M BANK CORP.
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 2000 1999
Cash and due from banks (note 3) $ 3,807,575 $ 4,799,546
Interest bearing deposits 312,524 462,127
Federal funds sold 909,000
Securities -
Held to maturity - fair value of $2,859,536
in 2000 and $4,240,013 in 1999 (note 4) 2,886,336 4,329,863
Available for sale (note 4) 38,679,896 36,168,625
Other investments (note 4) 3,756,537 3,923,097
Loans (note 5) 152,034,979 140,317,896
Less allowance for loan losses (note 6) (1,107,917) 1,090,262)
------------ -----------
Net Loans 150,927,062 139,227,634
Construction in progress 578,586
Bank premises and equipment, net (note 7) 3,068,827 3,158,371
Other real estate 426,128 426,128
Interest receivable 1,481,032 1,372,707
Other assets 1,984,391 1,470,155
----------- -----------
Total Assets $208,817,894 $195,338,253
=========== ===========
LIABILITIES
Deposits:
Noninterest bearing $ 18,614,720 $ 17,192,876
Interest bearing:
Demand 14,371,795 15,009,191
Money market accounts 5,977,576 6,140,163
Savings 26,405,584 29,565,654
Time deposits over $100,000 (note 8) 12,574,718 7,381,162
All other time deposits (note 8) 74,410,006 64,217,906
----------- -----------
Total Deposits 152,354,399 139,506,952
Short-term debt (note 9) 8,698,035 7,719,369
Accrued liabilities 4,181,392 4,277,260
Long-term debt (note 10) 16,385,838 18,548,276
----------- -----------
Total Liabilities 181,619,664 170,051,857
----------- -----------
STOCKHOLDERS' EQUITY
Common stock $5 par value, 3,000,000 shares
authorized,2,433,373 and 2,455,962 shares
issued and outstanding for 2000 and 1999,
respectively 12,166,865 12,279,810
Capital surplus 479,468 868,132
Retained earnings (note 16) 13,790,628 11,587,061
Accumulated other comprehensive income 761,269 551,393
----------- -----------
Total Stockholders' Equity 27,198,230 25,286,396
----------- -----------
Total Liabilities and Stockholders' Equity $208,817,894 $195,338,253
=========== ===========
The accompanying notes are an integral part of this statement.
24
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
2000 1999 1998
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans $12,920,610 $11,740,753 $11,695,691
Interest on deposits and federal
funds sold 62,510 143,132 264,235
Interest on debt securities -
taxable 1,980,466 1,904,852 1,670,354
Interest on debt securities -
nontaxable 13,083
Dividends on equity securities 545,654 532,173 503,911
--------- ---------- ---------
Total Interest and Dividend Income 15,509,240 14,320,910 14,147,274
---------- ---------- ----------
INTEREST EXPENSE:
Interest on demand deposits 466,086 467,082 484,254
Interest on savings deposits 944,232 974,507 953,291
Interest on time deposits
over $100,000 462,019 312,233 317,374
Interest on all other time deposits 4,102,688 3,324,936 3,395,708
--------- ---------- ---------
Total interest on deposits 5,975,025 5,078,758 5,150,627
Interest on short-term debt 498,846 301,216 251,889
Interest on long-term debt 936,822 1,095,059 1,529,009
--------- ---------- ---------
Total Interest Expense 7,410,693 6,475,033 6,931,525
--------- ---------- ---------
NET INTEREST INCOME 8,098,547 7,845,877 7,215,749
--------- ---------- ---------
PROVISION FOR LOAN LOSSES (note 6) 123,000 140,000 110,000
--------- ---------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 7,975,547 7,705,877 7,105,749
--------- ---------- ---------
NONINTEREST INCOME:
Service charges on deposit accounts 554,685 470,623 419,904
Insurance and other commissions 143,682 145,007 19,857
Other operating income 339,582 300,227 176,557
Gain on security transactions
(note 4) 769,704 1,179,683 1,248,585
--------- ---------- ---------
Total Noninterest Income 1,807,653 2,095,540 1,864,903
--------- ---------- ---------
NONINTEREST EXPENSES:
Salaries 2,120,549 1,972,167 1,749,640
Employee benefits (note 12) 663,704 611,060 447,763
Occupancy expense 215,312 201,983 188,340
Equipment expense 284,514 254,220 254,402
Other operating expenses 1,369,139 1,273,926 1,240,199
--------- ---------- ---------
Total Noninterest Expenses 4,653,218 4,313,356 3,880,344
--------- ---------- ---------
Income before Income Taxes 5,129,982 5,488,061 5,090,308
INCOME TAX EXPENSE (note 11) 1,486,097 1,681,856 1,589,733
--------- ---------- ---------
NET INCOME $3,643,885 $ 3,806,205 $3,500,575
========= ========== =========
PER SHARE DATA
NET INCOME $ 1.49 $ 1.55 $ 1.43
========= ========== =========
CASH DIVIDENDS $ .59 $ .52 $ .73
========= ========== =========
AVERAGE COMMON SHARES OUTSTANDING 2,445,509 2,454,250 2,455,962
========= ========== =========
The accompanying notes are an integral part of this statement.
25
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Accumulated
Other
Common Capital Retained Comprehensive
Stock Surplus Earnings Income Total
BALANCE -
December 31, 1997 $ 4,093,270 $ 866,694 $ 15,536,083 $2,405,867 $22,901,914
Comprehensive Income:
Net income 3,500,575 3,500,575
Net change in
unrealized appreciation
on securities available
for sale (note 2(k)) (531,167) (531,167)
----------
Comprehensive Income 2,969,408
Dividends on common stock (1,792,852) (1,792,852)
Stock split effected
in the form of a
dividend (1,637,308
shares) 8,186,540 (8,186,540)
----------- ---------- ----------- ---------- ----------
BALANCE -
December 31, 1998 12,279,810 866,694 9,057,266 1,874,700 24,078,470
Comprehensive Income:
Net income 3,806,205 3,806,205
Net change in unrealized
appreciation on
securities available
for sale (note 2(k)) (1,323,307) (1,323,307)
----------
Comprehensive Income 2,482,898
Dividends on common stock (1,276,410) (1,276,410)
Shares repurchased
(2,655 shares) (13,275) (46,352) (59,627)
Shares sold to ESOP
(2,655 shares) 13,275 47,790 61,065
----------- ---------- ----------- --------- ----------
BALANCE -
December 31, 1999 12,279,810 868,132 11,587,061 551,393 25,286,396
Comprehensive Income:
Net income 3,643,885 3,643,885
Net change in unrealized
appreciation on
securities available
for sale (note 2(k)) 209,876 209,876
----------
Comprehensive Income 3,853,761
Dividends on common stock (1,440,318) (1,440,318)
Shares repurchased
(22,589 shares) (112,945) (388,664) (501,609)
----------- ---------- ----------- --------- ----------
BALANCE -
December 31, 2000 $ 12,166,865 $ 479,468 $ 13,790,628 $ 761,269 $27,198,230
=========== ========== =========== ========= ==========
The accompanying notes are an integral part of this statement.
26
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,643,885 $ 3,806,205 $ 3,500,575
Adjustments to reconcile net income
to net cash provided by operating
activities:
Gain on sale of securities (769,704) (1,179,683) (1,248,585)
Depreciation 257,586 218,134 212,687
Amortization of security premiums 19,222 198,559 155,898
Provision for loan losses 123,000 140,000 110,000
Provision for deferred taxes (90,867) 9,410 (35,407)
Increase in interest receivable (108,325) (20,895) (74,546)
Increase in other assets (514,236) (154,134) (147,721)
Increase (decrease) in accrued
expenses (52,373) 386,151 214,860
Amortization of limited
partnership investments 360,893 121,685 81,965
Other noncash expenses 15,208
Gain on sale of land (9,702)
---------- ---------- -----------
Net Cash Provided by
Operating Activities 2,869,081 3,525,432 2,775,232
---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest
bearing bank deposits 149,603 1,682,811 (1,317,478)
Net (increase) decrease in
federal funds sold (909,000) 2,436,000 (181,000)
Proceeds from maturities of
securities held to maturity 1,430,967 4,436,157 13,206,462
Proceeds from maturities of
securities available for sale 3,326,438 12,349,066 6,393,226
Proceeds from sales of
securities available for sale 2,185,135 3,764,619 7,319,842
Purchases of securities
held to maturity (6,771) (1,523,000) (5,438,377)
Purchases of securities
available for sale (7,233,362) (16,827,648) (25,390,932)
Purchase of other securities (1,500) (999,150)
Net increase in loans (11,822,428) (8,228,731) (9,225,487)
Purchase of property and equipment (225,456) (1,296,207) (319,803)
Construction in progress payments (578,586) (90,332)
Sale of other real estate 79,489 10,641
---------- ---------- -----------
Net Cash Used in Investing
Activities (13,603,971) (3,208,433) 16,032,388)
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in demand and savings
deposits (2,538,209) 4,036,901 2,825,773
Net increase in time deposits 15,385,656 347,781 5,962,403
Net increase in short-term debt 978,666 430,322 1,951,128
Dividends paid in cash (1,419,147) (1,227,072) (1,735,547)
Proceeds from long-term debt 1,000,000 23,714,053
Payments to repurchase common
stock (501,609) (59,627)
Proceeds from issuance of
common stock 61,065
Repayments of long-term debt (3,162,438) (3,305,295) 18,836,583)
----------- ----------- -----------
Net Cash Provided by
Financing Activities 9,742,919 284,075 13,881,227
---------- ---------- -----------
Net Increase (decrease) in Cash
and Cash Equivalents (991,971) 601,074 624,071
Cash and Cash Equivalents,
Beginning of Year 4,799,546 4,198,472 3,574,401
---------- ---------- -----------
Cash and Cash Equivalents,
End of Year $ 3,807,575 $ 4,799,546 $ 4,198,472
========== ========== ===========
Supplemental Disclosure:
Cash paid for:
Interest expense $ 7,218,051 $ 6,467,192 $ 6,883,142
Income taxes 1,322,000 1,345,000 1,595,000
Noncash Transactions
The Company financed purchases of its interests in limited partnerships in
1999 through the incurrence of debt totaling $1,498,500.
The accompanying notes are an integral part of this statement.
27
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 NATURE OF OPERATIONS:
F & M Bank Corp. ("Company"), through its subsidiary Farmers &
Merchants Bank ("Bank"), operates under a charter issued by the
Commonwealth of Virginia and provides commercial banking services. As
a state chartered bank, the Bank is subject to regulation by the
Virginia Bureau of Financial Institutions and the Federal Reserve
Bank. The Bank provides services to customers located mainly in
Rockingham County, Virginia, and the adjacent counties of Page,
Shenandoah and Augusta. Services are provided at five branch offices.
In addition, the Company offers insurance and financial services
through its subsidiaries, TEB Life Insurance, Inc. and Farmers &
Merchants Financial Services, Inc.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accounting and reporting policies of the Company and its
subsidiaries conform to generally accepted accounting principles and
to accepted practice within the banking industry.
The following is a summary of the more significant policies:
(d) Principles of Consolidation
The consolidated financial statements include the accounts of the
Farmers and Merchants Bank, the TEB Life Insurance Company and
Farmers & Merchants Financial Services, Inc. Significant
intercompany accounts and transactions have been eliminated.
(d) Use of Estimates in the Preparation of Financial Statements
In preparing the financial statements, management is required to
make estimates and assumptions that affect the reported amounts in
those statements; actual results could differ significantly from
those estimates. A material estimate that is particularly
susceptible to significant changes is the determination of the
allowance for loan losses, which is sensitive to changes in local
and national economic conditions.
(d) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and deposits at
other financial institutions whose initial maturity is ninety days
or less.
(d) Investment Securities
Management reviews the securities portfolio and classifies all
securities as either held to maturity or available for sale at the
date of acquisition. Securities that the Company has both the
positive intent and ability to hold to maturity (at time of
purchase) are classified as held to maturity securities. All other
securities are classified as available for sale. Securities held to
maturity are carried at historical cost and adjusted for
amortization of premiums and accretion of discounts, using the
effective interest method. Securities available for sale are
carried at fair value with any valuation adjustments reported, net
of deferred taxes, as a part of other accumulated comprehensive
income. Also included in securities available for sale are
marketable equity securities.
Interest, amortization of premiums and accretion of discounts on
securities are reported as interest income using the effective
interest method. Gains (losses) realized on sales and calls of
securities are determined on the specific identification method.
28
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(e)Accounting for Historic Rehabilitation and Low Income Housing
Partnerships
The Company periodically invests in low income housing partnerships
whose primary benefit is the distribution of federal tax credits to
partners. The Company recognizes these benefits and the cost of the
investments over the life of the partnership (usually 15 years). In
addition, state and federal historic rehabilitation credits are
generated from a recent investment in a partnership organized for
this purpose. Amortization of this investment is based on the
amount or benefits received in the current year to total estimated
benefits over the life of the project. All benefits have been shown
as investment income since income tax benefits are the only
anticipated benefits of ownership.
(f)Loans
Loans are carried on the balance sheet net of any unearned interest
and the allowance for loan losses. Interest income on loans is
determined using the effective interest method on the daily amount
of principal outstanding except where serious doubt exists as to
collectibility of the loan, in which case the accrual of income is
discontinued.
(g)Allowance for Loan Losses
The allowance for loan losses is based upon management's knowledge
and review of the loan portfolio. Estimation of an adequate
allowance for loan losses involves the exercise of judgement, the
use of assumptions with respect to present economic conditions and
knowledge of the environment in which the Bank operates. Among the
factors considered in determining the level of the allowance are
the changes in composition of the loan portfolio, the amount of
delinquent and nonaccrual loans, past loan loss experience and the
value of collateral securing the loans.
(h)Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation is charged to income over the estimated
useful lives of the assets on a combination of the straight-line
and accelerated methods. The ranges of the useful lives of the
premises and equipment are as follows:
Buildings and Improvements 10 - 40 years
Furniture and Fixtures 5 - 20 years
Maintenance, repairs, and minor improvements are charged to
operations as incurred. Gains and losses on dispositions are
reflected in other income or expense.
(i)Pension Plans
Substantially all employees are covered by a pension plan. The net
periodic pension expense includes a service cost component,
reflecting the actual return on plan assets, and the effect of
deferring and amortizing certain actuarial gains and losses and the
unrecognized net transition asset.
29
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(j)Income Taxes
Amounts provided for income tax expense are based on income
reported for financial statement purposes rather than amounts
currently payable under income tax laws. Deferred taxes, which
arise principally from temporary differences between the period in
which certain income and expenses are recognized for financial
accounting purposes and the period in which they affect taxable
income, are included in the amounts provided for income taxes.
(k)Earnings Per Share
Earnings per share are based on the weighted average number of
shares outstanding. Prior period per share amounts have been
restated to reflect the 1998 stock split.
(l)Comprehensive Income
The Corporation adopted SFAS 130, Reporting Comprehensive Income,
as of January 1, 1998. Accounting principles generally require that
recognized revenue, expenses, gains and losses be included in net
income. Although certain changes in assets and liabilities, such as
unrealized gains and losses on available-for-sale securities, are
reported as a separate component of the equity section of the
balance sheet, such items, along with net income, are components of
comprehensive income. The adoption of SFAS 130 had no effect on the
Corporation's net income or shareholders' equity.
The components of other comprehensive income and related tax
effects are as follows:
Years Ended December 31,
------------------------
2000 1999 1998
---- ---- ----
Unrealized holding gains
(losses) on available-
for-sale securities $1,011,142 $ (915,573) $ 388,325
Reclassification adjustment
for gains realized in
income (769,704) (1,179,683) (1,248,585)
--------- ---------- ----------
Net Unrealized Gains
(Losses) 241,438 (2,095,256) (860,260)
Tax effect 31,562 771,949 329,093
--------- --------- ---------
Net Change $ 209,876 $(1,323,307) $ (531,167)
========= ========== =========
NOTE 3 CASH AND DUE FROM BANKS:
The Bank is required to maintain average reserve balances based on a
percentage of deposits. The average balance of cash, which the Federal
Reserve Bank requires to be on reserve, was $764,000 and $736,000 for
the years ended December 31, 2000 and 1999, respectively.
30
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 INVESTMENT SECURITIES:
The amortized cost and fair value of securities held to maturity are
as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
December 31, 2000
U. S. Treasuries
and Agencies $1,109,274 $ $ 1,786 $1,107,488
Corporate bonds 1,777,062 25,014 1,752,048
--------- -------- --------- ---------
Total Securities
Held to Maturity $2,886,336 $ $ 26,800 $2,859,536
========= ======== ======== =========
December 31, 1999
U. S. Treasuries
and Agencies $2,468,607 $ $ 25,194 $2,443,413
Mortgage-backed
obligations of
federal agencies 79,696 316 79,380
Corporate bonds 1,781,560 64,340 1,717,220
--------- -------- -------- ---------
Total Securities
Held to Maturity $4,329,863 $ $ 89,850 $4,240,013
========= ======== ======== =========
The amortized cost and fair value of securities available for sale are
as follows:
December 31, 2000
U.S. Agencies $15,326,434 $ 137,478 $ 45,452 $15,418,460
Mortgage-backed
obligations of
federal agencies 1,839,058 7,445 6,808 1,839,695
Marketable
equities 10,853,533 2,416,151 1,327,793 11,941,891
Corporate bonds 9,499,943 57,652 77,745 9,479,850
--------- --------- --------- ---------
Total Securities
Available for
Sale $37,518,968 $2,618,726 $1,457,798 $38,679,896
========== ========= ========= ==========
December 31, 1999
U.S. Agencies $14,273,511 $ $ 360,181 $13,913,330
Mortgage-backed
obligations of
federal agencies 2,584,194 7,480 20,353 2,571,321
Marketable
equities 10,810,992 2,433,176 905,194 12,338,974
Corporate bonds 7,580,438 235,438 7,345,000
--------- --------- --------- ---------
Total Securities
Available for
Sale $35,249,135 $2,440,656 $1,521,166 $36,168,625
========== ========= ========= ==========
31
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 INVESTMENT SECURITIES (CONTINUED):
The amortized cost and fair value of securities at December 31, 2000,
by contractual maturity are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
Securities Held Securities Available
to Maturity for Sale
Amortized Fair Amortized Fair
Cost Value Cost Value
Due in one year or
less $ 298 $ 298 $ 1,092,595 $ 1,091,349
Due after one year
through five
years 2,886,038 2,859,238 25,572,840 25,646,656
--------- --------- ---------- ----------
Total 2,886,336 2,859,536 26,665,435 26,738,005
Marketable
equities 10,853,533 11,941,891
---------- --------- ---------- ----------
$2,886,336 $2,859,536 $37,518,968 $38,679,896
========= ========= ========== ==========
Realized gains and losses and the gross proceeds from the sale of debt
securities were not material in 2000, 1999 or 1998. Realized gains and
losses on marketable equity transactions are summarized below:
2000 1999 1998
Gains $ 798,563 $1,239,207 $1,579,042
Losses 28,859 59,524 330,457
-------- -------- --------
Net Gains $ 769,704 $1,179,683 $1,248,585
======== ========= =========
The carrying value (which approximates fair value) of securities
pledged by the Company to secure deposits and for other purposes
amounted to $18,107,053 at December 31, 2000 and $13,836,267 at
December 31, 1999.
There were no state or political subdivision obligations of a single
issuer that exceeded 10% of stockholders' equity at December 31, 2000,
1999 or 1998.
32
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED):
NOTE 4 INVESTMENT SECURITIES (CONTINUED):
Other investments consist of investments in six low-income housing and
historic credit partnerships (carrying basis of $2,519,368) and stock
in the Federal Home Loan Bank, Community Bankers Bank, Federal Reserve
Bank, Shenandoah Title, LLC and Virginia Bankers' Insurance Center,
LLC (carrying basis of $1,237,169). The interests in the low-income
housing and historic credit partnerships have limited transferability
and the interests in the other stocks are restricted as to sales. The
market values of these securities are estimated to approximate their
carrying value as of December 31, 2000.
At December 31, 2000, the Company was committed to invest an
additional $2,151,766 in four low-income housing limited partnerships.
These funds will be paid as requested by the general partner to
complete the projects. This additional investment has been reflected
in the above carrying basis and as an accrued liability on the balance
sheet.
NOTE 5 LOANS:
Loans outstanding as of December 31 are summarized as follows:
2000 1999
Real Estate
Construction $ 4,371,959 $ 5,481,073
Mortgage 92,463,872 84,019,312
Commercial and agricultural 32,987,085 31,685,756
Installment 20,927,176 18,082,123
Credit cards 1,249,068 1,015,866
Other 35,819 33,766
----------- -----------
Total $152,034,979 $140,317,896
=========== ===========
The Company has pledged mortgage loans as collateral for borrowings
with the Federal Home Loan Bank of Atlanta totaling $21,293,076 and
$22,033,948 as of December 31, 2000 and 1999, respectively.
NOTE 6 ALLOWANCE FOR LOAN LOSSES:
A summary of changes in the allowance for loan losses is shown in the
following schedule:
2000 1999 1998
Balance, beginning of year $1,090,262 $1,162,176 $1,120,749
Provision charged to operating
expenses 123,000 140,000 110,000
Loan recoveries 42,697 47,107 104,844
Loans charged off (148,042) (259,021) (173,417)
---------- --------- ---------
Balance, End of Year $1,107,917 $1,090,262 $1,162,176
========= ========= =========
Percentage of gross loans .73% .78% .88%
33
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 BANK PREMISES AND EQUIPMENT:
Bank premises and equipment as of December 31 are summarized as
follows:
2000 1999
Land $ 424,723 $ 480,651
Buildings and improvements 2,797,386 2,818,590
Furniture and equipment 2,661,095 2,558,613
----------- -----------
5,883,204 5,857,854
Less - accumulated depreciation (2,814,377) (2,699,483)
----------- -----------
Net $ 3,068,827 $ 3,158,371
=========== ===========
Provisions for depreciation of $257,586 in 2000, $218,134 in 1999 and
$212,687 in 1998 were charged to operations.
NOTE 8 DEPOSITS:
At December 31, 2000, the scheduled maturities of time deposits are as
follows:
2001 $ 53,881,016
2002 20,179,485
2003 6,878,376
2004 1,153,448
Thereafter 4,892,399
-----------
Total $ 86,984,724
===========
NOTE 9 SHORT-TERM DEBT:
Short-term debt information is summarized as follows:
Weighted
Maximum Outstanding Average Average Year End
Outstanding at at Balance Interest Interest
Any Month End Year End Outstanding 1 Rate Rate
2000
Treasury, tax
and loan $ 29,205 $ $ 16,931 n/a n/a
Federal funds
purchased 6,040,000 2,037,910 6.74% n/a
Notes payable 359,302 68,105 8.92% n/a
Securities sold
under agreements
to repurchase 8,698,035 8,698,035 6,255,820 5.68% 5.76%
---------- ---------- ---------- ------ ----
Totals $ 8,698,035 $ 8,378,766 5.95% 5.76%
========== ========== ===== =====
34
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 SHORT-TERM DEBT (CONTINUED):
Weighted
Maximum Outstanding Average Average Year End
Outstanding at at Balance Interest Interest
Any Month End Year End Outstanding 1 Rate Rate
1999
Treasury, tax
and loan $ 26,246 $ 17,081 $ 22,214 n/a n/a
Federal funds
purchased 1,072,000 963,000 136,827 5.66% 5.77%
Notes payable 116,739 116,739 9,598 8.00% 8.00%
Securities sold
under agreements
to repurchase 7,762,956 6,622,549 6,557,376 4.46% 4.88%
---------- ---------- ---------- ----- -----
Totals $ 7,719,369 $ 6,726,015 4.47% 5.03%
========== ========== ===== =====
1998
Treasury, tax
and loan $ 661,833 $ $ 73,505 7.98% n/a
Federal funds
purchased 304,000 11,244 5.88% n/a
Notes payable 344,753 50,542 7.75% n/a
Securities sold under
agreements to
repurchase 7,155,227 7,155,227 5,099,700 4.82% 4.31%
---------- ---------- ---------- ---- ----
Totals $ 7,155,227 $ 5,234,991 4.81% 4.31%
========== ========== ==== ====
1 Based on daily amounts outstanding
The Bank issues repurchase agreements to customers desiring short-term
investments. These agreements are issued on a daily basis and are
secured by United States Agency obligations and corporate bonds. The
market value of these securities approximates their carrying value.
All securities sold under agreements to repurchase are under the
Company's control.
As of December 31, 2000, the Company had lines of credit with
correspondent banks totaling $13,366,000, which are used in the
management of short-term liquidity.
35
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 LONG-TERM DEBT:
Advances from the Federal Home Loan Bank of Atlanta (FHLB) were
$1,000,000 in 2000 and zero in 1999. The interest rates on the notes
payable are fixed at the time of the advance and range from 5.05% to
5.96%; the weighted average interest rate is 5.50% at December 31,
2000. During 1998, the Company paid $392,729 in prepayment penalties
to refinance portions of this debt. These penalties were expensed in
1998 when paid. The long-term debt is secured by qualifying mortgage
loans owned by the Company.
Repayments of long-term debt are due either quarterly or semi-annually
and interest is due monthly. Interest expense of $936,822, $1,095,059,
and $1,529,009 was incurred on these debts in 2000, 1999, and 1998,
respectively. The maturities of long-term debt as of December 31, 2000
are as follows:
2001 $ 3,065,295
2002 2,985,295
2003 2,831,241
2004 2,369,079
2005 2,369,079
Thereafter 2,765,849
----------
Total $16,385,838
==========
NOTE 11 INCOME TAX EXPENSE:
The components of the income tax expense are as follows:
2000 1999 1998
Current expense
Federal $1,538,275 $1,626,377 $1,552,168
State 38,689 46,069 72,972
Deferred expense
Federal (90,867) 9,410 (35,407)
---------- --------- ---------
Total Income Tax Expense $1,486,097 $1,681,856 $1,589,733
========= ========= =========
Amounts in above arising from gains
on security transactions $ 293,322 $ 427,980 $ 473,182
========= ========= =========
The deferred tax effects of temporary differences are as follows:
2000 1999 1998
Tax Effects of Temporary Differences:
LIH Partnership Losses $ (43,697) $ $
Provision for loan losses 4,983 24,451 (14,086)
Split dollar life insurance (8,506) (2,422) (11,267)
Non-qualified deferred
compensation (54,828) (42,932) (27,427)
Depreciation 56,362 19,902 8,477
Pension expense (40,163) 7,992 16,818
Other (5,018) 2,419 (7,922)
--------- -------- --------
Deferred Income Tax Benefit $ (90,867) $ 9,410 $ (35,407)
========= ======== =========
36
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 INCOME TAX EXPENSE (CONTINUED):
The components of the deferred taxes as of December 31 are as follows:
2000 1999
Deferred Tax Assets:
Bad debt allowance $ 257,058 $ 252,075
Split dollar life insurance 94,375 85,869
Nonqualified deferred compensation 129,747 74,919
Low income housing partnership losses 29,743 12,152
State historic tax credits 129,871
Other 7,205
---------
Total Assets 647,999 425,015
--------- --------
Deferred Tax Liabilities:
Securities available for sale 375,693 368,730
Unearned low income housing credits 288,438 199,980
Depreciation 102,409 46,047
Pension 125,599 165,762
Other 9,418 23,371
-------- --------
Total Liabilities 901,557 803,890
-------- --------
Net Liability $(253,558) $(378,875)
========= ========
The following table summarizes the differences between the actual
income tax expense and the amounts computed using the federal
statutory tax rates:
2000 1999 1998
Tax expense at federal
statutory rates $1,744,194 $1,865,941 $1,730,705
Increases (decreases) in taxes
resulting from:
State income taxes, net 39,512 56,038 62,594
Partially exempt income (126,828) (146,584) (138,667)
Tax-exempt income (180,486) (47,212) (41,034)
Other 9,705 (46,327) (23,865)
--------- ---------- ---------
Total Income Tax Expense $1,486,097 $1,681,856 $1,589,733
========= ========= =========
NOTE 12 EMPLOYEE BENEFITS:
The Bank participates in the Virginia Bankers' Association Master
Defined Benefit Pension Plan and Trust. Substantially all bank
employees are covered by the plan. Benefits are based upon the
participant's length of service and annual earnings with vesting of
benefits after five years of service. Plan assets consist primarily of
investments in stocks and bonds. Pension expense totaled $165,509,
$153,667, and $96,868 for 2000, 1999, and 1998, respectively.
37
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 EMPLOYEE BENEFITS (CONTINUED):
The Company has established an employee stock ownership plan which
provides stock ownership to substantially all employees of the Bank.
The Plan provides total vesting upon the attainment of five years of
service. Contributions to the plan are made at the discretion of the
Board of Directors and are allocated based on the compensation of each
employee relative to total compensation paid by the Bank. All shares
issued and held by the Plan are considered outstanding in the
computation of earnings per share. Dividends on Company stock are
allocated and paid to participants at least annually. Shares of
Company stock, when distributed, have restrictions on transferability.
The Company contributed $159,000 in 2000, $160,000 in 1999, $150,000
in 1998 to the Plan and charged this expense to operations.
NOTE 13 CONCENTRATIONS OF CREDIT:
The Company had cash deposits in other commercial banks totaling
$2,580,337 and $2,157,260 at December 31, 2000 and 1999, respectively.
The Company grants commercial, residential real estate and consumer
loans to customers located primarily in the northwestern portion of
the state of Virginia. Although the Company has a diversified loan
portfolio, a substantial portion of its debtors' ability to honor
their contracts is dependent upon the agribusiness economic sector,
specifically the poultry industry. Collateral required by the Company
is determined on an individual basis depending on the purpose of the
loan and the financial condition of the borrower. Approximately 70% of
the loan portfolio is secured by real estate.
NOTE 14 COMMITMENTS:
The Company makes commitments to extend credit in the normal course of
business and issues standby letters of credit to meet the financing
needs of its customers. The amount of the commitments represents the
Company's exposure to credit loss that is not included in the balance
sheet. As of the balance sheet dates, the Company had the following
commitments outstanding:
2000 1999
Commitments to loan money $ 23,266,949 $ 25,295,880
Standby letters of credit 596,922 1,189,951
The Company uses the same credit policies in making commitments to
lend money and issue standby letters of credit as it does for the
loans reflected in the balance sheet.
38
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14 COMMITMENTS (CONTINUED):
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of
the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's creditworthiness
on a case-by-case basis. Collateral required, if any, upon extension
of credit is based on management's credit evaluation of the borrower.
Collateral held varies but may include accounts receivable, inventory,
property, plant and equipment.
NOTE 15 TRANSACTIONS WITH RELATED PARTIES:
During the year, officers and directors (and companies controlled by
them) were customers of and had transactions with the Company in the
normal course of business. These transactions were made on
substantially the same terms as those prevailing for other customers
and did not involve any abnormal risk.
Loan transactions with related parties are shown in the following
schedule:
2000 1999
Total loans, beginning of year $1,345,420 $ 1,133,362
Change in directorship 131,279
New loans 594,748 697,597
Repayments (536,569) (616,818)
---------- ----------
Total Loans, End of Year $1,403,599 $ 1,345,420
========= ==========
NOTE 16 DIVIDEND LIMITATIONS ON SUBSIDIARY BANK:
The principal source of funds of F & M Bank Corp. is dividends paid by
the Farmers and Merchants Bank. The Federal Reserve Act restricts the
amount of dividends the Bank may pay. Approval by the Board of
Governors of the Federal Reserve System is required if the dividends
declared by a state member bank, in any year, exceed the sum of (1)
net income of the current year and (2) income net of dividends for the
preceding two years. As of January 1, 2001, approximately $2,118,000
was available for dividend distribution without permission of the
Board of Governors. Dividends paid by the Bank to the Company totaled
$1,345,000 in 2000, $1,419,000 in 1999 and $1,550,000 in 1998.
39
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 17 DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107 (SFAS 107)
"Disclosures About the Fair Value of Financial Statements" defines the
fair value of a financial instrument as the amount at which a
financial instrument could be exchanged in a current transaction
between willing parties, other than in a forced liquidation sale. As
the majority of the Bank's financial instruments lack an available
trading market, significant estimates, assumptions and present value
calculations are required to determine estimated fair value.
Estimated fair value and the carrying value of financial instruments
at December 31, 2000 and 1999 are as follows (in thousands):
2000 1999
Estimated Carrying Estimated Carrying
Fair Value Value Fair Value Value
Financial Assets
Cash $ 3,808 3,808 $ 4,800 $ 4,800
Interest bearing
deposits 313 313 462 462
Federal funds sold 909 909
Securities available for
sale 38,680 38,680 36,169 36,169
Securities held to
maturity 2,860 2,886 4,240 4,330
Other investments 3,757 3,757 3,923 3,923
Loans 150,833 150,927 136,922 139,228
Accrued interest
receivable 1,481 1,481 1,373 1,373
Financial Liabilities
Demand Deposits:
Non-interest bearing 18,615 18,615 17,193 17,193
Interest bearing 20,349 20,349 21,149 21,149
Savings deposits 26,406 26,406 29,566 29,566
Time deposits 87,385 86,985 71,904 71,599
Accrued liabilities 4,181 4,181 4,277 4,277
Short-term debt 8,698 8,698 7,719 7,719
Long-term debt 16,219 16,386 17,472 18,548
The carrying value of cash and cash equivalents, other investments,
deposits with no stated maturities, short-term borrowings, and accrued
interest approximate fair value. The fair value of securities was
calculated using the most recent transaction price or a pricing model,
which takes into consideration maturity, yields and quality. The
remaining financial instruments were valued based on the present value
of estimated future cash flows, discounted at various rates in effect
for similar instruments during the month of December 2000.
40
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 18 REGULATORY MATTERS:
The Company and its subsidiary bank are subject to various regulatory
capital requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate certain
mandatory - and possibly additional discretionary - actions by
regulators that, if undertaken, could have a direct material effect on
the Company's financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Company
must meet specific capital guidelines that involve quantitative
measures of the Company's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting
practices. The Company's capital amounts and classification are also
subject to qualitative judgments by the regulators about components,
risk weightings, and other factors.
Quantitative measures established by regulation, to ensure capital
adequacy, require the Company to maintain minimum amounts and ratios.
These ratios are defined in the regulations and the amounts are set
forth in the table below. Management believes, as of December 31,
2000, that the Company and its subsidiary bank meet all capital
adequacy requirements to which they are subject.
As of the most recent notification from the Bureau of Financial
Institutions, the subsidiary bank was categorized as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Company must maintain minimum
total risk-based, Tier I risk-based, and Tier I leverage ratios as set
forth in the table. There are no conditions or events since that
notification that management believes have changed the institution's
category.
The Company's actual capital ratios are presented in the following
table:
Actual Regulatory Requirements
December 31, Adequately Well
2000 1999 Capitalized Capitalized
Total risk-based ratio 18.95% 18.44% 8.00% 10.00%
Tier 1 risk-based ratio 18.20% 17.66% 4.00% 6.00%
Total assets leverage
ratio 12.96% 12.65% 3.00% 5.00%
NOTE 19 ACQUISITION OF BRANCHES:
During the third quarter of 2000, F&M Bank Corp. entered into an
agreement to purchase the First Union National Bank branches located
in Edinburg and Woodstock, Virginia. The agreement has been approved
by bank regulators and closing is set for February 23, 2001. The
branches to be acquired have a combined total of approximately $40
million in deposits as of December 31, 2000.
41
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 20 PARENT CORPORATION ONLY FINANCIAL STATEMENTS:
BALANCE SHEETS
December 31,
ASSETS 2000 1999
Cash and cash equivalents $ 176,599 $ 189,476
Investment in subsidiaries 15,147,934 13,461,648
Loans receivable 194,902 246,885
Securities available for sale 11,409,194 11,851,335
Other securities 2,519,666 2,873,490
Accrued interest receivable 736 1,373
Due from subsidiaries 68,762
Income tax receivable 248,086 127,673
Other real estate 426,128 426,128
---------- ----------
Total Assets $30,192,007 $29,178,008
========== ==========
LIABILITIES
Notes payable $ $ 116,739
Due to subsidiaries 176,743
Dividends payable 365,006 343,835
Demand obligations for low income
housing investment 2,151,766 2,467,809
Deferred income taxes 477,005 786,486
---------- ----------
Total Liabilities 2,993,777 3,891,612
---------- ----------
STOCKHOLDERS' EQUITY
Common stock par value $5 per share,
3,000,000 shares authorized, 2,433,373
and 2,455,962 shares issued and outstanding
for 2000 and 1999, respectively 12,166,865 12,279,810
Capital surplus 479,468 868,132
Retained earnings 13,790,628 11,587,061
Accumulated other comprehensive income 761,269 551,393
---------- ----------
Total Stockholders' Equity 27,198,230 25,286,396
---------- ----------
Total Liabilities and Stockholders' Equity $30,192,007 $29,178,008
========== ==========
42
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 20 PARENT CORPORATION ONLY FINANCIAL STATEMENTS (CONTINUED):
STATEMENTS OF NET INCOME AND RETAINED EARNINGS
Years Ended December 31,
2000 1999 1998
INCOME
Dividends from affiliate $ 1,345,000 $ 1,419,000 $ 1,550,000
Interest on loans 16,543 21,022 22,059
Investment income 20,933 12,759 26,308
Dividend income 415,533 422,640 433,962
Security gains 798,563 1,127,882 1,236,405
Net limited partnership income 147,008 36,302 12,802
Other 831 2,504 9,702
---------- ---------- ----------
Total Income 2,744,411 3,042,109 3,291,238
---------- ---------- ----------
EXPENSES
Interest expense 6,087 965 3,917
Administrative expenses 111,740 112,531 80,584
---------- ---------- ----------
Total Expenses 117,827 113,496 84,501
---------- ---------- ----------
Net income before income tax expense
and increase in undistributed equity
of affiliates 2,626,584 2,928,613 3,206,737
INCOME TAX EXPENSE 200,018 401,790 461,570
---------- ---------- ----------
Income before increase in undistributed
equity of affiliates 2,426,566 2,526,823 2,745,167
Increase in undistributed income
of affiliates 1,217,319 1,279,382 755,408
---------- ---------- ----------
NET INCOME 3,643,885 3,806,205 3,500,575
Retained earnings, beginning of year 11,587,061 9,057,266 15,536,083
Stock split effected in the form of
a dividend (8,186,540)
Dividends on common stock (1,440,318) (1,276,410) (1,792,852)
---------- ---------- ----------
Retained Earnings, End of Year $13,790,628 $11,587,061 $ 9,057,266
========== ========== ==========
43
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 20 PARENT CORPORATION ONLY FINANCIAL STATEMENTS (CONTINUED):
STATEMENTS OF CASH FLOWS
Years Ended December 31,
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,643,885 $ 3,806,205 $ 3,500,575
Adjustments to reconcile net income
to net cash provided by operating
activities:
Undistributed subsidiary income (1,217,319) (1,279,382) (755,408)
Gain on sale of securities (798,563) (1,127,882) (1,236,405)
Deferred tax (benefit) expense (90,608) 10,628
Decrease (increase) in interest
receivable (637) (168) 267
Decrease (increase) in due from
subsidiary (68,762) 4,393 360,052
Decrease (increase) in other
receivables (120,414) 81,929 (89,161)
Increase (decrease) in due to
subsidiary (176,743) 234,492 51,650
Amortization of limited
partnership investments 360,893 121,685 81,965
---------- ---------- ----------
Net Cash Provided by Operating
Activities 1,531,732 1,851,900 1,913,535
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities
available for sale 2,185,135 3,556,512 4,912,248
Proceeds from maturity of securities
available for sale 690 1,987 994,192
Purchase of securities available
for sale (1,428,879) (5,167,543) (4,646,422)
Purchase of other securities (1,500) (999,150)
Decrease in loans receivable 51,983 12,944 11,979
---------- ---------- ----------
Net Cash Provided by (Used in)
Investing Activities 808,929 (1,597,600) 272,847
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term debt (116,739) 116,739
Decrease in demand obligations payable (316,043)
Payments to repurchase common stock (501,609) (59,627)
Proceeds from issuance of common stock 61,065
Dividends paid in cash (1,419,147) (1,227,072) (1,735,547)
----------- ----------- ----------
Net Cash Used in Financing
Activities (2,353,538) (1,108,895) (1,735,547)
----------- ----------- ----------
Net Increase (decrease) in Cash and
Cash Equivalents (12,877) (854,595) 450,835
Cash and Cash Equivalents, Beginning
of Year 189,476 1,044,071 593,236
---------- ---------- ----------
Cash and Cash Equivalents, End of Year $ 176,599 $ 189,476 $ 1,044,071
========== ========== ==========
Noncash Transactions
The Company financed purchases of its interests in limited partnerships in
1999 through the incurrence of debt totaling $1,498,500.
44
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
Part III
Item 9. Directors and Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Principal Occupation
Name and Position Director During the Last
with the Bank Age Since Five Years
CLASS A DIRECTORS
(to serve until the 2000 annual meeting of shareholders)
Ellen R. Fitzwater 54 1999 Corporate Accountant, Rocco,
Inc., since 1995; Partner,
Financial Manager Fitzwater
Trucking since 1990;
Member-manager, F&R Leasing
L.L.C. since June 2000;
Member, Blue Ridge
Transportation Service,
L.L.C. since June 2000
Lawrence H. Hoover, Jr. 66 1981 Attorney, Partner in Hoover,
Vice Chairman of the Penrod, Davenport & Crist and
Board its predecessor since 1971
Richard S. Myers 53 1988 President of Dick Myers
Chevrolet-GEO since February
1991; Owner, TrAndy
Apartments, L.L.C. and
TrAndy Real Estate Holdings,
L.L.C.
Ronald E. Wampler 53 1991 Farmer and partner in Dove
Ohio Farms, LLC. and its
affiliates
CLASS B DIRECTORS
(to serve until the 2001 annual meeting of shareholders)
Thomas L. Cline 54 1991 President of Truck &
Equipment Corp. and
MacLease, Inc. since May
1997; Secretary of North and
South Lines, Inc. since May
1997; Secretary of Truck
Thermo King and Transport
Repairs, Inc. since 1974
Robert L. Halterman 65 1980 President of Virginia
Classic Mustang, Inc., an
auto parts company; Partner
in H&H Properties
Michael W. Pugh 46 1994 President of Old Dominion
Realty, Inc.; Partner in
Tri-City Development Co.;
President of Colonial
Appraisal Service, Inc. and
Treasurer of Old Mill
Enterprises, Inc.; Manager
of Pugh Investments L.L.C.
and Secretary of Oak Tree
Enterprises, Inc.
45
CLASS C DIRECTORS
(to serve until the 2002 annual meeting of shareholders)
Julian D. Fisher 60 1990 CEO of Farmers & Merchants
President Bank since May 1996; President
of Bank since Oct. 1991
Dan B. Todd 69 1969 CEO of Farmers & Merchants
Chairman Bank from 1969 to May 1996;
Chairman of the Board since
Oct. 1991
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act (Continued)
Compliance with Section 16(a)
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and any persons who own more than 10% of the
common stock of the Company to file with the Securities and Exchange Commission
reports of ownership and changes in ownership of common stock. Officers and
directors are required by SEC regulation to furnish the Company with copies of
all Section 16(a) forms they file. Based solely on review of the copies of such
reports furnished to the Company or written representation that no other reports
were required, the Company believes that, during 1999, all filing requirements
applicable to its officers and directors were complied with.
Item 10. Executive Compensation
The Summary Compensation Table below sets forth the compensation of the
Company's Chief Executive Officer for all services rendered to the Company and
its subsidiary, Farmers & Merchants Bank, for the last three fiscal years.
SUMMARY COMPENSATION TABLE
Name and Annual Compensation 1 Other
Principal Position Year Salary($) Bonus($) Compensation($)3
Julian D. Fisher 2000 $130,000 $47,500 2 $44,853
Chief Executive Officer 1999 120,000 45,000 42,157
& President 1998 110,000 40,000 42,742
1 The value of perquisites and other personal benefits did not exceed the
lesser of $50,000 or 10% of the total of annual salary and bonus.
2 The amount presented includes compensation that was deferred at Mr.
Fisher's election.
3 The amounts presented include the Company's contribution for the benefit of
Mr. Fisher under the Company's Stock Bonus Plan ($12,297, $15,322, and
$16,116, in 2000, 1999, and 1998, respectively), the gross value of life
insurance premiums paid by the Company on behalf of Mr. Fisher ($15,995,
$16,106, and $16,210 in 2000, 1999, and 1998, respectively) and the Company's
contribution for the benefit of Mr. Fisher under the Executive Deferred
Compensation Plan for Farmers & Merchants Bank ($16,561, $10,729 and $10,416
in 2000, 1999 and 1998, respectively). Pursuant to a split-dollar insurance
agreement between the Company and Mr. Fisher, the Company will be repaid such
premium payments from the proceeds of the insurance policies. Thus, the gross
premium payment amounts shown overstate the actual economic benefit to Mr.
Fisher.
(1)All Directors of the Company, who are also Directors of the Bank are
compensated for attendance at the Board and Committee meetings, of which they
are members, as follows: Four hundred ($400) for each Board of Directors'
meeting, and one hundred ($100) for each Committee meeting; in addition each
Director is paid a bonus at the end of each calendar year, the amount of
which is determined by the Board of Directors, after considering the
performance of the Bank. For the calendar year 2000, a bonus of $5,500 was
paid to each Director.
46
Item 11. Security Ownership of Certain Beneficial Owners and Management
There were no persons or entities that held directly or indirectly more than
a 5% beneficial interest in the capital stock of the Company as of December 31,
2000.
The following table sets forth the number and percentage of shares of common
stock held, as of December 31, 2000, by each of the Company's directors and all
of the Company's directors and officers as a group.
Amount Percent
Beneficially of
Name of Owner Owned Class
Thomas L. Cline 7,051 1 .290%
Julian D. Fisher 105,087 2 4.320%
Ellen R. Fitzwater 3,582 3 .147%
Robert L. Halterman 29,348 1.207%
Lawrence H. Hoover, Jr. 54,095 4 2.224%
Richard S. Myers 13,769 5 .566%
Michael W. Pugh 784 6 .032%
Dan B. Todd 33,504 7 1.377%
Ronald E. Wampler 7,500 .308%
All Directors and executive 254,720 10,472%
officers as a group
1 Includes 3,823 shares owned directly, 3,060 shares owned jointly with
another member of his household and 168 shares owned by another member of
his household.
2 Includes 9,427 shares owned directly, 8,199 shares owned by another member
of his household and 87,461 shares which are owned by the Company's stock
bonus plan over which Mr. Fisher has voting power.
3 Includes 2,604 shares owned directly and 978 shares owned jointly with
other persons.
4 Includes 33,536 shares owned directly, 138 shares owned by another member of
his household and 20,421 shares owned by unitrusts in which he is one of the
trustees.
5 Includes 4,800 shares owned directly and 8,969 shares held in Mr. Myers'
IRA account.
6 Includes 600 shares owned directly, 84 shares owned jointly with another
member of his household and 100 shares held in Mr. Pugh's SEP.
7 Includes 18,488 shares owned directly, 8,992 shares owned by another
member of his household and 6,024 shares held in Mr. Todd's IRA Account.
47
Item 12. Certain Relationships and Related Transactions
Most of the directors, partnerships of which they may be general partners
and corporations of which they are officers or directors, maintain normal
banking relationships with the Bank. Loans made by the Bank to such persons or
other entities were made only in the ordinary course of business, were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and did
not involve more than normal risk of collectibility or present other unfavorable
features. See Note 15 of the consolidated financial statements.
Part IV
Item 13. Exhibits and Reports on Form 8-K
Exhibit No.
3 i Articles of Incorporation of F & M Bank Corp. are incorporated by
reference to Exhibits to F & M Bank Corp.'s Form S14 filed February
17, 1984.
3 ii Bylaws of F & M Bank Corp. are incorporated by reference to
Exhibits to F & M Bank Corp.'s form S14 filed February 17, 1984.
21 Subsidiaries of the small business issuers attached
23 Consent of Certified Public Accountant attached
27 Financial Data Schedule attached
Reports on Form 8-K
The Corporation did not file any reports on Form 8-K for the quarter ending
December 31, 2000.
48
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
F & M Bank Corp.
By: JULIAN D. FISHER
----------------
Julian D. Fisher
Chief Executive Officer and President
Date: March 29, 2001
By: NEIL W. HAYSLETT
----------------
Neil W. Hayslett
Vice President and Chief Financial
Officer
Date: March 29, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and as of the date indicated.
Signature Title Date
THOMAS L. CLINE Director March 29, 2001
- --------------------------- --------------
Thomas L. Cline
JULIAN D. FISHER Director, President, March 29, 2001
- --------------------------- Chief Executive Officer --------------
Julian D. Fisher
ELLEN R. FITZWATER Director March 29, 2001
- --------------------------- --------------
Ellen R. Fitzwater
ROBERT L. HALTERMAN Director March 29, 2001
- --------------------------- --------------
Robert L. Halterman
49
Director
- --------------------------
Lawrence H. Hoover, Jr.
Director
- --------------------------
Richard S. Myers
Director
- --------------------------
Michael W. Pugh
DAN B. TODD Director, Chairman March 29, 2001
- ------------------------- --------------
Dan B. Todd
Director
- -------------------------
Ronald E. Wampler