-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KlG2LCnb1R63NEEsnWlhgDftjHZlBZ16+/kVT9b3YVh8DjJNsRLytSuUGufsrGRz /qTtHddpw/ZWaDGeqxpV1g== 0000930609-00-000011.txt : 20000331 0000930609-00-000011.hdr.sgml : 20000331 ACCESSION NUMBER: 0000930609-00-000011 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: F&M BANK CORP CENTRAL INDEX KEY: 0000740806 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 541280811 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-13273 FILM NUMBER: 586050 BUSINESS ADDRESS: STREET 1: PO BOX F CITY: TIMBERVILLE STATE: VA ZIP: 22853 BUSINESS PHONE: 7038968941 MAIL ADDRESS: STREET 1: DRAWER F CITY: TIMBERVILLE STATE: VA ZIP: 22853 10KSB 1 FILING FOR FORM 10KSB SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-KSB ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For fiscal year ended December 31, 1999 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-KSB or any amendment to this Form 10-KSB. [ ] Issuer's revenues for its most recent fiscal year: $16,416,000 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 10, 2000 - $20.63 average bid price; $20.63 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 10, 2000 - 2,453,402 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 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 20 Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 43 Part III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act 43 Item 10. Executive Compensation 44 Item 11. Security Ownership of Certain Beneficial Owners and Management 45 Item 12. Certain Relationships and Related Transactions 46 Part IV Item 13. Exhibits and Reports on Form 8-K 46 Signatures 47 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 State 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 and to provide 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 continued to experience good loan demand throughout 1999 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, at 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. On December 31, 1999, F & M Bank Corp., the Bank, TEB and FMFS had fifty-three full time and twenty part time employees. No one employee devotes full time services to F & M Bank Corp. Competition The Bank's offices compete with approximately fifteen 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. 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 and IV, 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, contains an automatic teller machine 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, 1999. 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 holding 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 holding company 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 1997 through 1999: Dividends Declared High Low 1997 1st quarter .073 11.67 11.00 2nd quarter .087 11.92 11.00 3rd quarter .097 11.67 11.17 4th quarter .097 12.63 11.33 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 All amounts reflect a three for one stock split declared in 1998. (b) Stockholders On December 31, 1999, there were 1,183 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 - 1999 Compared to 1998 Overview The Company's net income for 1999 increased $305,630 or 8.73% from 1998 earnings. Net income per share increased from $1.43 in 1998 to $1.55 in 1999. The Company's improved earnings were due to a combination of factors summarized below. See Table I (page 16) for a five year summary of operations. Net Interest Margins The net weighted interest margin on earning assets on a tax equivalent basis increased from 4.39% in 1998 to 4.52% in 1999. The Company's net yield on average earning assets of 4.52% is in line with its peer group. Yields on loans decreased from 9.15% in 1998 to 8.81% in 1999. Real estate loan rates decreased twenty-one basis points, while commercial and installment loans decreased forty-nine and sixty basis points, respectively, due to a general decline in rates of interest in the market. 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 6.34% in 1999 from 6.58% in 1998. This decrease was primarily a result of a decline in market rates on all types of debt instruments. Average investments increased 12.27% 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 decreased to 4.22% in 1999 from 4.47% in 1998. Average rates decreased on all deposit types as a result of declines in general market rates. Rates on interest bearing demand, savings and time deposits decreased twenty-three, nineteen and twenty-three basis points, respectively. The improvement in the net interest margin was positively affected by an increase in the mix of interest bearing deposit liabilities that are low rate obligations (i.e. demand deposits and savings). The Bank also offers a tiered rate savings account which is designed to be an alternative to time deposits in periods of changing interest rates. This savings account rate can be changed daily and gives the Bank the ability to adjust rates quickly in response to changes in market rates. Also affecting the improved net interest margin was a full year of reduced interest expense on long-term debt, which resulted from refinancing at lower rates in the latter part of 1998. Borrowings through the FHLB are incurred only to balance the rate exposure on fixed rate loans and are used to fund loans with variable rate features. Yields on short-term debt (primarily repurchase agreements) declined forty basis points and was in line with declining market rates. Table II (page 17) contains a complete yield analysis for the last three years and Table III (page 18) contains the rate/volume changes in these years. 8 Other Income The Company realized gains of $1,179,883 in 1999 on the sale of corporate stocks compared with gains of $1,248,585 in 1998. A significant portion of these gains in each year has come from the sale of common stock in regional bank holding companies. These assets have been sold to reduce the concentration in both individual stocks and within the financial services industry as a whole. To diversify the portfolio, proceeds have been reinvested in a variety of holdings including healthcare, technology, utilities, retail and service businesses. Other noninterest income increased 48.60% in 1999 from 1998 levels. The increase is attributed to an increase in service charges on deposit accounts and increases in commissions from the sales of insurance and investment products. Other Expenses 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 group. 1998 COMPARED TO 1997 OPERATIONS Net income in 1998 increased 16.39% over net income in 1997. Gains on securities transactions increased $903,323 or 261.63%. The Company continued its strategy of selectively selling common stocks that have shown sizable long-term appreciation. Other noninterest income increased 16.78% due to an increase in commissions generated from insurance, investment sales, and loan origination fees. Noninterest expense increased $311,992 or 8.74% in 1998 over 1997 levels. Salaries and employee benefits increased 7.61% due to increased staffing and normal salary increases. Other noninterest expenses increased $156,593 (10.26%). 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 issuers. 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. 9 BALANCE SHEET INVESTMENT SECURITIES Average balances in investment securities increased 12.27% in 1999 compared to 1998. Growth of the loan portfolio was flat through eight months of 1999 and funds generated from deposit growth were invested in the securities portfolio. The Company maintains a high level of earning assets in investment securities to provide for liquidity and 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 1999, 1998 and 1997 are shown in the yield analysis in Table II (page 17). The carrying amount and estimated market value of debt securities (in thousands of dollars) at December 31, 1999 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 in one year or less $ 1,550 $ 1,539 5.97% Due after one year through five years 2,780 2,701 6.12% ------- ------- ---- Total $ 4,330 $ 4,240 6.07% ======== ======== ==== Securities Available for Sale Amortized Fair Average ----------------------------- Cost Value Yield Due in one year or less $ 1,858 $ 1,839 6.12% Due after one year through five years 22,580 21,991 6.05% ------- ------- ---- 24,438 23,830 6.06% Equity securities 10,811 12,339 6.45% -------- -------- ---- Total $ 35,249 $ 36,169 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. 10 INVESTMENT SECURITIES (CONTINUED) Mortgage-backed Securities The Company's investment in mortgage-backed securities as of December 31, 1999, is shown in the following schedule: Book Fair Issuer Value Value Pass through obligations FNMA & FHLMC $ 263 $ 260 GNMA 2,321 2,311 -------- -------- 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 $10,810,992 at December 31, 1999, with an estimated market value of $12,338,974. 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 1999 of the Company's corporate bonds was $9,062,220 compared with book value of $9,361,998. The Bonds were purchased primarily as short-term investments and maturities extend to 2004. 11 RISK ELEMENTS IN THE LOAN PORTFOLIO The Company's loan portfolio totaled $140,317,896 at December 31, 1999 compared with $132,301,709 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 .37% during 1999 to $31,685,756. The composition of the loans as of December 31, 1999 is shown in the following schedule: Commercial and Agricultural Loans (In thousands) Secured by Real Estate Other Total Commercial $ 14,029 $ 8,851 $ 22,880 Agricultural 6,244 2,148 8,392 Multi family residential 414 414 -------- ------- ------- $ 20,687 $ 10,999 $ 31,686 ======== ======= ======= The majority of commercial loans are made to small retail and service businesses. The Company's mortgage loans increased 7.24% from $78,348,885 to $84,019,312 at December 31, 1999. Residential real estate loans are generally made for a period not to exceed 25 years and are secured by first deed of trust which do 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 10 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 year, or seven year periods at a fixed rate or as a revolving line of credit. The Company's consumer installment loans increased 5.59% to $18,082,123 at December 31, 1999. 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. In 1996 and 1997, the poultry industry suffered due to high grain prices, excess supplies of all types of meat and high mortality rates among turkey poults. During 1998 and 1999, poultry operations improved due primarily to falling grain prices and better poultry pricing. If the above conditions return, the Company would expect greater delinquency rates and more problem loans in the future. The Company continuously monitors its loan delinquency rates. During 1999, 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. 12 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 4.0% 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, 1999: Maturity Range Less Than 1-5 Over Loan Type 1 Year Years 5 Years Total --------- --------- ----- ------- ----- Commercial and Agricultural Loans $ 7,259 $ 15,620 $ 8,807 $ 31,686 Real Estate - mortgage 516 2,190 81,313 84,019 Real Estate - construction 5,481 5,481 Consumer - installment/other 1,970 16,099 1,063 19,132 -------- ------- ------- ------- Total $ 15,226 $ 33,909 $ 91,183 $140,318 ======== ======= ======= ======= Loans with predetermined rates $ 2,231 $ 18,220 $ 13,767 $ 34,218 Loans with variable or adjustable rates 12,995 15,689 77,416 106,100 -------- ------- ------- ------- Total $ 15,226 $ 33,909 $ 91,183 $140,318 ======== ======= ======= ======= 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, ------------------------------ 1999 1998 1997 ---- ---- ---- Nonaccruing loans None None None Loans past due 90 days or more $1,917 $2,059 $ 825 Percentage to total loans 1.37% 1.56% .67% 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, 1999 and 1998, 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, 1999, management had identified loans of $2,970,634 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, or 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. 13 LOAN CONCENTRATIONS At December 31, 1999, no industry category exceeded ten percent of total loans. 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. 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 1999, 1998, and 1997 follows: 1999 1998 1997 ---- ---- ---- Balance at beginning of period $1,162,176 $1,120,749 $1,003,371 --------- --------- --------- Provision charged to expenses 140,000 110,000 180,000 --------- -------- -------- Loan losses: Commercial 107,280 3,551 9,635 Installment 149,357 169,866 91,510 Real estate 2,384 Total loan losses 259,021 173,417 101,145 --------- -------- -------- Recoveries: Commercial 5,381 6,819 7,213 Installment 39,454 98,025 31,310 Real Estate 2,272 Total recoveries 47,107 104,844 38,523 --------- -------- -------- Net loan losses 211,914 68,573 62,622 --------- -------- -------- Balance at end of period $1,090,262 $1,162,176 $1,120,749 ========= ========= ========= Allowance for loan losses as a percentage of loans .78% .88% .91% Ratio of net loan losses during the period to average loans outstanding during the period .16% .05% .05% 14 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 ------------------------------------------------ 1999 1998 1997 ------------------ ------------------ ------------ 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 $ 327 30% 26% $ 392 34% 27% $ 376 34% 22% Real estate mortgage 327 30 60 350 30 59 370 33 64 Installment 273 25 14 260 22 14 255 22 14 Unallocated 163 15 160 14 120 11 ----- -- --- ------- --- ---- ------- --- --- Total $ 1,090 100% 100% $ 1,162 100% 100% $ 1,121 100% 100% ====== === === ====== === === ====== === ===
DEPOSITS The Bank recognized an increase in year-end deposits in 1999 of 3.23%. 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 $ 7,381,162 at December 31, 1999. The maturity distribution of these certificates is as follows: Less than 3 months $ 947,906 3 to 12 months 4,332,614 1 year to 5 years 2,100,642 --------- Total $7,381,162 ========= 15 STOCKHOLDERS' EQUITY Total stockholders' equity increased $1,207,926 or 5.02% in 1999. Earnings retained from operations were the primary source of the increase. As of December 31, 1999, the book value per share was $10.30 compared to $9.80 as of December 31, 1998. 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, 1999, the Company had Tier I capital of 17.66% of risk weighted assets and combined Tier I and II capital of 18.44% 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, 1999, the Company reported a leverage ratio of 12.65%. 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, 1999 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 1999, the Bank used maturing investments, deposit growth and an increase in short-term debt to meet its liquidity needs. The Bank was a seller of federal funds for most of 1999. 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 19) contains an analysis, which shows the repricing opportunities of earning assets and interest bearing liabilities as of December 31, 1999. At December 31, 1999, the Company had a cumulative Gap Rate Sensitivity Ratio of 22.44% 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. 16 Table I F & M BANK CORP. SELECTED OPERATING INFORMATION Years Ending December 31, ----------------------------------------------- (In Thousands, Except per Share Information) 1999 1998 1997 1996 1995 CONDENSED STATEMENTS OF INCOME AND DIVIDENDS Interest and Dividend Income $ 14,321 $ 14,147 $ 13,532 $ 12,505 $ 11,136 Interest Expense 6,475 6,931 6,319 6,076 5,515 ------- ------- ------- ------- ------- Net Interest Income 7,846 7,216 7,213 6,429 5,621 Provision for Loan Losses 140 110 180 226 164 Net Interest Income after Provision for Loan Losses 7,706 7,106 7,033 6,203 5,457 Noninterest Income 2,095 1,865 873 661 947 Noninterest Expenses 4,313 3,880 3,568 3,410 3,333 ------- ------- ------- ------- ------- Income before Income Taxes 5,488 5,091 4,338 3,454 3,071 Income Tax Expense 1,682 1,590 1,330 1,013 955 ------- ------- ------- ------ ------ Net Income $ 3,806 $ 3,501 $ 3,008 $ 2,441 $ 2,116 ======= ======= ======= ======= ======= Total Assets at Year End $195,338 $191,495 $173,810 $166,511 $152,301 ======= ======= ======= ======= ======= PER SHARE INFORMATION Net Income Per Share $ 1.55 $ 1.43 $ 1.22 $ 1.00 $ .87 Dividends Per Share $ .52 $ .73 $ .35 $ .29 $ .27 Book Value Per Share $ 10.30 $ 9.80 $ 9.33 $ 7.79 $ 7.00 FINANCIAL STATEMENT RATIOS Return on Average Assets 2 1.96% 1.94% 1.77% 1.54% 1.49% Return on Average Equity 2 15.47% 15.00% 14.44% 13.58% 13.15% Dividend Payout Ratio 33.55% 51.22% 28.89% 28.79% 30.79% Average Equity to Average Assets Ratio 2 12.65% 12.97% 12.22% 11.34% 11.34% 1 Reflects adjustments for three for one stock split declared in 1998. 2 Ratios are primarily based on daily average balances. 17 Table II F & M BANK CORP. NET INTEREST INCOME/RATES EARNED AND PAID (On a fully taxable equivalent basis) (In thousands of dollars)
1999 1998 1997 ---- ---- ---- 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 $ 35,799 $ 3,147 8.79% $ 33,921 $ 3,148 9.28% $ 29,518 $ 2,791 9.46% Real estate 1 80,693 6,944 8.61 78,072 6,889 8.82 73,499 6,491 8.83 Installment 1 17,131 1,681 9.81 16,226 1,689 10.41 14,427 1,514 10.49 -------- ------- ---- ------- ------- ----- ------- ------- ----- Total Loans 133,623 11,772 8.81 128,219 11,726 9.15 117,444 10,796 9.19 Investment securities: Fully taxable 3 32,530 1,983 6.10 27,794 1,707 6.14 33,196 2,147 6.47 Partially Taxable 2,3 8,278 605 7.31 8,235 663 8.05 7,460 645 8.65 Nontaxable 2,3 320 20 6.25 372 23 6.18 -------- ------ ---- ------- ------ ----- ------- ------- ----- Total Investment Securities 40,808 2,588 6.34 36,349 2,390 6.58 41,028 2,815 6.86 Interest bearing deposits in banks 893 38 4.26 1,777 82 4.61 546 28 5.13 Federal funds sold 2,135 105 4.92 3,415 182 5.33 1,968 108 5.49 -------- ------ ---- ------- ----- ----- ------- ------ ---- Total Earning Assets 177,459 14,503 8.17 169,760 14,380 8.47 160,986 13,747 8.54 ------- ---- ------- ------ ----- ------ ---- Allowance for loan losses (1,109) (1,174) (1,086) Nonearning assets 18,085 11,420 10,412 ------ ------ ------ Total Assets $194,435 $180,006 $170,312 ======= ========= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Demand - Interest bearing $ 20,771 $ 467 2.25 $ 19,552 485 2.48 $ 19,666 495 2.52 Savings 29,532 975 3.30 27,286 953 3.49 28,005 999 3.57 All other time deposits 69,964 3,637 5.20 68,362 3,713 5.43 65,732 3,550 5.40 ------- ------- ---- ------- ------ ---- ------- ------ ----- Total Deposits 120,267 5,079 4.22 115,200 5,151 4.47 113,403 5,044 4.45 Short-term debt 6,726 301 4.48 5,159 252 4.88 3,306 163 4.93 Long-term debt 20,010 1,095 5.47 18,824 1,529 8.12 17,065 1,112 6.52 ------- ------ ---- ------- ------ ---- ------- ------ ---- Total Interest Bearing Liabilities 147,003 6,475 4.40 139,183 6,932 4.98 133,774 6,319 4.72 ------ ---- ------ ---- ------ ---- Noninterest bearing deposits 16,618 14,813 13,101 Other liabilities 6,211 2,668 2,608 ------- ------- ------- Total Liabilities 169,832 156,664 149,483 Stockholders' equity 24,603 23,342 20,829 ------ ------ ------ Total Liabilities and Stockholders' Equity $194,435 $180,006 $170,312 ======= ======= ======= Net Interest Earnings $ 8,028 $ 7,448 $ 7,428 ======= ======= ====== Net Yield on Interest Earning Assets 4.52% 4.39% 4.61% ==== ==== ====
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. 18 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)
1999 Compared to 1998 1998 Compared to 1997 ----------------------------- --------------------- 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 $ 174 $ (175) (1) $ 416 $ (59) $ 357 Real estate 231 (176) 55 404 (6) 398 Installment 94 (102) (8) 189 (14) 175 ---- ------ ------ ---- ----- ---- Total loans 499 (453) 46 1,009 (79) 930 Investment securities: Fully taxable 291 (15) 276 (350) (90) (440) Partially taxable 3 (61) (58) 67 (49) 18 Nontaxable (20) (20) (3) 0 (3) ----- ----- ------ ----- ---- ---- Total investment securities 274 (76) 198 (286) (139) (425) Interest bearing deposits in banks (41) (3) (44) 63 (9) 54 Federal funds sold (68) (9) (77) 79 (5) 74 ----- ------ ------ ---- ------ ---- Total Interest Income $ 664 $ (541) $ 123 $ 865 $(232) $ 633 ==== ====== ===== ==== ===== ==== Interest expense: Deposits: Demand $ 30 $ (48) $ (18) $ (3) $ (7) $ (10) Savings 78 (56) 22 (26) (20) (46) All other time deposits 87 (163) (76) 143 20 163 Total deposits 195 (267) (72) 114 (7) 107 Short-term debt 76 (27) 49 91 (2) 89 Long-term debt 96 (530) (434) 115 302 417 ---- ------ ------ ---- ---- ---- Total Interest Expense $ 367 $ (824) $ (457) $ 320 $ 293 $ 613 ==== ===== ===== ==== ==== ====
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. 19 Table IV F & M BANK CORP. INTEREST SENSITIVITY ANALYSIS (In Thousands of Dollars) December 31, 1999 1-90 91-365 1-5 Over 5 Not Days Days Years Years Classified Total Uses of Funds Loans: Commercial $4,750 $3,318 $16,336 $7,282 $ $31,686 Consumer installment 86 868 16,099 1,063 18,116 Consumer real estate 5,629 13,272 52,701 17,898 89,500 Credit cards 1,016 1,016 ----- ----- ----- ----- ----- ------ Total Loans 11,481 17,458 85,136 26,243 140,318 Interest bearing bank deposits 462 462 Investment Securities 3,389 24,771 16,262 44,422 ----- ----- ------ ----- ------ ------ Total 11,943 20,847 109,907 26,243 16,262 185,202 Sources of Funds Deposits: Interest bearing demand deposits 6,072 9,074 6,003 21,149 Savings 5,913 11,826 11,827 29,566 Certificates of deposit $100,000 and over 948 4,333 1,426 674 7,381 Other certificates of deposit 13,015 36,352 14,587 264 64,218 ------ ------ ------ ----- ----- ------ Total Deposits 13,963 52,670 36,913 18,768 122,314 Short-term debt 7,719 7,719 Long-term debt 2,711 15,837 18,548 ----- ----- ----- ------ ----- ------ Total 21,682 52,670 39,624 34,605 148,581 Discrete Gap (9,739) (31,823) 70,283 (8,362) 16,262 36,621 Cumulative Gap (9,739) (41,562) 28,721 20,359 36,621 Ratio of Cumulative Gap to Total Earning Assets (5.26)% (22.44)% 15.51% 10.99% 19.77% Table IV reflects the earlier of the maturity or repricing dates for various assets and liabilities at December 31, 1999. 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. 20 Item 7. Financial Statements INDEX TO FINANCIAL STATEMENTS Page Independent Auditors' Report 21 Consolidated Balance Sheets as of December 31, 1999 and 1998 22 Consolidated Statements of Income - Years Ended December 31, 1999, 1998, and 1997 23 Consolidated Statements of Changes in Stockholders' Equity - Years Ended December 31, 1999, 1998, and 1997 24 Consolidated Statements of Cash Flows - Years Ended December 31, 1999, 1998, and 1997 25 Notes to Consolidated Financial Statements 26 - 42 21 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, 1999 and 1998, 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, 1999. 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, 1999 and 1998, and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 1999, in conformity with generally accepted accounting principles. S. B. Hoover & Company, L.L.P. January 25, 2000 Harrisonburg, Virginia 22 F & M BANK CORP. CONSOLIDATED BALANCE SHEETS December 31, ASSETS 1999 1998 -------------- ------- Cash and due from banks (note 3) $ 4,799,546 $ 4,198,472 Interest bearing deposits 462,127 2,144,938 Federal funds sold 2,436,000 Securities - Held to maturity - fair value of $4,240,013 in 1999 and $9,820,919 in 1998 (note 4) 4,329,863 9,714,876 Available for sale (note 4) 36,168,625 33,941,033 Other investments (note 4) 3,923,097 2,700,682 Loans (note 5) 140,317,896 132,301,079 Less allowance for loan losses (note 6) (1,090,262) (1,162,176) ----------- ---------- Net Loans 139,227,634 131,138,903 Bank premises and equipment, net (note 7) 3,158,371 2,080,298 Other real estate 426,128 472,128 Interest receivable 1,372,707 1,351,812 Other assets 1,470,155 1,316,020 ---------- --------- Total Assets $195,338,253 $191,495,162 =========== =========== LIABILITIES Deposits: Noninterest bearing $17,192,876 $16,232,131 Interest bearing: Demand 15,009,191 14,665,408 Money market accounts 6,140,163 5,547,034 Savings 29,565,654 27,443,491 Time deposits over $100,000 (note 8) 7,381,162 6,941,598 All other time deposits (note 8) 64,217,906 64,309,689 ---------- ---------- Total Deposits 139,506,952 135,139,351 Short-term debt (note 9) 7,719,369 7,155,227 Accrued liabilities 4,277,260 3,268,543 Long-term debt (note 10) 18,548,276 21,853,571 ---------- ---------- Total Liabilities 170,051,857 167,416,692 ----------- ----------- STOCKHOLDERS' EQUITY Common stock $5 par value, 3,000,000 shares authorized, 2,455,962 shares issued and outstanding 12,279,810 12,279,810 Capital surplus 868,132 866,694 Retained earnings (note 16) 11,587,061 9,057,266 Accumulated other comprehensive income 551,393 1,874,700 ---------- --------- Total Stockholders' Equity 25,286,396 24,078,470 ---------- ---------- Total Liabilities and Stockholders' Equity $195,338,253 $191,495,162 =========== =========== The accompanying notes are an integral part of this statement. 23 F & M BANK CORP. CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31, 1999 1998 1997 -------------------------- ------ INTEREST AND DIVIDEND INCOME: Interest and fees on loans $11,740,753 $11,695,691 $10,778,088 Interest on deposits and federal funds sold 143,132 264,235 135,835 Interest on debt securities - taxable 1,904,852 1,670,354 2,198,515 Interest on debt securities - nontaxable 13,083 15,212 Dividends on equity securities 532,173 503,911 404,082 -------- -------- -------- Total Interest and Dividend Income 14,320,910 14,147,274 13,531,732 ---------- ---------- ---------- INTEREST EXPENSE: Interest on demand deposits 467,082 484,254 494,549 Interest on savings deposits 974,507 953,291 999,314 Interest on time deposits over $100,000 312,233 317,374 247,949 Interest on all other time deposits 3,324,936 3,395,708 3,301,664 --------- --------- --------- Total interest on deposits 5,078,758 5,150,627 5,043,476 Interest on short-term debt 301,216 251,889 163,478 Interest on long-term debt 1,095,059 1,529,009 1,112,146 --------- --------- --------- Total Interest Expense 6,475,033 6,931,525 6,319,100 --------- --------- --------- NET INTEREST INCOME 7,845,877 7,215,749 7,212,632 --------- --------- --------- PROVISION FOR LOAN LOSSES (note 6) 140,000 110,000 180,000 -------- -------- -------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 7,705,877 7,105,749 7,032,632 --------- --------- --------- NONINTEREST INCOME: Service charges on deposit accounts 470,623 419,904 400,192 Insurance and other commissions 145,007 19,857 15,268 Other operating income 300,227 176,557 112,307 Gain on security transactions (note 4) 1,179,683 1,248,585 345,262 --------- --------- -------- Total Noninterest Income 2,095,540 1,864,903 873,029 --------- --------- -------- NONINTEREST EXPENSES: Salaries 1,972,167 1,749,640 1,563,488 Employee benefits (note 12) 611,060 447,763 478,516 Occupancy expense 201,983 188,340 168,785 Equipment expense 254,220 254,402 285,715 Other operating expenses 1,273,926 1,240,199 1,071,848 --------- --------- --------- Total Noninterest Expenses 4,313,356 3,880,344 3,568,352 --------- --------- --------- Income before Income Taxes 5,488,061 5,090,308 4,337,309 INCOME TAX EXPENSE (note 11) 1,681,856 1,589,733 1,329,766 --------- --------- --------- NET INCOME $3,806,205 $3,500,575 $3,007,543 ========= ========= ========= PER SHARE DATA NET INCOME $ 1.55 $ 1.43 $ 1.22 ========= ======== ======== CASH DIVIDENDS $ .52 $ .73 $ .35 ========= ======== ======== COMMON SHARES OUTSTANDING 1 2,454,250 2,455,962 2,455,962 ========= ========= ========= 1 Restated to reflect three for one stock split in 1998. The accompanying notes are an integral part of this statement. 24 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, 1996 $ 4,093,270 $ 866,694 $13,396,313 $ 769,595 $19,125,872 Comprehensive Income: Net income 3,007,543 3,007,543 Net change in unrealized appreciation on securities available for sale (note 2(k)) 1,636,272 1,636,272 Comprehensive Income 4,643,815 Dividends on common stock (867,773) (867,773) ---------- -------- ---------- --------- ---------- 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 ========== ======== ========== ========= ==========
The accompanying notes are an integral part of this statement. 25 F & M BANK CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 1999 1998 1997 ---------------------------- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $3,806,205 $3,500,575 $3,007,543 Adjustments to reconcile net income to net cash provided by operating activities: Gain on sale of securities (1,179,683) (1,248,585) (345,262) Depreciation 218,134 212,687 256,495 Amortization of security premiums 198,559 155,898 92,415 Provision for loan losses 140,000 110,000 180,000 Provision for deferred taxes 9,410 (35,407) (32,140) (Increase) decrease in interest receivable (20,895) (74,546) 34,379 Increase in other assets (154,134) (147,721) (325,233) Increase (decrease) in accrued expenses 386,151 214,860 (86,600) Amortization of limited partnership investments 121,685 81,965 94,127 Other noncash expenses 15,208 25,807 Gain on sale of land (9,702) ---------- ---------- --------- Net Cash Provided by Operating Activities 3,525,432 2,775,232 2,901,531 ---------- ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Net (increase) decrease in interest bearing bank deposits 1,682,811 (1,317,478) 26,646 Net (increase) decrease in federal funds sold 2,436,000 (181,000) 1,142,000 Proceeds from maturities of securities held to maturity 4,436,157 13,206,462 10,724,026 Proceeds from maturities of securities available for sale 12,349,066 6,393,226 3,193,936 Proceeds from sales of securities available for sale 3,764,619 7,319,842 7,326,099 Purchases of securities held to maturity (1,523,000) (5,438,377) (5,949,245) Purchases of securities available for sale (16,827,648) (25,390,932) (8,767,821) Purchase of other securities (1,500) (999,150) (187,488) Net increase in loans (8,228,731) (9,225,487) (11,516,933) Purchase of property and equipment (1,296,207) (319,803) (203,173) Construction in progress payments (90,332) Purchase of other real estate (427,067) Proceeds from sales of equipment 9,500 Sale of other real estate 10,641 ---------- ----------- ---------- Net Cash Used in Investing Activities (3,208,433) (16,032,388) (4,629,520) ---------- ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in demand and savings deposits 4,036,901 2,825,773 579,339 Net increase in time deposits 347,781 5,962,403 1,173,241 Net increase in short-term debt 430,322 1,951,128 2,088,511 Dividends paid in cash (1,227,072) (1,735,547) (810,468) Proceeds from long-term debt 23,714,053 2,000,000 Payments to repurchase common stock (59,627) Proceeds from issuance of common stock 61,065 Repayments of long-term debt (3,305,295) (18,836,583) (3,296,061) ---------- ----------- ---------- Net Cash Provided by Financing Activities 284,075 13,881,227 1,734,562 ---------- ----------- ---------- Net Increase in Cash and Cash Equivalents 601,074 624,071 6,573 Cash and Cash Equivalents, Beginning of Year 4,198,472 3,574,401 3,567,828 ---------- ---------- ---------- Cash and Cash Equivalents, End of Year $ 4,799,546 $ 4,198,472 $ 3,574,401 ========== ========== ========== Supplemental Disclosure: Cash paid for: Interest expense $ 6,467,192 $ 6,883,142 $ 6,324,663 Income taxes 1,345,000 1,595,000 1,370,180 Noncash Transactions The Company financed purchases of its interests in limited partnerships in 1999 and 1998 through the incurrence of debt totaling $1,498,500 and $969,309, respectively. The accompanying notes are an integral part of this statement. 26 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: (a)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. (b)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 economic conditions. (c)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. 27 F & M BANK CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): (d)Investment Securities (Continued) 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. (e)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. (f)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. (g)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. 28 F & M BANK CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): (h)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. (i)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. (j)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. (k)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, ------------------------ 1999 1998 1997 ---- ---- ---- (In thousands) Unrealized holding gains (losses) on available- for-sale securities $ (915,573) $ 388,325 $ 2,980,100 Reclassification adjustment for gains realized in income (1,179,683) (1,248,585) (345,262) Net Unrealized Gains (Losses) (2,095,256) (860,260) 2,634,838 Tax effect 771,949 329,093 (998,566) -------- -------- -------- Net Change $ (1,323,307) $ (531,167) $1,636,272 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 $736,000 and $659,000 for the years ended December 31, 1999 and 1998, respectively. 29 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, 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 ========= ======== ======== ========= December 31, 1998 U. S. Treasuries and Agencies $4,985,921 $ 44,231 $ $5,030,152 Mortgage-backed obligations of federal agencies 1,220,365 11,595 2,330 1,229,630 State and municipals 250,000 58 250,058 Corporate bonds 3,258,590 52,489 3,311,079 --------- -------- --------- --------- Total Securities Held to Maturity $9,714,876 $ 108,373 $ 2,330 $9,820,919 ========= ======== ======== ========= The amortized cost and fair value of securities available for sale are as follows: 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 ========== ========= ========= ========== December 31, 1998 U.S. Agencies $13,848,879 $ 37,887 $ 780 $13,885,986 Mortgage-backed obligations of federal agencies 3,869,491 15,685 2,040 3,883,136 Marketable equities 7,604,938 3,019,825 134,980 10,489,783 Corporate bonds 5,602,341 79,787 5,682,128 --------- -------- -------- --------- Total Securities Available for Sale $30,925,649 $3,153,184 $ 137,800 $33,941,033 ========== ========= ======== ========== 30 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, 1999, 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 $1,550,038 $1,538,733 $1,857,554 $1,838,561 Due after one year through five years 2,779,825 2,701,280 22,580,589 21,991,090 Total 4,329,863 4,240,013 24,438,143 23,829,651 Marketable equities 10,810,992 12,338,974 --------- --------- ---------- ---------- $4,329,863 $4,240,013 $35,249,135 $36,168,625 ========= ========= ========== ========== Realized gains and losses and the gross proceeds from the sale of debt securities were not material in 1999, 1998 or 1997. Realized gains and losses on marketable equity transactions are summarized below: 1999 1998 1997 ------- ------- ------ Gains $1,239,207 $1,579,042 $ 461,136 Losses 59,524 330,457 115,874 --------- --------- -------- Net Gains $1,179,683 $1,248,585 $ 345,262 ========= ========= ======== The carrying value (which approximates fair value) of securities pledged by the Company to secure deposits and for other purposes amounted to $13,836,267 at December 31, 1999 and $13,563,958 at December 31, 1998. There were no state or political subdivision obligations of a single issuer that exceeded 10% of stockholders' equity at December 31, 1999, 1998 or 1997. 31 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 partnerships (carrying basis of $2,873,490) 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 $1,049,607). The interests in the low-income housing 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, 1999. At December 31, 1999, the Company was committed to invest additional $2,467,809 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: 1999 1998 ------ ------ Real Estate Construction $ 5,481,073 $ 4,375,669 Mortgage 84,019,312 78,348,885 Commercial and agricultural 31,685,756 31,567,617 Installment 18,082,123 17,125,279 Credit cards 1,015,866 831,814 Other 33,766 51,815 ---------- ---------- Total $140,317,896 $132,301,079 =========== =========== The Company has pledged mortgage loans as collateral for borrowings with the Federal Home Loan Bank of Atlanta totaling $22,033,948 and $24,246,293 as of December 31, 1999 and 1998, respectively. NOTE 6 ALLOWANCE FOR LOAN LOSSES: A summary of changes in the allowance for loan losses is shown in the following schedule: 1999 1998 1997 ------------------------ ------ Balance, beginning of year $1,162,176 $1,120,749 $1,003,371 Provision charged to operating expenses 140,000 110,000 180,000 Loan recoveries 47,107 104,844 38,523 Loans charged off (259,021) (173,417) (101,145) --------- ---------- -------- Balance, End of Year $1,090,262 $1,162,176 $1,120,749 ========= ========= ========= Percentage of gross loans .78% .88% .91% 32 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: 1999 1998 ------ ------ Construction in progress $ $ 90,332 Land 480,651 480,651 Buildings and improvements 2,818,590 1,954,531 Furniture and equipment 2,558,613 2,110,885 ---------- ---------- 5,857,854 4,636,399 Less - accumulated depreciation (2,699,483) (2,556,101) ---------- ---------- Net $ 3,158,371 $ 2,080,298 ========== ========== Provisions for depreciation of $218,134 in 1999, $212,687 in 1998 and $256,495 in 1997 were charged to operations. NOTE 8 DEPOSITS: At December 31, 1999, the scheduled maturities of time deposits are as follows: 2000 $54,825,367 2001 8,333,688 2002 3,037,372 2003 4,276,930 2004 1,125,711 ---------- Total $71,599,068 ========== 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 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% ========= ========= ===== ===== 33 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 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% ========= ========= ==== ==== 1997 Treasury, tax and loan $1,402,834 $1,300,663 $ 332,603 4.52% 5.25% Federal funds purchased 2,577,000 81,512 5.75 n/a Notes payable 477,220 55,642 7.74 n/a Securities sold under agreements to repurchase 3,903,436 3,903,436 2,892,035 4.98 4.91 --------- --------- ---------- ----- ---- Totals $5,204,099 $3,361,792 4.86% 5.00% ========= ========= ==== ==== 1 Based on daily amounts outstanding The Bank issues repurchase agreements to commercial 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. As of December 31, 1999, the Company had lines of credit with correspondent banks totaling $8,585,000, which are used in the management of short-term liquidity. All securities sold under agreements to repurchase are under the Company's control. 34 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 zero in 1999 and $8,000,000 in 1998. 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 5.47% at December 31, 1999. 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 $1,095,059, $1,529,009 and $1,112,146 was incurred on these debts in 1999, 1998, and 1997, respectively. The maturities of long-term debt as of December 31, 1999 are as follows: 2000 $ 3,162,438 2001 2,922,438 2002 2,842,438 2003 2,688,384 2004 2,226,222 Thereafter 4,706,356 --------- Total $18,548,276 ========== NOTE 11 INCOME TAX EXPENSE: The components of the income tax expense are as follows: 1999 1998 1997 ------------------------ ------ Current expense Federal $1,626,377 $1,552,168 $1,341,529 State 46,069 72,972 20,377 Deferred expense Federal 9,410 (35,407) (32,140) -------- --------- -------- Total Income Tax Expense $1,681,856 $1,589,733 $1,329,766 ========= ========= ========= Amounts in above arising from gains on security transactions $ 427,980 $ 473,182 $ 132,744 ======== ======== ======== The deferred tax effects of temporary differences are as follows: 1999 1998 1997 ------------------ ------ Tax Effects of Temporary Differences: Provision for loan losses $ 24,451 $ (14,086) $ (36,848) Split dollar life insurance (2,422) (11,267) (6,557) Non-qualified deferred compensation (42,932) (27,427) (4,561) Depreciation 19,902 8,477 1,037 Pension expense 7,992 16,818 15,946 Accounting change (11,523) (11,523) Other 2,419 3,601 10,366 -------- -------- -------- Deferred Income Tax Benefit $ 9,410 $ (35,407) $ (32,140) ======= ========= ======== 35 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: 1999 1998 ------ ------ Deferred Tax Assets: Bad debt allowance $ 252,075 $ 276,526 Split dollar life insurance 85,869 85,316 Non-qualified deferred compensation 74,919 31,988 Other 12,152 11,220 -------- -------- Total Assets 425,015 405,050 -------- -------- Deferred Tax Liabilities: Securities available for sale 368,730 1,140,679 Low income housing credits 199,980 145,557 Depreciation 46,047 26,145 Pension 165,762 157,770 Partnership losses 13,953 FHLB dividends 9,418 18,564 -------- -------- Total Liabilities 803,890 1,488,715 -------- --------- Net Liability $(378,875)$(1,083,665) ========= ========== The following table summarizes the differences between the actual income tax expense and the amounts computed using the federal statutory tax rates: 1999 1998 1997 ----------------------------- ---- Tax expense at federal statutory rates $1,825,616 $1,702,599 $1,451,470 Increases (decreases) in taxes resulting from: State income taxes, net 56,038 62,594 25,250 Partially exempt income (146,584) (138,667) (127,577) Tax-exempt interest (6,887) (12,928) (11,796) Other (46,327) (23,865) (7,581) --------- -------- --------- Total Income Tax Expense $1,681,856 $1,589,733 $1,329,766 ========= ========= ========= 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. The Bank's funding policy is to fund the maximum amount permitted by federal income tax regulations. Plan assets consist primarily of investments in stocks and bonds. Pension expense totaled $153,667, $96,868, and $90,786 for 1999, 1998, and 1997, respectively. 36 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 $160,000 in 1999, $150,000 in 1998 and $153,663 in 1997 to the Plan and charged this expense to operations. NOTE 13 CONCENTRATIONS OF CREDIT: The Company had cash deposits in other commercial banks totaling $2,157,260 and $2,488,133 at December 31, 1999 and 1998. 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. In 1998 and 1997, the poultry industry suffered due to high grain prices, excess supplies of all types of meat and high mortality rates among turkey poults. Within 1999, poultry operations improved due primarily to falling grain prices and better poultry pricing. The Company continues to monitor its loan delinquency rates. If the above adverse conditions return, the Company would expect greater delinquency rates and more problem loans in the future. 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: 1999 1998 ------- ------ Commitments to loan money $25,295,880 $18,695,383 Standby letters of credit 1,189,951 748,620 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. 37 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: 1999 1998 ------- ------ Total loans, beginning of year $1,133,362 $1,217,533 Change in directorship 131,279 New loans 697,597 693,832 Repayments (616,818) (778,003) --------- -------- Total Loans, End of Year $1,345,420 $1,133,362 ========= ========= 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, 2000, approximately $1,715,000 was available for dividend distribution without permission of the Board of Governors. Dividends paid by the Bank to the Company totaled $1,419,000 in 1999, $1,550,000 in 1998 and $2,120,364 in 1997. 38 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, 1999 and 1998 are as follows (in thousands): 1999 1998 ---------------- --------- Estimated Carrying Estimated Carrying Fair Value Value Fair Value Value Financial Assets Cash $ 4,800 $ 4,800 $ 4,198 $ 4,198 Interest bearing deposits 462 462 2,145 2,145 Federal funds sold 2,436 2,436 Securities available for sale 36,169 36,169 33,941 33,941 Securities held to maturity 4,240 4,330 9,821 9,715 Other investments 3,923 3,923 2,701 2,701 Loans 136,922 139,228 135,799 131,139 Accrued interest receivable 1,373 1,373 1,352 1,352 Financial Liabilities Demand Deposits: Non-interest bearing 17,193 17,193 16,232 16,232 Interest bearing 21,149 21,149 20,213 20,213 Savings deposits 29,566 29,566 27,443 27,443 Time deposits 71,904 71,599 71,971 71,251 Accrued liabilities 4,277 4,277 3,269 3,269 Short-term debt 7,719 7,719 7,155 7,155 Long-term debt 17,472 18,548 21,883 21,854 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 1999. 39 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, 1999, 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 1999 1998 Capitalized Capitalized Total risk-based ratio 18.44% 18.36% 8.00% 10.00% Tier 1 risk-based ratio 17.66% 17.45% 4.00% 6.00% Total assets leverage ratio 12.65% 12.32% 3.00% 5.00% 40 F & M BANK CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 19 PARENT CORPORATION ONLY FINANCIAL STATEMENTS: BALANCE SHEETS December 31, ASSETS 1999 1998 --------- ------ Cash and cash equivalents $ 189,476 $ 1,044,071 Investment in subsidiaries 13,461,648 12,651,188 Loans receivable 246,885 259,829 Securities available for sale 11,851,335 10,492,756 Other securities 2,873,490 1,495,177 Accrued interest receivable 1,373 1,205 Due from subsidiaries 4,393 Income tax receivable 127,673 209,602 Other real estate 426,128 426,128 -------- -------- Total Assets $29,178,008 $26,584,349 ========== ========== LIABILITIES Notes payable $ 116,739 $ Due to subsidiaries 176,743 Dividends payable 343,835 294,716 Demand obligations for low income housing investment 2,467,809 969,309 Deferred income taxes 786,486 1,241,854 -------- --------- Total Liabilities 3,891,612 2,505,879 --------- --------- STOCKHOLDERS' EQUITY Common stock par value $5 per share, 3,000,000 shares authorized, 2,455,962 shares issued and outstanding, respectively 12,279,810 12,279,810 Capital surplus 868,132 866,694 Retained earnings 11,587,061 9,057,266 Accumulated other comprehensive income 551,393 1,874,700 -------- --------- Total Stockholders' Equity 25,286,396 24,078,470 ---------- ---------- Total Liabilities and Stockholders' Equity $29,178,008 $26,584,349 ========== ========== 41 F & M BANK CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 19 PARENT CORPORATION ONLY FINANCIAL STATEMENTS (CONTINUED): STATEMENTS OF NET INCOME AND RETAINED EARNINGS Years Ended December 31, 1999 1998 1997 ---------------------------- ------- INCOME Dividends from affiliate $1,419,000 $ 1,550,000 $2,120,364 Interest on loans 21,022 22,059 24,929 Investment income - taxable 12,759 26,308 6,364 Dividend income 422,640 433,962 404,082 Security gains 1,127,882 1,236,405 373,469 Limited partnership income (loss), net of tax credits 36,302 12,802 (25,062) Other 2,504 9,702 --------- ---------- --------- Total Income 3,042,109 3,291,238 2,904,146 --------- ---------- --------- EXPENSES Interest expense 965 3,917 4,305 Administration expense 112,531 80,584 74,043 --------- ---------- --------- Total Expenses 113,496 84,501 78,348 --------- ---------- --------- Net income before income tax expense and increase in undistributed equity of affiliates 2,928,613 3,206,737 2,825,798 INCOME TAX EXPENSE 401,790 461,570 125,215 --------- ---------- --------- Income before increase in undistributed equity of affiliates 2,526,823 2,745,167 2,700,583 Increase in undistributed income of affiliates 1,279,382 755,408 306,960 --------- ---------- --------- NET INCOME 3,806,205 3,500,575 3,007,543 Retained earnings, beginning of year 9,057,266 15,536,083 13,396,313 Stock split effected in the form of a dividend (8,186,540) Dividends on common stock (1,276,410) (1,792,852) (867,773) ----------- ----------- --------- Retained Earnings, End of Year $11,587,061 $ 9,057,266 $15,536,083 ========== ========== ========== 42 F & M BANK CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 19 PARENT CORPORATION ONLY FINANCIAL STATEMENTS (CONTINUED): STATEMENTS OF CASH FLOWS Years Ended December 31, 1999 1998 1997 ---------------------------- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $3,806,205 $3,500,575 $3,007,543 Adjustments to reconcile net income to net cash provided by operating activities: Undistributed subsidiary income (1,279,382) (755,408) (306,960) Gain on sale of securities (1,127,882) (1,236,405) (373,469) Deferred tax expense 10,628 Decrease (increase) in interest receivable (168) 267 80 Decrease (increase) in due from subsidiary 4,393 360,052 (273,755) Decrease (increase) in other receivables 81,929 (89,161) (120,441) Increase (decrease) in accrued expenses 234,492 51,650 (1,673) Amortization of limited partnership investments 121,685 81,965 94,127 --------- -------- -------- Net Cash Provided by Operating Activities 1,851,900 1,913,535 2,025,452 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of securities available for sale 3,556,512 4,912,248 1,251,339 Proceeds from maturity of securities available for sale 1,987 994,192 703,793 Purchase of securities available for sale (5,167,543) (4,646,422) (2,135,196) Purchase of other securities (1,500) (999,150) (187,488) Decrease in loans receivable 12,944 11,979 10,463 Purchase of other real estate (427,067) --------- -------- -------- Net Cash Provided by (Used in) Investing Activities (1,597,600) 272,847 (784,156) ----------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in short-term debt 116,739 Payments to repurchase common stock (59,627) Proceeds from issuance of common stock 61,065 Dividends paid in cash (1,227,072) (1,735,547) (810,468) ---------- ---------- -------- Net Cash Used in Financing Activities (1,108,895) (1,735,547) (810,468) ---------- ---------- -------- Net Increase (decrease) in Cash and Cash Equivalents (854,595) 450,835 430,828 Cash and Cash Equivalents, Beginning of Year 1,044,071 593,236 162,408 ----------- --------- -------- Cash and Cash Equivalents, End of Year $ 189,476 $1,044,071 $ 593,236 ========= ========= ======== Noncash Transactions The Company financed purchases of its interests in limited partnerships in 1999 and 1998 through the incurrence of debt totaling $1,498,500 and $969,309, respectively. 43 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 53 1999 Corporate Accountant, Rocco, Inc., since 1995; Partner, Financial Manager Fitzwater Trucking since 1990 Lawrence H. Hoover, Jr. 65 1981 Attorney, Partner in Hoover, Vice Chairman of the Board Penrod, Davenport & Crist and its predecessor since 1971 Richard S. Myers 52 1988 President of Dick Myers Chevrolet-GEO since February 1991 Ronald E. Wampler 52 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 53 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 64 1980 President of Virginia Classic Mustang, Inc., an auto parts company; Partner in H&H Properties Michael W. Pugh 45 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. CLASS C DIRECTORS (to serve until the 2002 annual meeting of shareholders) Julian D. Fisher 59 1990 CEO of Farmers & Merchants President Bank since May 1996; President of Bank since Oct. 1991 Dan B. Todd 68 1969 CEO of Farmers & Merchants Chairman Bank from 1969 to May 1996; Chairman of the Board since Oct. 1991 44 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 and 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 1999 $120,000 $45,000 2 $42,157 Chief Executive Officer 1998 110,000 40,000 42,742 & President 1997 100,000 35,000 31,082 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 ($15,322, $16,116, and $14,486 1999, 1998 and 1997, respectively), the gross value of life insurance premiums paid by the Company on behalf of Mr. Fisher ($16,106, $16,210 and $14,796 in 1999, 1998, and 1997, respectively) and the Company's contribution for the benefit of Mr. Fisher under the Executive Deferred Compensation Plan for Farmers & Merchants Bank ($10,729 and $10,416 in 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) Directors of the Bank are compensated for attendance at the Board and Committee meetings, of which they are members, as follows: Two hundred ($200) 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 1999, a bonus of $5,000 was paid to each Director. 45 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, 1999. The following table sets forth the number and percentage of shares of common stock held, as of December 31, 1999 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 6,951 1 .283% Julian D. Fisher 92,117 2 3.751% Ellen R. Fitzwater 3,582 3 .146% Robert L. Halterman 29,348 1.195% Lawrence H. Hoover, Jr. 55,095 4 2.243% Richard S. Myers 12,069 5 .491% Michael W. Pugh 784 6 .032% Dan B. Todd 34,438 7 1.402% Ronald E. Wampler 7,500 .306% All Directors and executive 241,884 9.849% officers as a group 1 Includes 3,723 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, 8,201 shares owned by another member of his household and 74,489 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 21,421 shares owned by unitrusts in which he is one of the trustees. 5 Includes 4,800 shares owned directly and 7,267 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 19,422 shares owned directly, 8,992 shares owned by another member of his household and 6,024 shares held in Mr. Todd's IRA Account. 46 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, 1999. 47 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 President and Chief Executive Officer Date: March 30, 2000 By: NEIL W. HAYSLETT ------------------------------------- Neil W. Hayslett Vice President and Chief Financial Officer Date: March 30, 2000 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 30, 2000 - --------------------------- Thomas L. Cline JULIAN D. FISHER Director, President, March 30, 2000 - --------------------------- Chief Executive Officer Julian D. Fisher ELLEN R. FITZWATER Director March 30, 2000 - --------------------------- Ellen R. Fitzwater ROBERT L. HALTERMAN Director March 30, 2000 - --------------------------- Robert L. Halterman 48 - --------------------------- Director Lawrence H. Hoover, Jr. RICHARD S. MYERS Director March 30, 2000 - --------------------------- Richard S. Myers - --------------------------- Director Michael W. Pugh - ---------------------------- Director, Chairman Dan B. Todd - ---------------------------- Director Ronald E. Wampler EX-21 2 FILING FOR FORM EX-21 49 Exhibit 21 - List of Subsidiaries of the Registrant Farmers & Merchants Bank (incorporated in Virginia) TEB Life Insurance Company (incorporated in Arizona) Farmers & Merchants Financial Services (incorporated in Virginia), a subsidiary of Farmers & Merchants Bank EX-23 3 FILING FOR FORM EX-23 50 Exhibit 23 - Consent of Certified Public Accountant To the Shareholders and Board of Directors F & M Bank Corp. We consent to the use of our report, dated January 25, 2000, relating to the consolidated balance sheets of F & M Bank Corp. as of December 31, 1999 and 1998, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1999, which report appears on Page 21 in the December 31, 1999 Annual Report on Form 10-KSB of F & M Bank Corp. S. B. Hoover & Company, L.L.P. Harrisonburg, VA March 28, 2000 EX-27 4 FDS FOR 10KSB
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM F & M BANK CORP. FORM 10KSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000740806 F & M BANK CORP. 1,000 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 4,800 462 0 0 36,169 4,330 4,240 140,318 1,090 195,338 139,507 7,719 4,277 18,548 0 0 12,280 13,006 195,338 11,741 1,905 675 14,321 5,079 6,475 7,846 140 1,180 4,313 5,488 3,806 0 0 3,806 1.55 1.55 4.52 0 1,917 0 2,971 1,162 259 47 1,090 1,090 0 0
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