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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] Quarterly report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the quarterly period ended September 30, 2004
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number: 000-13273
F & M BANK CORP.
Virginia 54-1280811
- ------------------------------------ ---------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
P. O. Box 1111
Timberville, Virginia 22853
(Address of Principal Executive Offices) (Zip Code)
(540) 896-8941
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 requirement for
the past 90 days. Yes .[ X ] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act) Yes ____ No ____
State the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at October 31, 2004
Common Stock, par value - $5 2,402,351 shares
1
F & M BANK CORP.
INDEX
PART I FINANCIAL INFORMATION 2
Item 1. Financial Statements
Consolidated Statements of Income - Nine Months
Ended September 30, 2004 and 2003 2
Consolidated Statements of Income - Three Months
Ended September 30, 2004 and 2003 3
Consolidated Balance Sheets - September 30, 2004
and December 31, 2003 4
Consolidated Statements of Cash Flows - Nine Months
Ended September 30, 2004 and 2003 5
Consolidated Statements of Changes in Stockholders'
Equity - Nine Months Ended September 30, 2004 and 2003 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 20
PART II OTHER INFORMATION 21
Item 1. Legal Proceedings 21
Item 2. Unregistered Sales of Equity Securities and Use
of Proceeds 21
Item 3. Defaults upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits 21
SIGNATURES 22
2
Part I Financial Information
Item 1 Financial Statements
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars Except per Share Amounts)
(Unaudited)
Nine Months Ended
September 30,
2004 2003
---------- ---------
Interest Income
Interest and fees on loans $ 10,840 $ 10,637
Interest on federal funds sold 21 141
Interest on interest bearing deposits 142 134
Interest and dividends on investment securities 1,223 1,693
-------- --------
Total Interest Income 12,226 12,605
-------- --------
Interest Expense
Interest on demand deposits 152 169
Interest on savings accounts 337 379
Interest on time deposits 2,474 3,100
-------- --------
Total interest on deposits 2,963 3,648
Interest on short-term debt 149 36
Interest on long-term debt 756 965
-------- --------
Total Interest Expense 3,868 4,649
-------- --------
Net Interest Income 8,358 7,956
Provision for Loan Losses 180 165
-------- --------
Net Interest Income after Provision for Loan Losses 8,178 7,791
-------- --------
Noninterest Income
Service charges 690 663
Other 740 710
Income on bank owned life insurance 188 317
Security gains 409 287
-------- --------
Total Noninterest Income 2,027 1,977
-------- --------
Noninterest Expense
Salaries 2,403 2,329
Employee benefits 886 719
Occupancy expense 301 295
Equipment expense 318 293
Intangibles amortization 207 207
Other 1,562 1,557
-------- --------
Total Noninterest Expense 5,677 5,400
-------- --------
Income before Income Taxes 4,528 4,368
Provision for Income Tax 1,361 1,248
-------- --------
Net Income $ 3,167 $ 3,120
======== ========
Per Share Data
Net Income $ 1.31 $ 1.29
======== ========
Cash Dividends $ .55 $ .52
======== ========
Equivalent Shares Outstanding 2,416,526 2,421,165
========= =========
The accompanying notes are an integral part of these statements.
3
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars Except per Share Amounts)
(Unaudited)
Three Months Ended
September 30,
2004 2003
---------- ---------
Interest Income
Interest and fees on loans $ 3,820 $ 3,512
Interest on federal funds sold 3 43
Interest on interest bearing deposits 49 44
Interest and dividends on investment securities 365 504
-------- --------
Total Interest Income 4,237 4,103
-------- --------
Interest Expense
Interest on demand deposits 49 55
Interest on savings accounts 118 106
Interest on time deposits 817 984
-------- --------
Total interest on deposits 984 1,145
Interest on short-term debt 112 9
Interest on long-term debt 266 301
-------- --------
Total Interest Expense 1,362 1,455
-------- --------
Net Interest Income 2,875 2,648
Provision for Loan Losses 60 32
-------- --------
Net Interest Income after Provision for Loan Losses 2,815 2,616
-------- --------
Noninterest Income
Service charges 223 244
Other 284 194
Income on bank owned life insurance 63 207
Security gains (losses) 88 (2)
-------- --------
Total Noninterest Income 658 643
-------- --------
Noninterest Expense
Salaries 801 807
Employee benefits 293 219
Occupancy expense 104 95
Equipment expense 105 101
Intangible amortization 69 69
Other 538 555
-------- --------
Total Noninterest Expense 1,910 1,846
-------- --------
Income before Income Taxes 1,563 1,413
Provision for Income Tax 471 369
-------- --------
Net Income $ 1,092 $ 1,044
======== ========
Per Share Data
Net Income $ .45 $ .43
======== ========
Cash Dividends $ .19 $ .18
======== ========
Equivalent Shares Outstanding 2,413,758 2,417,526
========= =========
The accompanying notes are an integral part of these statements.
4
F & M BANK CORP.
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
September 30, December 31,
ASSETS 2004 2003
------------ ---------
(Unaudited) (Audited)
Cash and due from banks $ 6,509 $ 5,665
Interest bearing deposits in banks 7,002 9,003
Fed funds sold 5,035
Loans held for sale 54,738
Securities held to maturity (note 2) 110 873
Securities available for sale (note 2) 35,972 54,896
Other investments 7,563 5,461
Loans 236,781 211,231
Less allowance for loan losses (note 4) (1,548) (1,484)
------- --------
Net Loans 235,233 209,747
Bank premises and equipment 4,864 5,001
Interest receivable 1,189 1,496
Deposit intangible 1,771 1,978
Goodwill 2,639 2,639
Bank owned life insurance (note 5) 5,020 4,832
Other assets 2,478 2,501
------- -------
Total Assets $365,088 $309,126
======= =======
LIABILITIES
Deposits
Noninterest bearing demand $40,480 $ 33,124
Interest bearing
Demand 37,383 37,875
Savings deposits 51,017 47,545
Time deposits 118,465 122,171
------- -------
Total Deposits 247,345 240,705
Short-term debt 55,211 6,389
Long-term debt 23,348 24,784
Accrued expenses and other liabilities 5,571 4,919
------ -------
Total Liabilities 331,475 276,807
------- -------
STOCKHOLDERS' EQUITY
Common stock, $5 par value, 2,412,530 and
2,420,478 issued and outstanding, in 2004
and 2003, respectively 12,063 12,102
Surplus 132 286
Retained earnings 21,548 19,710
Accumulated other comprehensive income (loss) (130) 221
------- -------
Total Stockholders' Equity 33,613 32,319
------- -------
Total Liabilities and Stockholders' Equity $365,088 $309,126
======= =======
The accompanying notes are an integral part of these statements.
5
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
Nine Months Ended
September 30,
2004 2003
---------- ---------
Cash Flows from Operating Activities:
Net income $ 3,167 $ 3,120
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 348 311
Amortization of security premiums 269 201
Gain on security transactions (409) (287)
Income from life insurance investment (188) (284)
Provision for loan losses 180 165
Decrease in interest receivable 307 325
Decrease in other assets 232 406
Intangible amortization 207 207
Increase in accrued expenses 636 358
Losses on limited partnership investments 183 193
------ ------
Total Adjustments 1,765 1,595
------ ------
Net Cash Provided by Operating Activities 4,932 4,715
------ ------
Cash Flows from Investing Activities:
Proceeds from maturity of investments held
to maturity 760
Proceeds from sales of investments available
for sale 20,817 1,813
Proceeds from maturity of investments available
for sale 15,650 49,992
Purchase of investments available for sale (20,231) (38,238)
Net change in interest bearing bank deposits 2,001 (3,581)
Net change in federal funds sold 5,035 (10,496)
Net increase in loans held for sale (54,738)
Net increase in loans held for investment (25,665) (4,928)
Proceeds from sale of other real estate owned 194
Purchase of life insurance (1,871)
Purchase of property and equipment (211) (653)
------- ------
Net Cash Used in Investing Activities (56,582) (7,768)
------- ------
Cash Flows from Financing Activities:
Net change in demand and savings deposits 10,336 9,295
Net change in time deposits (3,706) 1,256
Net change in short-term debt 48,822 (1,867)
Repurchase of common stock (194) (194)
Repayment of long-term debt (5,436) (5,539)
Proceeds of long-term debt 4,000
Payment of dividends (1,328) (1,257)
------ ------
Net Cash Provided by Financing Activities 52,494 1,694
------ ------
Net Decrease (Increase) in Cash and Cash Equivalents 844 (1,359)
Cash and Cash Equivalents, Beginning of Period 5,665 6,017
------ ------
Cash and Cash Equivalents, End of Period $ 6,509 $ 4,658
====== ======
Supplemental Disclosure
Cash paid for:
Interest expense $ 3,926 $ 4,758
Income taxes 700 750
The accompanying notes are an integral part of these statements.
6
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands of Dollars)
(Unaudited)
Nine Months Ended
September 30,
2004 2003
---------- ---------
Balance, beginning of period $32,319 $29,541
Comprehensive Income
Net income 3,167 3,120
Net change in unrealized appreciation on securities
available for sale, net of taxes (351) (3)
------ ------
Total comprehensive income 2,816 3,117
Repurchase of common stock (194) (194)
Dividends declared (1,328) (1,257)
------ ------
Balance, end of period $33,613 $31,207
====== ======
The accompanying notes are an integral part of these statements.
7
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ACCOUNTING PRINCIPLES:
The consolidated financial statements include the accounts of F & M
Bank Corp. and its subsidiaries (the "Company"). Significant
intercompany accounts and transactions have been eliminated in
consolidation.
The consolidated financial statements conform to accounting
principles generally accepted in the United States and to general
industry practices. In the opinion of management, the accompanying
unaudited consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position as of September 30, 2004 and the results
of operations for the nine and three month periods ended September 30,
2004 and September 30, 2003. The notes included herein should be read
in conjunction with the notes to financial statements included in the
2003 annual report to stockholders of the F & M Bank Corp.
The Company does not expect the anticipated adoption of any newly
issued accounting standards to have a material impact on future
operations or financial position.
NOTE 2 INVESTMENT SECURITIES:
The amounts at which investment securities are carried in the
consolidated balance sheets and their approximate market values are as
follows:
September 30, December 31,
2004 2003
------------------- ---------------
Market Market
Cost Value Cost Value
Securities Held to Maturity
U. S. Treasury and
Agency obligations $ 110 $ 110 $ 110 $ 111
Other debt securities 763 787
------ ------- ------- ------
Total $ 110 $ 110 $ 873 $ 898
====== ======= ======= ======
September 30, December 31,
2004 2003
----------------- ----------------
Market Market
Value Cost Value Cost
Securities Available for Sale
U. S. Treasury and
Agency obligations $18,522 $ 18,481 $ 25,444 $25,387
Equity securities 9,412 9,576 9,245 9,110
Mortgage-backed
securities 6,062 6,100 8,989 9,004
Other debt securities 1,976 2,000 11,218 11,035
------ ------- ------- ------
Total $35,972 $ 36,157 $ 54,896 $54,536
====== ======= ======= ======
8
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
NOTE 3 LOANS HELD FOR INVESTMENT:
Loans outstanding are summarized as follows:
September 30, December 31,
2004 2003
Real Estate
Construction $16,800 $ 15,329
Residential 138,980 118,677
Commercial and agricultural 56,224 56,000
Installment loans to individuals 23,287 19,630
Credit cards 1,324 1,463
Other 166 132
------ -------
Total $236,781 $211,231
======= =======
NOTE 4 ALLOWANCE FOR LOAN LOSSES:
A summary of transactions in the allowance for loan losses follows:
Nine Months Ended Three Months Ended
September 30, September 30,
2004 2003 2004 2003
---- ---- ---- ----
Balance, beginning of period $1,484 $1,477 $1,512 $1,566
Provisions charged to
operating expenses 180 165 60 32
Net (charge-offs) recoveries:
Loan recoveries 66 56 17 18
Loan charge-offs (182) (170) (41) (88)
------ ----- ------ -----
Total Net Charge-Offs * (116) (114) (24) (70)
------ ----- ------ -----
Balance, End of Period $1,548 $1,528 $1,548 $1,528
===== ===== ===== =====
*Components of Net Charge-Offs
Real Estate (7)
Commercial (61) (23) (4) (20)
Installment (48) (91) (20) (50)
------ ----- ------ -----
Total $ (116) $ (114) $ (24) $ (70)
====== ===== ====== =====
9
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 BANK OWNED LIFE INSURANCE (BOLI)
The Bank currently offers a variety of benefit plans to all full
time employees. While the costs of these plans are generally tax
deductible to the Bank, the cost has been escalating greatly in recent
years. The Bank has determined that the benefits offered are
necessary in order to attract and retain good employees.
To help offset the growth in these costs, the Bank decided to enter
into BOLI contracts. Dividends received on these policies are
tax-deferred and are anticipated to be tax exempt as the death
benefits under the policies are exempt from income taxation. Rates of
return on a tax-equivalent basis are very favorable when compared to
other long-term assets which the Bank could obtain.
10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
F & M Bank Corp. (Company) is a one-bank holding company organized under
Virginia law which provides financial services through its wholly-owned
subsidiaries Farmers & Merchants Bank (Bank) and TEB Life Insurance Company
(TEB). Farmers & Merchants Financial Services (FMFS) is a wholly-owned
subsidiary of the Bank.
The Bank is a full service commercial bank offering a wide range of banking
and financial services through its seven branch offices. TEB reinsures credit
life and accident and health insurance sold by the Bank in connection with its
lending activities. FMFS provides title insurance, brokerage services and
property/casualty insurance to customers of the Bank.
The Company's primary trade area services customers in Rockingham County,
Shenandoah County, the southern part of Page County and the northern part of
Augusta County.
Management's discussion and analysis is presented to assist the reader in
understanding and evaluating the financial condition and results of operations
of the Company. The analysis focuses on the consolidated financial statements,
footnotes, and other financial data presented. The discussion highlights
material changes from prior reporting periods and any identifiable trends which
may affect the Company. Amounts have been rounded for presentation purposes.
This discussion and analysis should be read in conjunction with the Consolidated
Financial Statements and the Notes to the Consolidated Financial Statements
presented in Item 1, Part 1 or this Form 10Q.
Forward-Looking Statements
Certain statements in this report may constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are statements that include projections, predictions,
expectations or beliefs about future events or results or otherwise are not
statements of historical fact. Such statements are often characterized by the
use of qualified words (and their derivatives) such as "expect," "believe,"
"estimate," "plan," "project," or other statements concerning opinions or
judgment of the Company and its management about future events.
Although the Company believes that its expectations with respect to certain
forward-looking statements are based upon reasonable assumptions within the
bounds of its existing knowledge of its business and operations, there can be no
assurance that actual results, performance or achievements of the Company will
not differ materially from any future results, performance or achievements
expressed or implied by such forward-looking statements. Actual future results
and trends may differ materially from historical results or those anticipated
depending on a variety of factors, including, but not limited to, the effects of
and changes in: general economic conditions, the interest rate environment,
legislative and regulatory requirements, competitive pressures, new products and
delivery systems, inflation, changes in the stock and bond markets, technology,
and consumer spending and savings habits.
We do not update any forward-looking statements that may be made from time to
time by or on behalf of the Company.
11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Critical Accounting Policies
General
The Company's financial statements are prepared in accordance with
accounting principles generally accepted in the United States ("GAAP"). The
financial information contained within the statements is, to a significant
extent, financial information that is based on measures of the financial effects
of transactions and events that have already occurred. A variety of factors
could affect the ultimate value that is obtained either when earning income,
recognizing an expense, recovering an asset or relieving a liability. The
Company uses historical loss factors as one factor in determining the inherent
loss that may be present in its loan portfolio. Actual losses could differ
significantly from the historical factors that are used. The fair value of the
investment portfolio is based on period end valuations but changes daily with
the market. In addition, GAAP itself may change from one previously acceptable
method to another method. Although the economics of these transactions would be
the same, the timing of events that would impact these transactions could
change.
Allowance for Loan Losses
The allowance for loan losses is an estimate of the losses that may be
sustained in the loan portfolio. The allowance is based on two basic principles
of accounting: (i) Statement of Financial Accounting Standard ("SFAS") No. 5,
Accounting for Contingencies, which requires that losses be accrued when they
are probable of occurring and estimable and (ii) SFAS No. 114, Accounting by
Creditors for Impairment of a Loan, which requires that losses be accrued based
on the differences between the value of collateral, present value of future cash
flows or values that are observable in the secondary market and the loan
balance.
Goodwill and Intangibles
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 141, Business Combinations and SFAS No.
142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. Additionally, it further clarifies the criteria for the
initial recognition and measurement of intangible assets separate from goodwill.
SFAS No. 142 is effective for fiscal years beginning after December 15, 2001 and
prescribes the accounting for goodwill and intangible assets subsequent to
initial recognition. The provisions of SFAS No. 142 discontinue the amortization
of goodwill and intangible assets with indefinite lives. Instead, these assets
will be subject to at least an annual impairment review and more frequently if
certain impairment indicators are in evidence. SFAS No. 142 also requires that
reporting units be identified for the purpose of assessing potential future
impairments of goodwill.
Core deposit intangibles are amortized on a straight-line basis over ten
years. The Company adopted SFAS 147 on January 1, 2002 and determined that the
core deposit intangible will continue to be amortized over the estimated useful
life.
Securities Impairment
The Company evaluates each of its investments in securities, debt and
equity, under guidelines contained in SFAS 115, Accounting for Certain
Investments in Debt and Equity Securities. These guidelines require the Company
to determine whether a decline in value below original cost is other than
temporary. In making its determination, management considers current market
conditions, historical trends in the individual securities, and historical
trends in the total market. Expectations are developed regarding potential
returns from dividend reinvestment and price appreciation over a reasonable
holding period (five years).
Overview
Net income for the third quarter of 2004 was $1,092,000 or $.45 per share,
compared to $1,044,000 or $.43 in the third quarter of 2003, an increase of
4.60%. Core operating earnings, (exclusive of securities gains and non-recurring
income on life insurance policies, net of tax effect) totaled $1,034,000 in 2004
and $901,000 in 2003, an increase of 14.76%. For the nine months ended September
30, 2004, net income was $3,167,000 or $1.31 per share compared to $3,120,000 or
$1.29 in 2003. This was an increase of 1.51%. Noninterest income through three
quarters increased 2.53% and noninterest expense increased 5.13% during the same
period.
12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Year to Date
The 2004 year to date tax equivalent net interest margin increased
$421,000 or 5.20% compared to the same period 2003. The yield on earning assets
decreased .39%, while the cost of funds decreased .47% compared to the same
period in 2003. These decreases resulted as maturing assets and liabilities
continued to reprice at significantly lower rates.
The below average market rates resulted from aggressive rate cutting by
the Federal Reserve's Federal Open Market Committee (FOMC) which began in
January 2001 and included thirteen separate rate cuts through June 2003.
Recently the FOMC reversed its monetary policy by stating "With underlying
inflation still expected to be relatively low, the Committee believes that
policy accommodation can be removed at a pace that is likely to be measured."
The FOMC raised the federal rate by 1/4 percent at its June, August, and
September meetings.
Although the Interest Sensitivity Analysis on page 19 indicates the
Company is in a liability sensitive position through the twelve month point,
management anticipates the increase in rates should prove beneficial to the net
interest margin in future periods. A large percentage of rate sensitive
liabilities (checking and savings) do not reprice immediately with changes in
market rates, but are adjusted at the discretion of management based on funding
needs and competitive factors. However, the rapid growth in the loan portfolio
and competition within the Bank's market for deposit accounts could have a
material effect on the speed at which Bank management adjusts rates to meet
liquidity needs.
A schedule of the net interest margin for 2004 and 2003 can be found in
Table I on page 18.
Within 2003, the Company recognized a gain on the conversion of life
insurance policies that totaled $144,000. Such gain was not repeated in 2004
and income for this year is solely the result of insurance policy income.
Noninterest income, exclusive of gains on the sale of securities and
non-recurring gains on life insurance policies, increased $72,000 in 2004. The
increase includes a $51,000 increase in overdraft fees, a $38,000 increase in
card-related (credit, debit, merchant and ATM) fees, a $14,000 increase in check
printing income, and a $64,000 increase in brokerage and insurance activity.
These increases were partially offset by a $84,000 decline in secondary market
origination fees and $11,000 in other income declines.
Noninterest expense increased $277,000 in 2004. Of the total, $241,000 (a
7.91% increase) can be attributed to salaries and employee benefits. This
increase includes normal salary increases, an increase in pension expense of
17.74% and an increase in the cost of group insurance of 15.53%. Exclusive of
personnel expenses, other noninterest expenses increased at an annualized rate
of 2.04% in 2004 compared to 2003 operations. No individual caption changed
more than 10% in the two periods. Noninterest expense as an annualized
percentage of average assets decreased to 2.23% from 2.33% in the prior year
due primarily to the large increase in loans available for sale. Operating
costs continue to compare very favorably to the peer group. As stated in the
most recently available Bank Holding Company Performance Report, peer group
noninterest expenses averaged approximately 3.10% of average assets. The
Company's operating costs have always compared favorably to the peer group due
to an excellent asset to employee ratio and below average facilities costs.
Quarter Ending September 30
The Company's net income increased $48,000 to $1.092 million compared to
the third quarter of 2003. After adjusting to exclude securities transactions
and the aforementioned non-recurring split dollar insurance transactions, core
earnings and earnings per share increased $133,000 or 14.76%. This increase
resulted primarily from a $248,000 pretax increase in the tax equivalent net
interest margin. The margin expressed as a percentage of earning assets remained
unchanged at 3.79%. The growth in the margin is a result of volume increases as
earning assets increased $25,604,000 compared to the same period in the prior
year. The average balance of loans outstanding increased $57,171,000. Of this
amount $28,583,000 relates to short-term mortgage loan participations (discussed
further in the following section under the heading "Loan Portfolio"). The
remainder of the increase totals $28,588,000 and resulted from growth of loans
within the Bank's primary service areas.
The loan for sale have been funded primarily though an increase in
short-term debt (overnight borrowings). The growth in the loan portfolio within
the Bank's primary service areas was funded through a combination of decreases
in federal funds sold and the securities portfolio of the Bank.
Noninterest income increased due to substantially higher income from
investment services (up $47,000) and greater fee income from all of the other
services provided by the Company, Income on bank owned life insurance declined
$144,000, mainly due to the gain realized in 2003 that did not recur in 2004.
Personnel expenses increased 6.63% in the quarter for the same reasons cited in
the nine month discussion. Other noninterest expenses were virtually unchanged
from the previous year's third quarter as they showed a decline of .48%.
13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Financial Condition
Federal Funds Sold and Interest Bearing Bank Deposits
The Company's subsidiary bank invests a portion of its excess liquidity in
either federal funds sold or interest bearing bank deposits. Federal funds sold
offer daily liquidity and pay market rates of interest that is currently
benchmarked at 1.75% by the Federal Reserve. Actual rates received vary slightly
based upon money supply and demand among banks. Interest bearing bank deposits
are held either in money market accounts or as short-term certificates of
deposits. Balances in both federal funds sold and interest bearing bank deposits
have decreased due to growth in the loan portfolio.
Securities
The Company's securities portfolio serves several purposes. Portions of
the portfolio are held to assist the Company with liquidity, asset liability
management, as security for certain public funds and repurchase agreements and
for long-term growth potential.
The securities portfolio consists of investment securities (commonly
referred to as "securities held to maturity") and securities available for sale.
Securities are classified as investment securities when management has the
intent and ability to hold the securities to maturity. Investment securities are
carried at amortized cost. Securities available for sale include securities that
may be sold in response to general market fluctuations, liquidity needs and
other similar factors. Securities available for sale are recorded at market
value. Unrealized holding gains and losses on available for sale securities are
excluded from earnings and reported (net of deferred income taxes) as a separate
component of shareholders' equity. As of September 30, 2004, the market value of
all securities available for sale, bonds and equity securities, was $185,000
less than their amortized cost.
The value of the Bank's bond portfolio is $21,000 below its carrying
value. During the year, in an effort to generate liquidity to support
loan growth, management sold several securities which resulted in realized gains
of $98,000. The remainder of the portfolio is made up of primarily agency and
mortgage-backed securities with an average portfolio life of approximately two
years. This short average life results in less portfolio volatility and
positions the Bank to redeploy assets in response to rising rates.
The Company's equity securities portfolio was $164,000 below cost at
September 30, 2004. Gains totaling $311,000 have been taken within the equities
portfolio during 2004. The Company continues to hold equity investments in a
number of large, regional financial institutions, a diversified portfolio of
REITs and a variety of other predominantly blue-chip securities. Management
continues to believe that these investments offer adequate current returns
(dividends) and have the potential for future increases in value.
Management continues to evaluate its equities portfolio for impairment on a
quarterly basis. During the latter part of the third quarter and early part of
the current quarter (fourth quarter), one security suffered a significant
decline in value due to negative information that became available to the
financial markets. Management evaluated this holding and determined that it was
too soon to make a determination that the decrease in value was "other than
temporary." If a decision to writedown this security had been made during the
third quarter, and using the same methodology employed in the past, it would
have yielded a gross writedown of $55,000 and a writedown net of the deferred
tax of $37,000. This would have reduced net income for the third quarter to
$1,055,000 versus the reported net income of $1,092,000, or 1 1/2 cents per
share. Management will continue to monitor this security closely and make a
decision on whether there is an other than temporary impairment after digesting
the financial and nonfinancial information that has been reported subsequent to
September 30, 2004.
14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Loan Portfolio
The Company operates in a predominately rural area that includes the
counties of Rockingham, Page and Shenandoah in the western portion of Virginia.
The local economy benefits from a variety of businesses including agri-business,
manufacturing, service businesses and several universities/colleges. The Bank is
an active residential mortgage and residential construction lender and generally
makes commercial loans to small and mid size businesses and farms within its
primary service area.
The allowance for loan losses (see subsequent section) provides for the
risk that borrowers will be unable to repay their obligations and is reviewed
quarterly for adequacy. The risk associated with real estate and installment
notes to individuals is based upon employment, the local and national economies
and consumer confidence. All of these affect the ability of borrowers to repay
indebtedness. The risk associated with commercial lending is substantially based
on the strength of the local and national economies.
While lending is geographically diversified within the service area, the
Company does have loan concentrations in agricultural (primarily poultry
farming), construction, hotels, church loans and the aforementioned mortgage
participations. Management and the Board of Directors review these
concentrations periodically.
In addition to direct agricultural loans, a significant percentage of
residential real estate loans and consumer installment loans are made to
borrowers employed in the agricultural sector of the economy. In April 2004,
Pilgrim's Pride announced the planned sale or closure of its turkey processing
plant in Hinton, Virginia. A group of local growers organized the Virginia
Poultry Growers Cooperative and have contracted for the purchase of the plant.
The plant has recently closed (temporarily) awaiting the change in ownership and
management. Bank management has reviewed its poultry related loans that were
contracted with the Pilgrim's Pride Turkey Division and has determined that its
exposure is limited due to a combination of strong collateral positions on most
of the loans, the potential for some of these borrowers to contract these
poultry houses with other processors, the potential to convert the houses to
other uses and other sources of income for some of the borrowers. In addition to
direct agricultural loans, a significant percentage of residential real estate
loans and consumer installment loans are made to borrowers employed in the
agricultural sector of the local economy.
Management has entered into an agreement with Gateway Bank (of California)
to purchase short-term real estate loan participations. These loans have been
purchased by Gateway from mortgage brokers and will be held until sold to the
ultimate holder in the secondary market. All loans have firm take-out
commitments and are held for periods ranging from two to sixty days, but
averaging approximately fourteen days. These loans originate in several states
throughout the country, however, a significant portion are from the state of
California. These loans have been included with mortgage loans that the Bank has
originated within its own market and designated on the balance sheet as "Loans
Held for Sale".
Management has funded its loans for sale with short-term liquid assets and
through short-term borrowings. The yield on these loans is based on a discount
to the prime rate, but offers a premium over other comparable short-term
investments. During the third quarter, these loan participations have averaged
$28,583,000, with a maximum and quarter end balance of $54,514,000. The Bank has
made a commitment to purchase up to a maximum of $55,000,000 of these loans.
Short-term borrowings from the FHLB to fund this program averaged $21,299,000,
with a maximum and quarter end balance of $47,500,000.
The first nine months of 2004 resulted in an increase of $25,550,000 in
the Bank's core loan portfolio. Most of the increase was in the real estate
portfolio, both residential and commercial properties. As secondary market rates
increased during the first nine months of the year, the Bank's in-house three
and five year adjustable loan rates became more attractive and contributed to
the growth in the portfolio.
15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Nonperforming loans include nonaccrual loans, loans 90 days or more past
due and restructured loans. Nonaccrual loans are loans on which interest
accruals have been suspended or discontinued permanently. Restructured loans are
loans which have had the original interest rate or repayment terms changed due
to financial hardship. Nonperforming loans totaled $756,000 at September 30,
2004 compared to $1,614,000 at December 31, 2003. Approximately 65% of these
past due loans are secured by real estate. Although the potential exists for
some loan losses, management believes the bank is generally well secured and
continues to actively work with its customers to effect payment. As of September
30, 2004, the Company does not hold any real estate which was acquired through
foreclosure.
The following is a summary of information pertaining to risk elements and
impaired loans:
September 30, December 31,
2004 2003
------------ -----------
Nonaccrual loans $ 0 $ 0
Loans past due 90 days or more
and still accruing interest 756,000 1,614,000
Restructured loans 0 0
------- -------
$756,000 $1,614,000
Percent of total loans .32% .76%
Allowance for Loan Losses
Management evaluates the allowance for loan losses on a quarterly basis in
light of national and local economic trends, changes in the nature and volume of
the loan portfolio and the trend of past due and criticized loans. Specific
factors evaluated include internally generated loan review reports, past due
reports, historical loan loss experience and changes in the financial strength
of individual borrowers that have been included on the Banks watch list or
schedule of classified loans.
In evaluating the portfolio, loans are segregated into loans with
identified potential losses and pools of loans by type (commercial, residential,
consumer, credit cards). Loans with identified potential losses include examiner
and bank classified loans. Classified relationships in excess of $100,000 are
reviewed individually for impairment under FAS 114. A variety of factors are
taken into account when reviewing these credits including borrower cash flow,
payment history, fair value of collateral, company management, the industry in
which the borrower is involved and economic factors. Loan relationships that are
determined to have no impairment are placed back into the appropriate loan pool
and reviewed under FAS 5.
Loan pools are further segmented into watch list, past due over 90 days and
all other loans by type. Watch list loans include loans that are 60 days past
due, and may include restructured loans, borrowers that are highly leveraged,
loans that have been upgraded from classified or loans that contain policy
exceptions (term, collateral coverage, etc.). Loss estimates on these loans
reflect the increased risk associated with these assets due to any of the above
factors. The past due pools contain loans that are currently 90 days or more
past due. Loss rates assigned reflect the fact that these loans bear a
significant risk of charge-off. Loss rates vary by loan type to reflect the
likelihood that collateral values will offset a portion of the anticipated
losses.
The remainder of the portfolio falls into pools by type of homogenous loans
that do not exhibit any of the above described weaknesses. Loss rates are
assigned based on historical loss rates over the prior five years. A multiplier
has been applied to these loss rates to reflect the time for loans to season
within the portfolio and the inherent imprecision of these estimates.
All potential losses are evaluated within a range of low to high. An
unallocated reserve has been established to reflect other unidentified losses
within the portfolio. This helps to offset the increased risk of loss associated
with fluctuations in past due trends, changes in the local and national
economies, and other unusual events. The Board approves the loan loss provision
for the following quarter based on this evaluation and an effort is made to keep
the actual allowance at or above the midpoint of the range established by the
evaluation process.
16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
The allowance for loan losses of $1,548,000 at September 30, 2004 is equal
to .65% of total loans. This compares to an allowance of $1,484,000 (.70%) at
December 31, 2003. Management has funded the allowance at a rate of $20,000 per
month throughout the year of 2004, for a total of $180,000. Total charge-offs,
net of recoveries, equal $116,000 year to date which is comparable to the same
period of 2003. This is equivalent to an annualized loss rate of .07% of total
loans. In recent years, the company has had an average loss rate of .08% which
is approximately one-third the loss rate of its peer group.
The overall level of the allowance is well below the peer group average of
1.32%. 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 nine years of average loan losses. Based on historical
losses, delinquency rates, collateral values of delinquent loans and a thorough
review of the loan portfolio, management is of the opinion that the allowance
for loan losses fairly states the estimated losses in the current portfolio.
Deposits and Other Borrowings
The Company's main source of funding is comprised of deposits received
from individuals, governmental entities and businesses located within the
Company's service area. Deposit accounts include demand deposits, savings, money
market and certificates of deposit. Total deposits have increased $6,640,000
since December 31, 2003. Time deposits decreased $3,706,000 during this period
while demand deposits and savings deposits increased $10,346,000. Management
believes this increase resulted from frequent advertising of its free checking
account and accounts gained from BB&T following its takeover of the F & M
National Corp. branches.
Management has not offered any special rate promotions during the period
to attract certificates of deposit as the growth in other deposits, use of
federal funds, maturities and sales of securities, and short-term borrowings
have been sufficient to fund loan growth. Historically the Bank has had a
heavier concentration in certificates of deposit than its peers. Management is
willing to accept some level of run-off in certificates of deposit as the shift
to lower costing deposits will lead to improvements in the net interest margin.
Short-term debt
Short-term debt consists of federal funds purchased, commercial repurchase
agreements (repos.) and daily rate credit from the Federal Home Loan Bank
(FHLB). Commercial customers deposit operating funds into their checking account
and by mutual agreement with the bank their excess funds are swept daily into
the repurchase accounts. These accounts are not considered deposits and are not
insured by the FDIC. The Bank pledges securities held in its investment
portfolio as collateral for these short-term loans. Federal funds purchased are
overnight borrowings obtained from the Bank's primary correspondent bank to
manage short-term liquidity needs. Daily rate credit from the FHLB has been used
to finance the loans held for sale.
Long-term debt
Borrowings from the Federal Home Loan Bank of Atlanta (FHLB) continue to
be an important source of funding real estate loan growth. The Company's
subsidiary bank borrows funds on a fixed rate basis. These borrowings are used
to fund either a fifteen-year fixed rate loan or a twenty-year loan, of which
the first ten years have a fixed rate. This program allows the Bank to match the
maturity of its fixed rate real estate portfolio with the maturity of its debt
and thus reduce its exposure to interest rate changes. Scheduled repayments
totaled $5,436,000 through September 30, 2004. Additional borrowings of
$4,000,000 were obtained to assist in funding the growth in the loans portfolio
held for investment.
17
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
In September 2002, the Company borrowed $3 million from SunTrust Bank.
This loan carries an interest rate of LIBOR + 1.10% and is variable. Payments of
$230,769 plus interest began in the second quarter of 2004 and will continue for
a period of thirteen quarters. Proceeds of this loan were used primarily to
provide a capital contribution to the Bank.
Capital
The Company seeks to maintain a strong capital base to expand facilities,
promote public confidence, support current operations and grow at a manageable
level. As of September 30, 2004, the Company's total risk based capital and
total capital to total assets ratios were 12.82% and 8.39%, respectively. Both
ratios are in excess of regulatory minimums and exceed the ratios of the
Company's peers. Earnings have been satisfactory to allow an increase in the
third quarter dividend in 2004 of 5.55%.
Liquidity
Liquidity is the ability to meet present and future financial obligations
through either the sale or maturity of existing assets or the acquisition of
additional funds through liability management. Liquid assets include cash,
interest-bearing deposits with banks, 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 sufficient to satisfy its depositors' requirements and meet
its customers' credit needs.
Additional sources of liquidity available to the Company include, but are
not limited to, loan repayments, the ability to obtain deposits through the
adjustment of interest rates and the purchasing of federal funds. To further
meet its liquidity needs, the Company also 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.
Interest Rate Sensitivity
In conjunction with maintaining a satisfactory level of liquidity,
management must also control the degree of interest rate risk assumed on the
balance sheet. Managing this risk involves regular monitoring of interest
sensitive assets relative to interest sensitive liabilities over specific time
intervals. The Company monitors its interest rate sensitivity periodically and
makes adjustments as needed. There are no off balance sheet items that will
impair future liquidity.
A summary of asset and liability repricing opportunities is shown in Table
II.
Stock Repurchase
On June 12, 2003, the Board authorized the repurchase of 50,000 shares of
the Company's outstanding common stock. Management has been authorized to
repurchase shares from time to time in the open market or through privately
negotiated transactions when market conditions warrant. The repurchased shares
are held as unissued stock and are available for general corporate purposes.
Through the end of the third quarter of 2004, a total of 12,522 shares have been
repurchased. Shares repurchased during the third quarter of 2004 totaled 2,500
shares, at an average cost of $24.25 per share.
Effect of Newly Issued Accounting Standards
The Company does not believe that any newly issued but as yet unapplied
accounting standards will have a material impact on the Company's financial
position or operations.
Existence of Securities and Exchange Commission Web Site
The Securities and Exchange Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission, including F & M Bank
Corp. and the address is (http: //www.sec.gov).
18
TABLE 1
F & M BANK CORP.
NET INTEREST MARGIN ANALYSIS
(Dollar Amounts in Thousands)
Nine Months Ended Nine Months Ended
September 30, 2004 September 30, 2003
Average Income/ Rates Average Income/ Rates
Balance Expense Balance Expense
Rate Related Income
Loans held for investments 1 $ 221,247 $ 10,569 6.37% $ 200,926 $ 10,675 7.08%
Loans held for sale 13,256 316 3.18% 97 1 4.17%
Federal funds sold 2,891 21 .97% 17,509 141 1.07%
Bank deposits 9,229 142 2.05% 8,071 131 2.16%
Investments
Taxable3 37,192 881 3.16% 46,793 1,381 3.94%
Partially taxable2,3 9,675 435 5.99% 9,037 405 5.98%
Tax exempt 2,3 375 13 4.53% 88 3 4.55%
-------- ------- ----- -------- ------- -----
Total Earning Assets 293,865 12,377 5.62% 282,521 12,737 6.01%
-------- ------- ----- -------- ------- -----
Interest Expense
Demand deposits 38,035 152 .53% 34,509 165 .64%
Savings 49,564 337 .91% 44,032 382 1.16%
Time deposits 119,459 2,474 2.76% 126,540 3,101 3.27%
Short-term debt 16,184 149 1.23% 7,372 36 .65%
Long-term debt 23,501 756 4.29% 29,506 965 4.36%
------- ------ ----- -------- ------- -----
Total Interest Bearing
Liabilities 246,743 3,868 2.09% 241,959 4,649 2.56%
-------- ------ ----- -------- ------- ------
Net Interest Income 1 $ 8,509 $ 8,088
======= =======
Net Yield on Interest
Earning Assets 1 3.86% 3.82%
===== ====
1 Interest income on loans includes loan fees.
2 An incremental 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.
18 (CONTINUED)
TABLE 1 (CONTINUED)
F & M BANK CORP.
NET INTEREST MARGIN ANALYSIS
(Dollar Amounts in Thousands)
Three Months Ended Three Months Ended
September 30, 2004 September 30, 2003
Average Income/ Rates Average Income/ Rates
Balance Expense Balance Expense
Rate Related Income
Loans held for investments 1 $ 230,271 $ 3,617 6.28% $ 201,586 $ 3,521 6.99%
Loans held for sale 28,583 218 3.05% 97 1 4.17%
Federal funds sold 1,089 3 1.10% 18,536 43 .93%
Bank deposits 8,577 49 2.29% 8,948 41 1.83%
Investments
Taxable3 30,541 243 3.18% 44,928 397 3.53%
Partially taxable2,3 9,674 159 6.57% 9,149 132 5.77%
Tax exempt 2,3 375 4 4.27% 262 3 4.58%
-------- ------ ----- -------- ------ -----
Total Earning Assets 309,110 4,293 5.54% 283,506 4,138 5.84%
-------- ------ ----- -------- ------ -----
Interest Expense
Demand deposits 38,331 49 .51% 35,036 51 .58%
Savings 51,229 118 .92% 45,935 109 .95%
Time deposits 118,224 817 2.76% 125,249 985 3.15%
Short-term debt 29,165 112 1.54% 6,859 9 .52%
Long-term debt 24,276 266 4.38% 27,773 301 4.34%
-------- ----- ----- -------- ------ -----
Total Interest Bearing
Liabilities 261,225 1,362 2.09% 240,852 1,455 2.42%
-------- ------ ----- -------- ------ -----
Net Interest Income 1 $ 2,931 $ 2,683
====== ======
Net Yield on Interest
Earning Assets 1 3.79% 3.79%
===== =====
1 Interest income on loans includes loan fees.
2 An incremental 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 II
F & M BANK CORP.
INTEREST SENSITIVITY ANALYSIS
September 30, 2004
(In Thousands of Dollars)
The following table presents the Company's interest sensitivity.
0 - 3 4 - 12 1 - 5 Over 5 Not
Months Months Years Years Classified Total
Uses of Funds
Loans
Commercial $ 32,248 $ 5,433 $ 14,781 $ 3,762 $ $ 56,224
Installment 386 1,081 17,786 4,200 23,453
Real estate for
investments 19,880 12,320 101,505 22,075 155,780
Real estate for
sale 54,738 54,738
Credit cards 1,324 1,324
Interest bearing
bank deposits 3,239 2,772 991 7,002
Investment
securities 980 2,050 23,640 16,975 43,645
------- ------ ------ ------- ------ -------
Total 112,795 23,656 158,703 30,037 16,975 342,166
------- ------ ------- ------- ------ --------
Sources of Funds
Interest bearing
demand deposits 11,273 21,164 4,946 37,383
Savings
deposits 10,203 30,611 10,203 51,017
Certificates of
Deposit $100,000
and over 3,938 8,306 11,268 23,512
Other certificates
of deposit 17,657 32,925 44,371 94,953
Short-term
borrowings 55,211 55,211
Long-term
borrowings 2,086 8,514 10,253 2,495 23,348
------ ------ ------- -------- ------- -------
Total 78,892 71,221 117,667 17,644 285,424
------ ------ ------- -------- ------- -------
Discrete Gap 33,903 (47,565) 41,036 12,393 16,975 56,742
Cumulative Gap 33,903 (13,662) 27,374 39,767 56,742
Ratio of Cumulative
Gap to Total 10.40% (3.50)% 8.49% 12.12% 17.08%
Earning Assets
Table II reflects the earlier of the maturity or repricing dates for various
assets and liabilities as of September 30, 2004. In preparing the above table,
no assumptions were made with respect to loan prepayments. Loan principal
payments are included in the earliest period in which the loan matures or can
reprice. 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 of deposits, which have no stated maturity dates, were derived from
guidance contained in FDICIA 305.
20
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As a result of the enactment of the Sarbanes-Oxley Act of 2002, issuers
such as F & M Bank Corp. that file periodic reports under the Securities
Exchange Act of 1934 (the "Act") are required to include in those reports
certain information concerning the issuer's controls and procedures for
complying with the disclosure requirements of the federal securities laws. These
disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by an
issuer in the reports it files or submits under the Act, is communicated to the
issuer's management, including its principal executive officer or officers and
principal financial officer or officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure.
We have established our disclosure controls and procedures to ensure that
material information related to the Company is made known to our principal
executive officers and principal financial officer on a regular basis, in
particular during the periods in which our quarterly and annual reports are
being prepared. These disclosure controls and procedures consist principally of
communications between and among the Chief Executive Officer and the Chief
Financial Officer, and the other executive officers of the Company and its
subsidiaries to identify any new transactions, events, trends, contingencies or
other matters that may be material to the Company's operations. As required, we
will evaluate the effectiveness of these disclosure controls and procedures on a
quarterly basis, and most recently did so as of the end of the period covered by
this report.
Changes in Internal Controls
There were no significant changes in F & M Bank Corp.'s internal controls
pertaining to its financial reporting and control of its assets or in other
factors that could significantly affect these controls since the date of their
evaluation.
21
Part II Other Information
Item 1. Legal Proceedings - Not Applicable
Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds - Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders- Not Applicable
Item 5. Other Information - Not Applicable
Item 6. Exhibits
(a)Exhibits
3 i Restated Articles of Incorporation of F & M Bank Corp.
are incorporated by reference to Exhibits to F & M Bank
Corp.'s 2001 Form 10K filed March 1, 2002.
3 ii Amended and Restated Bylaws of F & M Bank Corp. are
incorporated by reference to Exhibits to F & M Bank Corp.'s
Form 10K filed March 1, 2002.
31.1 Certification of Chief Executive Officer pursuant to
Rule 13a-14(a) (filed herewith).
31.2 Certification of Chief Financial Officer pursuant to
Rule 13a-14(a) (filed herewith).
32 Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sabanes-Oxley Act of 2002
(filed herewith).
22
Signature
Pursuant to the requirements 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.
DEAN W. WITHERS
------------------------
Dean W. Withers
President and Chief Executive Officer
NEIL W. HAYSLETT
------------------------
Neil W. Hayslett
Senior Vice President and
Chief Financial Officer
November 12, 2004