UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from -- to -- .
Commission file number 0-12638
F&M BANCORP
(Exact name of registrant as specified in its charter)
Maryland 52-1316473
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 Thomas Johnson Drive
Frederick, Maryland 21702
(Address of principal executive offices) (zip code)
301-694-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock $5 par value, 5,984,664 shares outstanding as of August 9, 1997
Exhibit index located on page 27.
<PAGE>
F&M BANCORP
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION PAGE
Consolidated Balance Sheets (Unaudited),
June 30, 1997 and 1996 and December 31, 1996 2
Consolidated Statements of Income (Unaudited),
Three and Six Months Ended June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows (Unaudited),
Six Months Ended June 30, 1997 and 1996 5
Consolidated Statements of Changes in Shareholders'
Equity (Unaudited), Six Months Ended June 30, 1997
and Twelve Months Ended December 31, 1996 6
Notes to Consolidated Financial Statements (Unaudited) 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II OTHER INFORMATION
Item 2. Changes in Securities 25
Item 4. Submission of matters to Vote of Security Holders 25
Item 6. Exhibits and Reports on Form 8-K 27
Signatures 28
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS (Unaudited)
F&M Bancorp and Subsidiaries
<CAPTION>
(Dollars in thousands, June 30 June 30 December 31
except per share amounts) 1997 1996 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 33,908 $ 32,348 $ 33,762
Federal funds sold -- 2,700 --
Interest-bearing deposits with banks 4,327 4,378 4,943
---------- ---------- ----------
Total cash and cash equivalents 38,235 39,426 38,705
---------- ---------- ----------
Loans held for sale 212 823 309
---------- ---------- ----------
Investment securities
Held-to-maturity, fair value
$99,318, $107,371, and $100,201,
respectively 98,526 108,486 99,503
Available-for-sale, at fair value 155,342 133,344 146,308
---------- ---------- ----------
Total investment securities 253,868 241,830 245,811
---------- ---------- ----------
Loans, net of unearned income 691,887 636,895 670,269
Less: Allowance for credit losses (9,731) (9,870) (9,639)
---------- ---------- ----------
Net loans 682,156 627,025 660,630
---------- ---------- ----------
Bank premises and equipment, net 25,237 22,603 25,231
Other real estate owned 6,388 7,972 7,457
Interest receivable 6,944 6,719 6,701
Intangible assets 3,692 4,468 3,945
Other assets 16,924 15,371 17,062
---------- ---------- ----------
Total assets $1,033,656 $ 966,237 $1,005,851
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing $ 112,608 $ 108,749 $ 108,101
Interest-bearing 697,849 685,652 686,649
---------- ---------- ----------
Total deposits 810,457 794,401 794,750
Federal funds purchased and
securities sold under agreements
to repurchase 59,095 37,763 41,876
Other short-term borrowings 50,728 21,728 57,411
Long term borrowings 6,320 11,908 6,686
Accrued interest and other liabilities 10,107 9,731 11,668
---------- ---------- ----------
Total liabilities 936,707 875,531 912,391
---------- ---------- ----------
Shareholders' equity
Common stock, par value $5 per share;
authorized 50,000,000 shares;
issued and outstanding 5,980,786
shares (1), 5,672,725 shares, and
5,678,564 shares, respectively 29,904 28,363 28,393
Surplus 36,457 29,034 29,148
Retained earnings 30,733 34,420 36,113
Net unrealized gain (loss) on
securities available for sale (145) (1,111) (194)
---------- ---------- ----------
Total shareholders' equity 96,949 90,706 93,460
---------- ---------- ----------
Total liabilities and shareholders'
equity $1,033,656 $ 966,237 $1,005,851
========== ========== ==========
(1) Restated to reflect 5% stock dividend paid August 8, 1997.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
F&M BANCORP and Subsidiaries
<CAPTION>
Six months ended Three months ended
(Dollars in thousands, June 30 June 30
except per share amounts) 1997 1996 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $29,488 $27,545 $15,018 $13,829
Interest and dividends on investment
securities
Taxable 5,284 4,910 2,626 2,553
Tax-exempt 1,727 1,838 857 910
Interest on deposits with banks 98 159 62 41
Interest on federal funds sold 24 396 10 178
------- ------- ------- -------
Total interest income 36,621 34,848 18,573 17,511
------- ------- ------- -------
Interest Expense(1)
Interest on deposits 13,728 14,064 6,895 6,994
Interest on federal funds purchased
and securities sold under
agreements to repurchase 1,074 848 579 423
Interest on Federal Home Loan Bank
borrowings 1,656 908 835 445
Interest on other short-term borrowings 44 34 24 15
------- ------- ------- -------
Total interest expense 16,502 15,854 8,333 7,877
------- ------- ------- -------
Net interest income 20,119 18,994 10,240 9,634
Provision for credit losses 900 600 450 300
------- ------- ------- -------
Net interest income after provision
for credit losses 19,219 18,394 9,790 9,334
------- ------- ------- -------
Noninterest Income
Trust income 1,180 856 569 429
Service charges on deposit accounts 2,560 2,241 1,334 1,157
Gains on sales of securities 2 (55) 2 (27)
Gains on sales of loans 104 184 61 42
Gains (losses) on sales of property 15 130 20 51
Other operating income 2,411 1,950 1,262 995
------- ------- ------- -------
Total noninterest income 6,272 5,306 3,248 2,647
------- ------- ------- -------
Noninterest Expenses
Salaries and employee benefits 9,246 8,424 4,641 4,154
Occupancy and equipment expense 2,894 2,599 1,429 1,311
Other operating expense 5,346 5,837 2,768 3,150
------- ------- ------- -------
Total noninterest expenses 17,486 16,860 8,838 8,615
------- ------- ------- -------
Income before provision for income taxes 8,005 6,840 4,200 3,366
Provision for income taxes 2,381 1,752 1,300 752
------- ------- ------- -------
Net Income $ 5,624 $ 5,088 $ 2,900 $ 2,614
======= ======= ======= =======
Earnings per Common Share
Based on weighted average shares
outstanding of 5,974,072 for
1997, 5,951,796 for 1996 (1) $ 0.94 $ 0.85 $ 0.49 $ 0.44
======= ======= ======= =======
Dividends per Share (1) $ 0.42 $ 0.31 $ 0.21 $ 0.15
======= ======= ======= =======
(1) Restated to reflect 5% stock dividend paid August 8, 1997.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
F&M BANCORP and Subsidiary
<CAPTION>
Six Months Ended
June 30 June 30
(Dollars in thousands) 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,624 $ 5,088
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for credit losses 900 600
Depreciation and amortization 1,287 1,012
Amortization of intangibles 262 312
Net premium amortization on investment securities 247 360
Increase in interest receivable (243) (190)
Decrease in interest payable (67) (115)
Deferred income tax benefit (15) 91
Accretion of net loan origination fees 85 166
Gain on sales of property (15) (130)
Loss on sales/calls of securities 2 55
Decrease in loans held for sale 97 264
Increase (decrease) in other assets 107 (1,978)
Decrease in other liabilities (1,494) (47)
-------- --------
Net cash provided by operating activities 6,777 5,488
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities to be
held to maturity (1,110) (21,166)
Purchases of investment securities available
for sale (56,883) (37,160)
Proceeds from maturities and sales/calls of
securities available for sale 47,765 37,465
Proceeds from maturities and calls of securities
to be held to maturity 2,008 2,352
Net increase in loans (22,511) (11,275)
Purchases of premises and equipment (1,319) (3,187)
Proceeds from sales of property 107 128
Other investing activities 1,003 1,090
-------- --------
Net cash used in investing activities (30,940) (31,753)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in noninterest-bearing deposits,
interest-bearing checking, savings and
money market accounts 15,900 8,207
Net increase (decrease) in certificates of deposit (193) 1,569
Net increase (decrease) in securities sold under
agreements to repurchase 17,219 (2,395)
Net decrease in long-term borrowings (366) (364)
Net increase (decrease) in other short-term borrowings(6,683) 2,608
Cash dividends paid (2,503) (1,869)
Dividend reinvestment plan (63) (13)
Proceeds from issuance of common stock 382 192
-------- --------
Net cash provided by financing activities 23,693 7,935
-------- --------
Net decrease in cash and cash equivalents (470) (18,330)
Cash and cash equivalents at beginning of period 38,705 57,756
-------- --------
Cash and cash equivalents at end of period $ 38,235 $ 39,426
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for interest $ 16,569 $ 15,969
Cash payments for income tax 2,856 2,624
NON-CASH INVESTING AND FINANCING ACTIVITIES
Fair value adjustment for securities available
for sale, net of deferred income taxes payable
(benefits) 49 (1,093)
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
F&M BANCORP and Subsidiary
<CAPTION>
Net
Unrealized
Gain
(Loss) on
Securities
(Dollars in thousands Common Retained Available
except per share amounts) Stock Surplus Earnings for Sale Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $28,304 $28,811 $31,304 $ (18) $88,401
Net income -- -- 8,611 -- 8,611
Dividend reinvestment plan -- -- (25) -- (25)
Stock options exercised
(25,113 shares) 126 377 -- -- 503
Cash dividends paid
($.61 per share) -- -- (3,640) -- (3,640)
Stock repurchased (7,448 shares) (37) (40) (137) -- (214)
Fair value adjustment for
securities available
for sale, net -- -- -- (176) (176)
------- ------- ------- ------- -------
Balance at December 31, 1996 $28,393 $29,148 $36,113 $ (194) $93,460
Net income -- -- 5,624 -- 5,624
Dividend reinvestment plan -- -- (63) -- (63)
5% Stock dividend (283,322)(1) 1,417 7,012 (8,429) -- --
Cash dividends paid
($.42 per share) -- -- (2,503) -- (2,503)
Stock options exercised
(19,428 shares) 97 300 -- -- 397
Stock repurchased (578 shares) (3) (3) (9) -- (15)
Fair value adjustment for
securities available
for sale, net -- -- -- 49 49
------- ------- ------- ------- -------
Balance at June 30, 1997 $29,904 $36,457 $30,733 $ (145) $96,949
======= ======= ======= ======= =======
(1) 5% stock dividend paid August 8, 1997.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Summary of Significant Accounting Policies
The foregoing financial statements are unaudited; however, in the opinion of
management, all adjustments (comprising only normal recurring accruals)
necessary for a fair presentation of the financial statements have been
included. A summary of F&M Bancorp's ("Bancorp's") significant accounting
policies is set forth in Note 1 to the consolidated financial statements in
it's Annual Report on Form 10-K for the year ended December 31, 1996.
Certain reclassifications to prior year balances have been made in the
accompanying consolidated financial statements to make disclosures consistent
with those of the current year.
On November 15, 1996, Bancorp acquired all of the outstanding capital stock of
Home Federal Corporation, Hagerstown, Maryland, in a tax-free transaction. Home
Federal Corporation merged with and into Bancorp. This transaction was
accounted for as a "pooling of interests." Accordingly, the consolidated
financial statements for the period ended June 30, 1996 have been restated to
include the accounts of Home Federal Corporation and its subsidiaries.
Note 2. Investment Securities
Investment securities are summarized as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
June 30, 1997
- -------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies $ 62,888 $ 94 $ 138 $ 62,844
Obligations of states and
political subdivisions 6,216 37 -- 6,253
Other securities 24,960 -- -- 24,960
Mortgage-backed securities 53,882 213 320 53,775
- -------------------------------------------------------------------------------
Total debt securities 147,946 344 458 147,832
Equity securities 7,510 -- -- 7,510
- -------------------------------------------------------------------------------
Total available-for-sale: 155,456 344 458 155,342
- -------------------------------------------------------------------------------
Held-to-maturity:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies 11,951 33 75 11,909
Obligations of states and
political subdivisions 62,696 1,027 95 63,628
Mortgage-backed securities 23,879 88 186 23,781
- -------------------------------------------------------------------------------
Total held-to-maturity 98,526 1,148 356 99,318
- -------------------------------------------------------------------------------
Total investment securities $253,982 $1,492 $ 814 $254,660
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
June 30, 1996
- -------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies $ 66,926 $ 45 $ 742 $ 66,229
Obligations of states and
political subdivisions 12,140 212 2 12,350
Mortgage-backed securities 49,546 65 1,042 48,569
- -------------------------------------------------------------------------------
Total debt securities 128,612 322 1,786 127,148
Equity securities 6,196 -- -- 6,196
- -------------------------------------------------------------------------------
Total available-for-sale: 134,808 322 1,786 133,344
- -------------------------------------------------------------------------------
Held-to-maturity:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies 6,976 27 91 6,912
Obligations of states and
political subdivisions 60,274 586 756 60,104
Mortgage-backed securities 41,236 26 907 40,355
- -------------------------------------------------------------------------------
Total held-to-maturity 108,486 639 1,754 107,371
- -------------------------------------------------------------------------------
Total investment securities $243,294 $ 961 $3,540 $240,715
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
December 31, 1996
- -------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies $ 69,883 $ 112 $ 146 $ 69,849
Obligations of states and
political subdivisions 8,545 116 -- 8,661
Mortgage-backed securities 62,042 155 435 61,762
- -------------------------------------------------------------------------------
Total debt securities 140,470 383 581 140,272
Equity securities 6,036 -- -- 6,036
- -------------------------------------------------------------------------------
Total available-for-sale: 146,506 383 581 146,308
- -------------------------------------------------------------------------------
Held-to-maturity:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies 11,949 58 13 11,994
Obligations of states and
political subdivisions 62,336 1,038 214 63,160
Mortgage-backed securities 25,218 71 242 25,047
- -------------------------------------------------------------------------------
Total held-to-maturity 99,503 1,167 469 100,201
- -------------------------------------------------------------------------------
Total investment securities $246,009 $1,550 $1,050 $246,509
===============================================================================
</TABLE>
Bancorp classifies its investments in debt and equity securities into two
categories: held-to-maturity and available-for-sale. Securities classified as
held-to-maturity are those debt securities that Bancorp has both the positive
intent and ability to hold to maturity. These securities are carried at cost,
adjusted for amortization of premiums and accretion of discounts, which are
recognized as adjustments to interest income using the interest method.
Securities classified as available-for-sale are equity securities with readily
determinable fair values and those debt securities that Bancorp intends to hold
for an indefinite period of time but not necessarily to maturity. These
securities may be sold as part of its asset/liability management strategy, or
in response to significant movements in interest rates, liquidity needs,
regulatory capital considerations, and other similar factors. These securities
are carried at fair value, with any unrealized gains and losses reported as a
separate component of shareholders' equity, net of the related deferred tax
effect.
Regardless of the classification, dividend and interest income, including
amortization of premiums and accretion of discounts arising at acquisition, is
included in interest income in the consolidated statements of income. Realized
gains and losses, if any, determined based on the adjusted cost of the specific
securities sold, are reported as a separate line item in noninterest income in
the consolidated statements of income.
The amortized cost and estimated fair values of investments at June 30, 1997
by contractual maturity are shown below. Expected maturities may differ from
contractual maturities because borrowers have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Fair
(in thousands) Cost Value
- --------------------------------------------------------------------------
<S> <C> <C>
Available-for-sale:
Within 1 year $ 58,878 $ 58,909
After 1 but within 5 years 24,188 24,144
After 5 years but within 10 years 10,998 11,004
Mortgage-backed securities 53,882 53,775
Equity securities 7,510 7,510
- --------------------------------------------------------------------------
Total available-for-sale 155,456 155,342
- --------------------------------------------------------------------------
Held-to-maturity:
Within 1 year 1,855 1,879
After 1 but within 5 years 36,600 37,178
After 5 years but within 10 years 36,085 36,373
After 10 years 107 107
Mortgage-backed securities 23,879 23,781
- --------------------------------------------------------------------------
Total held-to-maturity 98,526 99,318
- --------------------------------------------------------------------------
Total investment securities $253,982 $254,660
==========================================================================
</TABLE>
The amortized cost of investment securities pledged to secure public deposits,
securities sold under repurchase agreements, Federal Home Loan Bank advances,
and for other purposes as required and permitted by law, totaled $121,721,000
at June 30, 1997.
Note 3. Loans
Loans, net of unearned income, consist of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
June 30, December 31,
- -------------------------------------------------------------------------------
(In thousands) 1997 1996 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Real Estate Loans
Construction and land development $ 30,416 $ 29,178 $ 29,571
Secured by farmland 6,693 6,333 6,864
Residential mortgage 187,562 176,482 183,035
Other mortgage 127,012 123,990 129,308
Agricultural 920 1,325 977
Commercial and industrial loans 73,369 55,239 62,288
Consumer 261,295 238,817 253,454
Other loans 4,620 5,531 4,772
- -------------------------------------------------------------------------------
Totals $691,887 $636,895 $670,269
===============================================================================
</TABLE>
Loans to states, political subdivisions, and industrial revenue bonds are
included in all other loans in the schedule above and in total loans in the
statement of condition.
The allowance for credit losses is maintained at a level which, in management's
opinion, is considered adequate to provide for possible loan losses on loans
currently held in the loan portfolio.
Note 4. Bank Premises and Equipment
Investments in bank premises and equipment are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
June 30, December 31,
- -------------------------------------------------------------------------------
(In thousands) 1997 1996 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank premises and land $ 22,691 $ 20,713 $ 22,786
Furniture and equipment 18,018 17,987 17,280
Leasehold improvements 1,760 1,693 1,696
- -------------------------------------------------------------------------------
42,469 40,393 41,762
Less accumulated depreciation
and amortization (17,232) (17,790) (16,531)
- -------------------------------------------------------------------------------
Net premises and equipment $ 25,237 $ 22,603 $ 25,231
===============================================================================
</TABLE>
Note 5. Subsequent Event
On July 15, 1997, the Board of Directors declared a 5% stock dividend payable
on August 8, 1997 to shareholders of record as of the close of business on July
25, 1997. Shares issued as a result of the dividend totaled 283,322. All per
share amounts presented in the accompanying financial statements and notes
thereto have been restated to reflect the stock dividend.
Note 6. Future Changes in Accounting Principals
In February, 1997 the FASB issued Statement No. 128, "Earnings Per Share" which
establishes standards for computing and presenting earnings per share. It is
effective for financial statements issued for periods after December 15, 1997.
Earlier application is not permitted. The effect of this statement is not
expected to materially affect Bancorp's consolidated financial statement.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
OVERVIEW
F&M Bancorp's net income for the second quarter of 1997 was $2,900,000 or 49
cents per share compared with $2,614,000 or 44 cents per share for the same
period last year. Return on average assets and return on average equity was
1.16 percent and 12.26 percent, respectively, in the second quarter of 1997
compared with 1.10 percent and 11.73 percent, respectively, in the same period
last year. Increases in net interest income and noninterest income were the
principal factors in the 10.9 percent increase in earnings.
Net income year-to-date through June 30, 1997 was $5,624,000 or 94 cents per
share compared with $5,088,000 or 85 cents per share for the first six months
of last year. Return on average assets and return on average equity was 1.13
percent and 12.09 percent, respectively, for the first six months of 1997
compared with 1.08 percent and 11.42 percent, respectively, for the same period
last year.
Results of Operations
Net Interest Income
Net interest income, which is the sum of interest and certain fees generated
by earning assets minus interest paid on deposits and other funding sources,
is the principal source of Bancorp's earnings. Net interest income is impacted
by changes in the volume and mix of earning assets and funding sources, market
interest rates, monetary policy of the Federal Reserve Board and other factors.
Average balances and rates for major categories of interest-earning assets and
interest-bearing liabilities for the three and six month periods ended June 30,
1997 and June 30, 1996 are presented on a year-to-year comparative basis in
Table 1. Net interest income on a taxable-equivalent basis increased $575,000 or
5.7 percent compared with the second quarter of last year. The primary reason
for the increase was the increase in the volume of loans from one period to the
other.
Average earning assets increased $43,200,000 or 4.9 percent during the second
quarter of 1997 compared with the second quarter of 1996. Loans increased
$58,510,000 or 9.3 percent, while average investments in federal funds and
investment securities declined $12,304,000 and $4,801,000, respectively, to help
fund loan growth. Interest-bearing deposits increased $6,448,000 or 0.9 percent.
Growth in interest checking, our least expensive source of interest-bearing
funds, exceeded nine percent, and was partially offset by a decline in savings
deposits. Average money market savings increased 1.6 percent and time deposits
were flat when compared with last year's second quarter. Additional funding was
provided through borrowed funds, which increased $37,272,000.
The average rate earned on earning assets increased five basis points to 8.24
percent when compared with the second quarter of last year while the average
rate paid on interest-bearing liabilities declined two basis points to 4.20
percent. The increase in the earning rate was attributable to the growth in the
loan portfolio which changed the mix of earning assets from lower yielding
investments to higher yielding loans. Loan rates declined eight basis points
when compared with the second quarter of last year while rates on taxable
investments increased 27 basis points and rates on tax-exempt investments
declined 19 basis points.
Deposit rates declined ten basis points overall, lead by the average rate paid
on time deposits, our largest single source of funds, which declined 12 basis
points when compared with the second quarter of last year. Rates on all
categories of deposits declined. The average rate paid on borrowed funds
increased 21 basis points.
The net interest margin, the ratio of taxable-equivalent net interest income to
earning assets increased two basis points for the second quarter of 1997
compared with the same period last year. The increase resulted from the
increase in the volume of loans, which increased interest income, and the
control of deposit interest rates which offset the increases in the volume and
rate paid on borrowed funds.
Net interest income year-to-date increased $1,059,000 or 5.3 percent compared
with the first six months of last year as a result of the increase in loan
volume which increased interest income. Loans increased 9.1 percent for the
first half of 1997 compared with the first six months of 1996, principally in
indirect consumer loans and commercial lending. Average earning assets increased
five percent and interest-bearing liabilities increased 5.8 percent, primarily
through the use of borrowed funds, which helped to fund loan growth.
The average rate earned on average earning assets for the first half of 1997 was
unchanged from a year earlier. The average rate incurred on interest-bearing
liabilities declined six basis points when compared with the rate incurred for
the first half of last year. The increase in interest income resulting from loan
volume and the reduction in the average rate incurred on liabilities served to
increase the net interest margin by three basis points when compared with last
year.
Table 1. Consolidated Average Balances, Interest and Average Rates
(Taxable Equivalent Basis)
<TABLE>
<CAPTION>
June 30,
- -------------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------------
YTD YTD
Average Average Average Average
(Dollars in thousands) Balance Interest Rate Balance Interest Rate
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets
Federal funds sold
- overnight $ 621 $ 24 5.20% $ 14,570 $ 396 5.47%
- -------------------------------------------------------------------------------
Short-term interest
bearing deposits 5,310 98 3.72 5,033 159 6.35
- -------------------------------------------------------------------------------
Total investment
securities -
Tax-exempt(1) 70,221 2,617 7.45 72,481 2,785 7.68
- -------------------------------------------------------------------------------
Total investment
securities - Taxable 165,377 5,284 6.39 162,278 4,910 6.05
- -------------------------------------------------------------------------------
Total investment
securities 235,598 7,901 6.71 234,759 7,695 6.56
- -------------------------------------------------------------------------------
Total loans 681,222 29,560 8.75 624,609 27,626 8.89
- -------------------------------------------------------------------------------
Total interest-
earning assets 922,751 37,583 8.21 878,971 35,876 8.21
- -------------------------------------------------------------------------------
Total noninterest-
earning assets 77,886 71,641
- -------------------------------------------------------------------------------
TOTAL ASSETS $1,000,637 $950,612
===============================================================================
LIABILITIES
Interest-bearing liabilities
Interest-bearing deposits
Basic savings, time
open & clubs $115,496 $ 1,455 2.54% $121,512 $ 1,591 2.63%
Interest checking 103,040 1,027 2.01 95,628 990 2.08
Money market
savings 114,290 1,719 3.03 113,186 1,714 3.05
Total time deposits 357,246 9,527 5.38 352,608 9,769 5.57
- -------------------------------------------------------------------------------
Total interest-bearing
deposits 690,072 13,728 4.01 682,934 14,064 4.14
- -------------------------------------------------------------------------------
Borrowed funds
Federal funds
purchased and
repurchase accounts 42,766 1,074 5.06 34,800 848 4.90
Other short-term
borrowings 53,224 1,503 5.69 18,565 570 6.17
- -------------------------------------------------------------------------------
Total short-term
borrowings 95,990 2,577 5.41 53,365 1,418 5.34
- -------------------------------------------------------------------------------
Long-term borrowings 5,994 197 6.63 12,289 372 6.09
- -------------------------------------------------------------------------------
Total borrowed funds 101,984 2,774 5.49 65,654 1,790 5.48
- -------------------------------------------------------------------------------
Total interest-bearing
liabilities 792,056 16,502 4.20 748,588 15,854 4.26
- -------------------------------------------------------------------------------
Non-interest bearing
liabilities
Demand deposits 103,253 102,003
Other liabilities 11,538 10,438
Shareholders' equity 93,790 88,583
- -------------------------------------------------------------------------------
TOTAL LIABILITIES
AND EQUITY $1,000,637 $950,612
===============================================================================
NET INTEREST INCOME * $21,081 $20,022
===============================================================================
NET INTEREST SPREAD 4.01% 3.95%
===============================================================================
NET INTEREST MARGIN AS A
PERCENT OF EARNING ASSETS 4.61% 4.58%
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
June 30,
- -------------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------------
QTD QTD
Average Average Average Average
(Dollars in thousands) Balance Interest Rate Balance Interest Rate
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets
Federal funds sold
- overnight $ 1,028 $ 17 6.63% $ 13,332 $ 178 5.37%
- -------------------------------------------------------------------------------
Short-term interest
bearing deposits 5,706 54 3.80 3,911 41 4.22
- -------------------------------------------------------------------------------
Total investment
securities -
Tax-exempt(1) 69,802 1,300 7.45 72,160 1,379 7.64
- -------------------------------------------------------------------------------
Total investment
securities - Taxable 164,104 2,626 6.40 166,547 2,553 6.13
- -------------------------------------------------------------------------------
Total investment
securities 233,906 3,926 6.71 238,707 3,932 6.59
- -------------------------------------------------------------------------------
Total loans 687,230 15,054 8.79 628,720 13,870 8.87
- -------------------------------------------------------------------------------
Total interest-
earning assets 927,870 19,051 8.24 884,670 18,021 8.19
- -------------------------------------------------------------------------------
Total noninterest-
earning assets 78,089 71,355
- -------------------------------------------------------------------------------
TOTAL ASSETS $1,005,959 $956,025
===============================================================================
LIABILITIES
Interest-bearing liabilities
Interest-bearing deposits
Basic savings, time
open & clubs $116,861 $ 738 2.53% $122,618 $ 791 2.59%
Interest checking 104,427 520 2.00 95,725 488 2.05
Money market
savings 115,474 867 3.01 113,660 871 3.08
Total time deposits 355,098 4,770 5.39 353,409 4,844 5.51
- -------------------------------------------------------------------------------
Total interest-bearing
deposits 691,860 6,895 4.00 685,412 6,994 4.10
- -------------------------------------------------------------------------------
Borrowed funds
Federal funds
purchased and
repurchase accounts 44,059 578 5.26 35,384 423 4.81
Other short-term
borrowings 54,091 761 5.64 18,562 282 6.11
- -------------------------------------------------------------------------------
Total short-term
borrowings 98,150 1,339 5.47 53,946 705 5.26
- -------------------------------------------------------------------------------
Long-term borrowings 5,195 98 7.57 12,127 178 5.90
- -------------------------------------------------------------------------------
Total borrowed funds 103,345 1,437 5.58 66,073 883 5.37
- -------------------------------------------------------------------------------
Total interest-bearing
liabilities 795,205 8,332 4.20 751,485 7,877 4.22
- -------------------------------------------------------------------------------
Non-interest bearing
liabilities
Demand deposits 103,937 103,920
Other liabilities 11,850 10,705
Shareholders' equity 94,967 89,915
- -------------------------------------------------------------------------------
TOTAL LIABILITIES
AND EQUITY $1,005,959 $956,025
===============================================================================
NET INTEREST INCOME * $10,719 $10,144
===============================================================================
NET INTEREST SPREAD 4.04% 3.97%
===============================================================================
NET INTEREST MARGIN AS A
PERCENT OF EARNING ASSETS 4.63% 4.61%
===============================================================================
</TABLE>
* Based on an effective federal tax rate of 34% for 1997 and 1996.
(1) Based on amortized cost (i.e. excludes mark-to-market adjustments).
Management continually monitors Bancorp's balance sheet to insulate net
interest income from significant swings caused by interest rate volatility
using the concept of natural hedges, a process of adjusting balance sheet
positions having individual interest rate risks to control the net interest
rate risk as a whole. Derivative financial instruments such as futures,
forwards, swaps, option contracts, or other financial instruments with similar
characteristics are not currently utilized. As market rates change,
corresponding changes in asset mix, funding sources and pricing are considered
to avoid a negative impact on net interest income.
Bancorp attempts to measure the interest rate sensitivity of its assets and
liabilities on the basis of when they will reprice as opposed to when they can
reprice. Since it is difficult to predict the movement of interest rates,
management's objective is to maintain a relatively balanced sensitivity
position, while not foregoing any opportunity to benefit from current rate
conditions. As indicated in Table 2, Bancorp had a cumulative net liability
sensitive position of $88,260,000 within the one year horizon at June 30, 1997.
This position would indicate that Bancorp has the potential for decreased
earnings if market interest rates rise in the next twelve months.
Due to inherent limitations in this traditional gap analysis technique for
measuring interest rate sensitivity, management also employs more sophisticated
interest sensitivity measurement tools to analyze the volatility of net
interest income as a result of changes in interest rates. Simulation models are
used to subject the current repricing gap positions to rising and falling
incremental changes in interest rates of 100, 200, and 300 basis points, and to
forecast how net interest income varies under alternative interest rate and
business activity scenarios. The effects of changes in interest rates on the
market value of assets, liabilities, and off-balance-sheet contracts is also
measured. At June 30, 1997, the changes in net interest income and/or market
value calculated under these alternative methods were within limits established
by the Board of Directors.
TABLE 2. INTEREST RATE SENSITIVITY ANALYSIS AT JUNE 30, 1997 (1)
<TABLE>
<CAPTION>
1-90 91-180 181-365 1-3 3-5 Beyond
(In thousands) days days days years years 5 years Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-
earning Assets:
Interest-bearing
deposits
with banks $ 3,266 $ -- $ -- $ -- $ -- $ -- $ 3,266
Federal funds
Sold -- -- -- -- -- -- --
Investment
securities (2) 61,063 20,082 17,276 78,291 35,590 36,479 248,781
Loans, net 125,828 67,831 124,839 201,484 113,015 41,643 674,640
-------- -------- -------- -------- -------- -------- --------
Total $190,157 $ 87,913 $142,115 $279,775 $148,605 $ 78,122 $926,687
======== ======== ======== ======== ======== ======== ========
Interest-bearing
Liabilities:
Deposits $145,231 $ 73,809 $174,400 $203,447 $ 89,951 $ 11,012 $697,850
Short-term
borrowings 98,821 -- 13,728 -- -- -- 112,549
Long-term
borrowings -- -- 2,456 -- 3,724 140 6,320
-------- -------- -------- -------- -------- -------- --------
Total $244,052 $ 73,809 $190,584 $203,447 $ 93,675 $ 11,152 $816,719
======== ======== ======== ======== ======== ======== ========
Interest
Sensitivity
Gap:
Period $(53,895)$ 14,104 $(48,469)$ 76,328 $ 54,930 $ 66,970 $ --
Cumulative (53,895) (39,791) (88,260) (11,932) 42,998 109,968 $109,968
</TABLE>
(1) Excludes nonaccrual loans and other nonrate-sensitive assets.
(2) Reflects fair value adjustments for securities available for sale.
Noninterest Income.
Noninterest income increased $601,000 or 22.7 percent for the second quarter of
1997 compared with the second quarter of 1996. All significant sources of
noninterest income increased as management's strategic emphasis on new sources
of revenue and innovative marketing and distribution of existing products
continue to develop revenue enhancing opportunities. Trust income increased
$140,000 or 32.6 percent when compared with the second quarter of 1996 and
service charges on deposit accounts increased $177,000 or 15.3 percent.
Year-to-date noninterest income increased $966,000 or 18.2 percent compared with
the first six months of 1996. Trust income and deposit service charges increased
37.9 percent and 14.2 percent, respectively. Deposit service fees increased as a
result of service enhancements and a revised fee schedule. The increase in trust
income reflects strong growth in financial planning and investment management
services.
Noninterest Expenses.
Noninterest expenses increased $223,000 or 2.6 percent compared with the second
quarter of last year. Salaries and benefits increased $487,000 or 11.7 percent
largely to merit-based compensation costs. Occupancy and equipment expense
increased $118,000 or nine percent, reflecting the completion of the
addition to the corporate headquarters building in the fourth quarter of 1996
and investments in technology which enhance customer service. Other operating
expenses declined $382,000 or 12.1 percent primarily as a result of FDIC
insurance premiums and cost reductions in several areas including office
supplies and postage.
Year-to-date noninterest expenses increased $626,000 or 3.7 percent compared
with the first six months of 1996. Salaries and benefits increased 9.8 percent
due to merit-based compensation increases and include personnel expenses
associated with the operation of a de-novo branch office which opened in March,
1996. Occupancy and equipment expenses increased 11.4 percent from year earlier
totals due to the corporate expansion and technology investments as mentioned
above. Other operation expenses declined 8.4 percent for the six month period.
Income Taxes.
The provision for income taxes increased $548,000 compared with the second
quarter of last year. Tax expense varies from one period to the next
with changes in the level of income before taxes, changes in the amount of tax-
exempt income, and the relationship of these changes to each other. Year-to-
date, the provision for income taxes was $629,000 ahead of the same period last
year. Bancorp's effective tax rate for the second quarter and year-to-date 1997
was 31.0 percent and 29.7 percent, respectively. For the second quarter and
year-to-date last year, the effective tax rate was 22.3 percent and 25.6
percent, respectively. Bancorp's income tax expense differs from the
amount computed at statutory rates primarily due to tax-exempt interest from
certain loans and investment securities. As net income increased from 1996 to
1997 and the percentage of tax-exempt interest declined relative to net income,
the effective tax rate increased.
NONPERFORMING ASSETS
Table 3 summarizes Bancorp's nonperforming assets and contractually past due
loans. Total nonperforming assets at June 30, 1997 have declined $618,000
compared with year earlier levels and have declined $1,187,000 since year-end.
Loans past due 90 or more days as to interest or principal reflected a $492,000
decrease compared with prior year levels and have decreased $1,365,000 since
year-end. Although there is no direct correlation between nonperforming loans
and ultimate loan losses, an analysis of the nonperforming loans may provide
some indication of the quality of the loan portfolio. Management believes that
the amounts of its nonperforming loans and past due loans are modest in
relation to the loan portfolio.
POTENTIAL PROBLEM LOANS
At June 30, 1997, Bancorp had performing loans amounting to $8,344,000 that
were identified as potential problem loans because the borrowers were currently
experiencing financial difficulties such that management had concerns that such
loans might, in the future, become classified as nonaccrual or delinquent. At
December 31, 1996, potential problem loans totaled $20,579,000. The decrease in
the amount of these loans during 1997 is a reflection of an improvement in
credit quality. As of June 30, 1997, management does not believe that these
loans present any significant risk of loss.
Bancorp had loans amounting to approximately $5,762,000 and $4,516,000 at June
30, 1997 and June 30, 1996, respectively, that were specifically classified as
impaired and included in non-accrual loans in Table 3. The average balance of
impaired loans for the six and three months ended June 30, 1997 and 1996
amounted to $5,950,000 and $5,862,000, $5,008,000 and $4,700,000, respectively.
Cash receipts for these same periods were $1,133,000 and $971,000 for 1997 and
$295,000 and $258,000 for 1996. All cash receipts were applied to reduce the
principal balance of those impaired loans and no interest income was recognized.
The specific allowance for credit losses related to these impaired loans was
$576,000 and $132,000, at June 30, 1997 and June 30, 1996, respectively.
TABLE 3. NONPERFORMING ASSETS AND CONTRACTUALLY PAST DUE LOANS
<TABLE>
<CAPTION>
June 30, December 31
(Dollars in thousands) 1997 1996 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Nonperforming Assets:
Nonaccrual loans(1) $ 7,162 $ 6,197 $ 7,281
Other real estate owned net of
valuation allowance(2)(4) 6,389 7,972 7,457
- -------------------------------------------------------------------------------
Total nonperforming assets $13,551 $14,169 $14,738
- -------------------------------------------------------------------------------
Loans past due 90 or more days
as to interest or principal(3) $ 855 $ 1,347 $ 2,220
- -------------------------------------------------------------------------------
Nonperforming loans to period-end loans 1.04% 0.97% 1.09%
Nonperforming assets to period-end
loans and other real estate owned 1.94% 2.20% 2.17%
Period-end allowance for credit
losses times nonperforming loans 1.36x 1.59x 1.32x
Period-end allowance for credit
losses times nonperforming assets 0.72x 0.70x 0.65x
</TABLE>
(1) Loans are placed on nonaccrual status when, in the opinion of
management, reasonable doubt exists as to the full, timely collection of
interest or principal or a specific loan meets the criteria for nonaccrual
status established by regulatory authorities. When a loan is placed on
nonaccrual status, all interest previously accrued but not collected is
reversed against current period interest income. No interest is taken into
income on nonaccrual loans unless received in cash or until such time the
borrower demonstrates sustained performance over a period of time in
accordance with contractual terms.
(2) Other real estate owned includes: banking premises no longer used
for business purposes and real estate acquired by foreclosure (in partial or
complete satisfaction of debt) or otherwise surrendered by the borrower to
Bancorp's possession. Other real estate owned is recorded at the lower of cost
or fair value on the date of acquisition or transfer from loans. Write-downs
to fair value at the date of acquisition are charged to the allowance for
credit losses. Subsequent to transfer, these assets are adjusted through a
valuation allowance to the lower of the net carrying value or the fair value
(net of estimated selling expenses) based on periodic appraisals.
(3) Nonaccrual loans are not included.
(4) Consists principally of the real estate held in a limited partnership
and includes minority interests totaling $915,000, $756,000, and $838,000 at
June 30, 1997, June 30, 1996 and December 31, 1996, respectively.
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses was $9,731,000 or 1.4 percent of loans
outstanding as of June 30, 1997 compared with $9,639,000 or 1.4 percent of
loans outstanding as of December 31, 1996 and $9,870,000 or 1.6 percent of
loans outstanding as of June 30, 1996. The provision for credit losses was
$450,000 for the second quarter of 1997 and $300,000 for the second quarter of
1996. Net charge-offs for the second quarter were $153,000 compared with
$116,000 for the second quarter of last year and $808,000 year-to-date this year
compared with $526,000 year-to-date last year. As reflected in Table 4, net
charge-offs as a percent of total loans were 0.12 percent year-to-date
compared with 0.08 percent for the same period last year.
TABLE 4. ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES
<TABLE>
<CAPTION>
Period ended
- -------------------------------------------------------------------------------
June 30, June 30, December 31,
(Dollars in thousands) 1997 1996 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Average loans outstanding
less average unearned income(1) $681,222 $623,653 $640,148
===============================================================================
Allowance for credit losses
at beginning of year $ 9,639 $ 9,796 $ 9,796
- -------------------------------------------------------------------------------
Charge-offs
Real estate 132 43 303
Commercial and industrial 24 10 10
Consumer 2,053 1,671 3,609
- -------------------------------------------------------------------------------
Total loans charged-off 2,209 1,724 3,922
- -------------------------------------------------------------------------------
Recoveries
Real estate 82 162 247
Commercial and industrial -- 2 2
Consumer 1,319 1,034 1,994
- -------------------------------------------------------------------------------
Total recoveries 1,401 1,198 2,243
- -------------------------------------------------------------------------------
Net charge-offs 808 526 1,679
- -------------------------------------------------------------------------------
Additions charged to operating expense 900 600 1,522
- -------------------------------------------------------------------------------
Allowance for credit losses
at end of period $ 9,731 $ 9,870 $ 9,639
===============================================================================
Ratio of net charge-offs to
average loans outstanding 0.12% 0.08% 0.26%
===============================================================================
</TABLE>
(1) Exclusive of loans held for sale.
Based upon management's analysis and review of the loan portfolio, past loss
experience, and current economic conditions, the amount in the allowance for
credit losses at June 30, 1997 is considered adequate. Management's estimate
of credit losses inherent in the credit extension process and the related
allowance may change in the near term due to uncertainties inherent in the
estimation process.
TABLE 5. ALLOCATION OF ALLOWANCES FOR CREDIT LOSSES
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996 1996
- -------------------------------------------------------------------------------
% Gross % Gross % Gross
(Dollars in thousands) Amount Loans(1) Amount Loans(1) Amount Loans(1)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Real estate
Construction and
land development $2,009 4.4% $1,479 4.6% $1,821 4.4%
Residential mortgage 592 27.1 474 27.7 510 27.4
Other mortgage 1,489 18.4 1,866 19.5 1,765 19.3
Commercial and industrial 621 10.6 729 8.7 830 9.3
Consumer 3,282 37.7 2,359 37.4 2,757 37.8
Unallocated 1,738 1.8 2,963 2.1 1,956 1.8
- -------------------------------------------------------------------------------
Total allowance for
credit losses $9,731 100.0% $9,870 100.0% $9,639 100.0%
===============================================================================
</TABLE>
(1) Excludes loans held for sale.
Table 5 presents an allocation of the allowance for credit losses to various
loan categories. This allocation does not limit the amount of the allowance
available to absorb losses from any type of loan and should not be viewed as
an indicator of the specific amount or specific loan categories in which
future charge-offs may ultimately occur.
CAPITAL RESOURCES
Shareholder's equity totaled $96,949,000 at June 30, 1997, an increase of 3.7
percent compared with the 1996 year end level of $93,460,000 and an increase of
6.9 percent from the year earlier level of $90,706,000. The fair value of the
available-for-sale portfolio has increased $49,000 (net of deferred taxes)
since year end. Capital levels are considered sufficient to absorb anticipated
future price volatility in the available-for-sale portfolio.
Bancorp's risk-based capital and leverage capital ratios continue to exceed
regulatory guidelines as of June 30, 1997, as follows:
TABLE 6. CAPITAL RATIOS
<TABLE>
<CAPTION>
Risk-based Capital
-------------------
Tier 1 Total Leverage
Capital Capital Ratio
------- ------- --------
<S> <C> <C> <C>
Actual 12.49% 13.60% 9.31%
Minimum 4.00% 8.00% 3.00%
------ ------ -----
Excess 8.49% 5.60% 6.31%
====== ====== =====
</TABLE>
Fair value adjustments to shareholders' equity for changes in the fair value
of securities classified as available-for-sale are excluded from the
calculation of these capital ratios in accordance with regulatory guidelines.
PART II - Other Information
Item 2 Changes in Securities
(a) The Charter of the company was changed pursuant to matters voted upon by
the security holders during the second quarter as follows:
(Item 1) Increase the number of authorized shares from 10,000,000 to
50,000,000.
(Item 2) Create a classified board of directors.
(Item 3) Delineate factors the board of directors may consider in
exercising its business judgement involving extraordinary activities.
(Item 4) Reduce the vote required to approve certain extraordinary
activities.
Item 4 Submission of Matters to Vote of Security Holders
(a) The annual meeting of stockholders of F&M Bancorp was held April 15,
1997.
The Reconvened Annual Meeting of stockholders of F&M Bancorp was held
May 20, 1997.
(b) Proxies for the annual meeting were solicited pursuant to Regulation 14A
under the Securities and Exchange Act of 1934. There was no solicitation in
opposition to management's nominees as listed in the proxy statement, and all
such nominees were re-elected.
(c) (1) Election of Directors
The following directors were elected for the periods shown, pursuant to the
proposed Charter amendment creating a classified Board of Directors which was
approved at the reconvened annual meeting held May 20, 1997.
Elected to serve as directors until the 1998 annual meeting of stockholders:
Name For Withheld Against
- ----------------------- ------------- ----------- -------
Howard B. Bowen 4,125,907.185 124,757.905 --
Martha E. Church 4,060,001.588 190,663.502 --
Albert H. Cohen 4,111,282.164 139,382.926 --
Charles W. Hoff, III 4,134,434.995 116,230.095 --
Robert K. Moler 4,134,966.836 115,698.254 --
Elected to serve as directors until the 1999 annual meeting of stockholders:
Name For Withheld Against
- ----------------------- ------------- ----------- -------
John D. Brunk 4,138,885.082 111,780.008 --
Faye E. Cannon 4,131,668.134 118,996.956 --
Charles A. Nicodemus 4,133,799.046 116,866.042 --
H. Deets Warfield, Jr. 4,138,785.082 111,880.008 --
John C. Warfield 4,107,776.244 142,888.846 --
Elected to serve as directors until the 2000 annual meeting of stockholders:
Name For Withheld Against
- ----------------------- ------------- ----------- -------
R. Carl Benna 4,137,744.836 112,920.254 --
Beverly B. Byron 4,057,665.466 192,999.624 --
Maurice A. Gladhill 4,135,546.082 115,119.008 --
James K. Klutz 4,117,066.896 133,599.194 --
Richard W. Phoebus, Sr. 4,127,350.836 123,314.254 --
Thomas R. Winkler 4,095,098.813 155,566.277 --
(c) (2) The following Charter amendments were voted upon, approved, and
adopted at the annual meeting of stockholders on April 15, 1997:
(a) Increase the number of authorized shares from 10,000,000 to
50,000,000.
BROKER
FOR 3,601,105.963 AGAINST 571,299.196 ABSTAIN 78,259.934 NON-VOTE 0
------------- ----------- ---------- ------
(b) Adopt revised language providing for indemnification of directors
and officers as presently exists and extending the privilege to employees under
certain circumstances as provided by law.
BROKER
FOR 3,795,147.166 AGAINST 370,455.592 ABSTAIN 74,429.330 NON-VOTE 10,633.000
------------- ----------- ---------- ----------
(c) Clarification of the charter by correcting punctuation,
capitalization, numbering, and the like.
BROKER
FOR 2,961,121.594 AGAINST 329,490.125 ABSTAIN 76,723.529 NON-VOTE 883,329.838
------------- ----------- ---------- -----------
(c) (3) The following Charter amendments were voted upon, approved, and
adopted at the reconvened annual meeting of stockholders on May 20, 1997:
(a) Create a classified board of directors.
BROKER
FOR 3,472,764 AGAINST 709,733 ABSTAIN 84,376 NON-VOTE 548,026
--------- ------- ------ -------
(b) Delineate factors the board of directors may consider in exercising
its business judgment involving extraordinary activities.
BROKER
FOR 3,243,197 AGAINST 681,299 ABSTAIN 131,438 NON-VOTE 758,965
--------- ------- ------- -------
(c) Reduce the vote required to approve certain extraordinary
activities.
BROKER
FOR 3,181,085 AGAINST 972,027 ABSTAIN 113,762 NON-VOTE 548,026
--------- ------- ------- -------
Item 6 Exhibits and Reports on Form 8-K Page
(a) Exhibits
3.1 Articles of Incorporation of F&M Bancorp with all
Articles of Amendment. 28
3.2 By-Laws of F&M Bancorp. 38
11 Statement Re: Computation of per share earnings. 51
27 Financial Data Schedule. 52
(b) No reports on Form 8-K were filed by the Corporation during the quarter
ended June 30, 1997.
Items 1, 3 and 5 have been omitted since the item is either inapplicable
or the answer is negative.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
F&M BANCORP
-----------
(Registrant)
August 14, 1997 /s/David L. Spilman
- ----------------- ----------------------------
Date DAVID L. SPILMAN
TREASURER
<PAGE>
EXHIBIT 3.1
F&M BANCORP
ARTICLES OF AMENDMENT AND RESTATEMENT
F&M BANCORP, a Maryland corporation, having its principal office in--Frederick
County, Maryland (which is hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended and restated in
its entirety to read as follows:
FIRST: THE UNDERSIGNED, Henry D. Kahn, whose address is 1100 Charles
Center South, 36 South Charles Street, Baltimore, Maryland 21201, being at least
eighteen years of age, acting as incorporator, does hereby form a corporation
under the General Laws of the State of Maryland.
SECOND: The name of the corporation (which is hereinafter called the
"Corporation") is: F&M BANCORP
THIRD: The purposes for which and any of which the Corporation is
formed and the business and objects to be carried on and promoted by it are:
(1) To acquire by purchase, subscription or otherwise, and to
receive, hold, own, guarantee, sell, assign, exchange, transfer, mortgage,
pledge or otherwise dispose of or deal in and with any and all securities, as
such term is hereinafter defined, issued or created by any corporation, firm,
organization, association or other entity, public or private, whether formed
under the laws of the United States of America or of any state, commonwealth,
territory, dependency or possession thereof, or of any foreign country or of
any political subdivision, territory, or issued or created by the United States
of America or any state or commonwealth thereof or any foreign country, or by
any agency, subdivision, territory, dependency, possession or municipality of
any of the foregoing, and as owner thereof to possess and exercise all the
rights, powers and privileges of ownership, including the right to execute
consents and vote thereon, and to do any and all acts and things necessary or
advisable for the preservation, protection, improvement and enhancement in value
thereof.
The term "securities" as used in this Article shall mean any and all notes,
stocks, treasury stocks, bond debentures, evidences of indebtedness,
certificates of interest or participation in any profit-sharing agreement,
collateral-trust certificates, preorganization certificates or subscriptions,
transferable shares, investment contracts, voting trust certificates,
certificates of deposit for a security, fractional undivided interests in oil,
gas, or other mineral rights, or, in general, any interests or instruments
commonly known as "securities", or any and all certificates of interest or
participation in, temporary or interim certificates for, receipts for,
guaranties of, or warrants or rights to subscribe to or purchase, any of the
foregoing.
(2) To engage in any one or more businesses or transactions, or to
acquire all or any portion of any entity engaged in any one or more businesses
or transactions which the Board of Directors may from time to time authorize or
approve, whether or not related to the business described elsewhere in this
Article or to any other business at the time or theretofore engaged in by the
Corporation.
The foregoing enumerated purposes and objects shall be in no way limited or
restricted by reference to, or inference from, the terms of any other clause of
this or any other article of the charter of the Corporation, and each shall be
regarded as independent; and they are intended to be and shall be construed as
powers as well as purposes and objects of the Corporation and shall be in
addition to and not in limitation of the general powers of corporations under
the General Laws of the State of Maryland.
FOURTH: The present address of the principal office of the Corporation
in this State is 110 Thomas Johnson Drive, Frederick, Maryland 21702.
FIFTH: The name and address of the resident agent of the Corporation
in this State are Gordon M. Cooley, 110 Thomas Johnson Drive, Frederick,
Maryland 21702. Said resident agent is a citizen of the State of Maryland who
resides there.
SIXTH: (a) The total number of shares of stock of all classes which
the Corporation has authority to issue is 50,000,000 shares of Capital Stock
(par value $5.00 per share), amounting in aggregate par value to $250,000,000.
All of such shares are initially classified as "Common Stock." The Board of
Directors may classify and reclassify any unissued shares of capital stock by
setting or changing in any one or more respects the preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption of such shares of capital
stock.
(b) The following is a description of the preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the Common Stock of
the Corporation.
(1) Each share of Common Stock shall have one vote and,
except as otherwise provided in respect of any class of stock hereafter
classified or reclassified, the exclusive voting power for all purposes shall
be vested in the holders of the Common Stock.
(2) Subject to the -provisions of law and any preferences of
any class of stock hereafter classified or reclassified, dividends including
dividends payable in shares of another class of the Corporation's stock may be
paid on the Common Stock of the Corporation at such time and in such amounts as
the Board of Directors may deem advisable.
(3) In the event of any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the holders of the
Common Stock shall be entitled, after payment or provision for payment of the
debts and other liabilities of the Corporation and the amount to which the
holders of any class of stock hereafter classified or reclassified having a
preference on distribution in the liquidation, dissolution or winding up of the
Corporation shall be entitled, together with the holders of any other class of
stock hereafter classified or reclassified not having a preference on
distributions in the liquidation, dissolution, or winding up of the
Corporation, to share ratably in the remaining net assets of the Corporation.
(c) Subject to the foregoing, the power of the Board of Directors
to classify and reclassify any of the shares of capital stock shall include,
without limitation, subject to the provisions of the charter, authority to
classify or reclassify any unissued shares of such stock into a class or classes
of preferred stock, preference stock, special stock, or other stock, and to
divide and classify shares of any class into one or more series of such class,
by determining, fixing, or altering one or more of the following:
(1) The distinctive designation of such class or series and
the number of shares to constitute such class or series; provided that, unless
otherwise prohibited by the terms of such or any other class or series, the
number of shares of any class or series may be decreased by the Board of
Directors in connection with any classification or reclassification of unissued
shares and the number of shares of such class or series may be increased by the
Board of Directors in connection with any such classification or
reclassification, and any shares of any class or series which have been
redeemed, purchased, otherwise acquired, or converted into shares of Common
Stock or any other class or series shall become part of the authorized Common
capital stock and be subject to classification and reclassification as provided
in this Section.
(2) Whether or not and, if so, the rates, amounts and times
at which, and the conditions under which, dividends shall be payable on shares
of such class or series, whether any such dividends shall rank senior or junior
to or on a parity with the dividends payable on any other class or series of
stock, and the status of any such dividends as cumulative, cumulative to a
limited extent, or non-cumulative and as participating or non-participating.
(3) Whether or not shares of such class or series shall have
voting rights, in addition to any voting rights provided by law and, if so, the
terms of such voting rights.
(4) Whether or not shares of such class or series shall have
conversion or exchange privileges and, if so, the terms and conditions thereof,
including provision for adjustment of the conversion or exchange rate in such
events or at such times as the Board of Directors shall determine.
(5) Whether or not shares of such class or series shall be
subject to redemption and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be redeemable and
the amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates; and whether or not there
shall be any sinking fund or purchase account in respect thereof, and if so, the
terms thereof.
(6) The rights of the holders of shares of such class or
series upon the liquidation, dissolution, or winding up of the affairs of, or
upon any distribution of the assets of, the Corporation, which rights may vary
depending upon whether such liquidation, dissolution, or winding up is voluntary
or involuntary and, if voluntary' may vary at different dates, and whether such
rights shall rank senior or junior to or on a parity with such rights of any
other class or series of stock.
(7) Whether or not there shall be any limitations applicable,
while shares of such class or series are outstanding, upon the payment of
dividends or making off distributions on, or the acquisition of, or the use of
moneys for purchase or redemption of, any stock of the Corporation, or upon any
other action of the Corporation, including action under this subparagraph, and,
if so, the terms and conditions thereof.
(8) Any other preferences, rights, restrictions, including
restrictions on transferability, and qualifications of shares of such class or
series, not inconsistent with law and the charter of the Corporation.
(d) For the purposes hereof and of any articles
supplementary to the charter providing for the classification or
reclassification of any shares of capital stock or of any other charter
document of the Corporation (unless otherwise provided in any such articles or
document), any class or series of stock of the Corporation shall be deemed to
rank:
(1) prior to another class or series either as to dividends or
upon liquidation, if the holders of such class or series shall be entitled to
the receipt of dividends or of amounts distributable on liquidation,
dissolution, or winding up, as the case may be, in preference or priority to
holders of such other class or series;
(2) on a parity with another class or series either as to
dividends or upon liquidation, whether or not the dividend rates, dividend
payment dates, or redemption or liquidation price per share thereof be different
from those of such others, if the holders of such class or series of stock
shall be entitled to receipt of dividends or amounts distributable upon
liquidation, dissolution, or winding up, as the case may be, in proportion to
their respective dividend rates or redemption or liquidation prices, without
preference or priority over the holders of such other class or series; and
(3) junior to another class or series either as to dividends or
upon liquidation, if the rights of the holders of such class or series shall be
subject or subordinate to the rights of the holders of such other class or
series in respect of the receipt of dividends or the amounts distributable upon
liquidation, dissolution, or winding up, as the case may be.
SEVENTH: (a) The number of directors of the Corporation shall be 16,
which number may be increased or decreased by-at least two-thirds of the
directors then in office pursuant to the By-Laws of the Corporation, but shall
never be less than the minimum number permitted by the General Laws of the
State of Maryland now or hereafter in force.
(b) Subject to the rights of the holders of any class of Prefer-
red Stock then outstanding, newly increased directorships resulting from any
increase in the authorized number of directors or any vacancies on the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office, or other cause shall be filled by the required vote of the
stockholders or the directors then in office. A director so chosen by the
stockholders shall hold office for the balance of the term then remaining. A
director so chosen by the remaining directors shall hold office until the next
annual meeting of stockholders, at which time the stockholders shall elect a
director to hold office for the balance of the term then remaining. No decrease
in the number of directors constituting the Board of Directors shall affect the
tenure of office of any director.
(c) Whenever the holders of any one or more series of Preferred
Stock of the Corporation shall have the right, voting separately as a class, to
elect one or more directors of the Corporation, the Board of Directors shall
consist of said directors so elected in addition to the number of directors
fixed as provided above in paragraph (a) of this Article SEVENTH or in the By-
Laws. Notwithstanding the foregoing, and except as otherwise may be required by
law, whenever the holders of any one or more series of Preferred Stock of the
Corporation shall have the right, voting separately as a class, to elect one or
more directors of the Corporation, the terms of the director or directors
elected by such holder shall expire at the next succeeding annual meeting of
stockholders.
(d) Subject to the rights of the holders of any class separately
entitled to elect one or more directors, any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause and then
only by the affirmative vote of the holders of at least 80% of the combined
voting power of all classes of shares of capital stock entitled to vote in the
election for directors voting together as a single class.
(e) At each annual meeting of stockholders beginning in 1997,
successors to the class of directors whose term expires at that annual meeting
shall be elected for a three year term.
(1) The following persons shall serve as directors until the
1998 annual meeting of stockholders:
Howard B. Bowen
Martha E. Church
Albert H. Cohen
Charles W. Hoff, III
Robert K. Moler
(2) The following persons shall serve as directors until the
1999 annual meeting of stockholders:
John D. Brunk
Faye E. Cannon
Charles A. Nicodemus
H. Deets Warfield
John C. Warfield
(3) The following persons shall serve as directors until the
2000 annual meeting of stockholders:
R. Carl Benna
Beverly B. Byron
Maurice A. Gladhill
James K. Kluttz
Richard W. Phoebus
Thomas R. Winkler
EIGHTH: The following provisions are hereby adopted for the purpose of
defining, limiting, and regulating the powers of the Corporation and of the
directors and stockholders:
(1) The Board of Directors is hereby empowered to authorize the
issuance from time to time of shares of its stock of any class, whether now or
hereafter authorized, or securities convertible into shares of its stock of any
class or class or classes, whether now or hereafter authorized, for such
consideration as may be deemed advisable by the Board of Directors and without
any action by the stockholders.
(2) No holder of any stock or any other securities of the
Corporation, whether now or hereafter authorized, shall have any preemptive
right to subscribe for or purchase any stock or any other securities of the
Corporation other than such, if any, as the Board of Directors, in its sole
discretion, may determine and at such price or prices and upon such other terms
as the Board of Directors, in its sole discretion, may fix; and any stock or
other securities which the Board of Directors may determine to offer for
subscription may, as the Board of Directors in its sole discretion shall
determine, be offered to the holders of any class, series or type of stock or
other securities at the time outstanding to the exclusion of the holders of any
or all other classes, series or @s of stock or other securities at the time
outstanding.
(3) The Board of Directors shall have power from time to time and
in its sole discretion to determine in accordance with sound accounting
practice, what constitutes annual or other net profits, earnings, surplus, or
net assets in excess of capital; to fix and vary from time to time the amount
to be reserved as working capital, or determine that retained earnings or
surplus shall remain in the hands of the Corporation; to set apart out of any
funds of the Corporation such reserve or reserves in such amount or amounts and
for such proper purpose or purposes as it shall determine and to abolish any
such reserve or any part thereof, to distribute and pay distributions or
dividends in stock, cash or other securities or property, out of surplus or any
other funds or amounts legally available therefor, at such times and to the
stockholders of record on such dates as it may, from time to time, determine;
and to determine whether and to what extent and at what times and places and
under what conditions and regulations the books, accounts and documents of the
Corporation, or any of them, shall be open to the inspection of stockholders,
except as otherwise provided by statute or by the By-Laws, and, except as so
provided, no stockholder shall have any right to act any book, account or
document of the Corporation unless authorized so to do by resolution of the
Board of Directors.
(4) A contract or other transaction between the Corporation and
any of its directors or between the Corporation and any other corporation, or
other entity in which any of its directors is a director or has a material
financial interest is not void or voidable solely because of any one or more of
the following: the common directorship or interest; the presence of the
director at the meeting of the Board of Directors which authorizes, approves
or ratifies the contract or transaction; or the counting of the vote of the
director for the authorization, approval or ratification of the contract or
transaction. as Paragraph (4) applies if-
(a) the fact of the common directorship or interest is
disclosed or known to: the Board of Directors and the Board authorizes,
approves or ratifies the contract or transaction by the affirmative vote of
a majority of disinterested directors, even if the disinterested directors
constitute less than a quorum; or the stockholders entitled to vote, and the
contract or transaction is authorized, approved, or ratified by a majority of
the votes cast by the stockholders entitled to vote other than the votes of
shares owned of record or beneficially by the interested director or
corporation, firm, or other entity; or (b) the contract or transaction is
fair and reasonable to the Corporation.
Common or interested directors or the stock owned by them or by an
interested corporation, firm, or other entity may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or at a meeting of
the stockholders, as the case may be, at which the contract or transaction is
authorized, approved or ratified. If a contract or transaction is not
authorized, approved or ratified in one of the ways provided for in clause (a)
of the second sentence of this Paragraph (4), the person asserting the validity
of the contract or transaction bears the burden of proving that the contract or
transaction was fair and reasonable to the Corporation at the time it was
authorized, approved, or ratified. The procedures in this Paragraph
(4) do not apply to the fixing by the Board of Directors of
reasonable compensation for a director, whether as a director or in any other
capacity.
(5) The Corporation shall indemnify (a) its directors and
officers, whether serving the Corporation or at its request any other entity,
to the full extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of expenses under the
procedures and to the full extent permitted by law and (b) other employees and
agents to such extent as shall be authorized by the Board of Directors or the
Corporation's By-Laws and be permitted by law. The foregoing rights of
indemnification shall not be exclusive of any other rights to which those
seeking indemnification may be entitled. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from time to time such by-laws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of the
charter of the Corporation or repeal of any of its provisions shall limit or
eliminate the right to indemnification provided hereunder with respect to acts
or omissions occurring prior to such amendment or repeal.
(6) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, no director or officer of this
Corporation shall be personally liable to the Corporation or its stockholders
for money damages. No amendment of the charter of the Corporation or repeal of
any of its provisions shall limit or eliminate the benefits provided to
directors and officers under this provision with respect to any act or omission
which occurred prior to such amendment or repeal.
(7) The Board of Directors shall, in connection with the exercise
of its business judgment involving a Business Combination (as defined in
Section 3-601 of the Corporations and Associations Article of the Annotated
Code a Maryland) or any actual or proposed transaction which would or may
involve a change in control of the Corporation (whether by purchases or shares
of stock or any other securities of the Corporation in the open market or
otherwise, tender offer, merger, consolidation, dissolution, liquidation, sale
of all or substantially all of the assets of the Corporation, proxy
solicitation or otherwise), in determining what is in the best interests of the
Corporation and its stockholders and in making any recommendation to its
stockholders, give due consideration to all relevant factors, including, but
not limited to (A) the economic effect, both immediate and long-term, upon the
Corporation's stockholders, including stockholders, if any, not to participate
in the transaction; (B) the social and economic effect on the employees,
depositors and customers of, and others dealing with, the Corporation and its
subsidiaries and on the communities in which the Corporation and its
subsidiaries operate or are located; (C) whether the proposal is acceptable
based on the historical and current operating results or financial condition of
the Corporation; (D) whether a more favorable price could be obtained for the
Corporation's stock or other securities in the future; (E) the reputation and
business practices of the offeror and its management and affiliates as they
would affect the employees of the Corporation and its subsidiaries; (F) the
future value of the stock or any other securities of the Corporation; (G) any
antitrust or other legal and regulatory issues that are raised by the proposal;
and (H) the business and financial condition and earnings prospects of the
acquiring person or entity, including, but not limited to, debt service and
other existing financial obligations, financial obligations to be incurred in
connection with the acquisition, and other likely financial obligations or the
acquiring person or entity. If the Board of Directors determines that any
proposed Business Combination (as defined in Section 3-601 of the Corporations
and Associations Article of the Annotated Code of Maryland) or actual or
proposed transaction which would or may involve a change in control of the
Corporation should be rejected, it may take any lawful action to defeat such
transaction, including, but not limited to, any or all of -the following;
advising stockholders not to accept the proposal; instituting litigation
against the party making the proposal; filing complaints with governmental and
regulatory authorities; acquiring the stock or any of the securities of the
Corporation; selling or otherwise issuing authorized but unissued stock, other
securities or treasury stock or granting options. with respect thereto;
acquiring a company to create an antitrust or other regulatory problem for the
party making the proposal; and obtaining a more favorable offer from another
individual or entity.
(8) The Corporation reserves the right from time to time to make
any amendments of its charter which may now or hereafter be authorized by law,
including any amendments changing the terms of contract rights, as expressly
set forth in its charter, of any of its outstanding stock by classification,
reclassification or otherwise; but no such amendment which changes such terms
or contract rights of any of its o ding stock shall be valid unless such
amendment shall have been authorized by not less dm a majority of the aggregate
number of the votes entitled to be cast thereon, by a vote at a meeting or in
writing with or without a meeting.
The enumeration and definition of particular powers of the Board of
Directors included in the foregoing shall in no way be limited or restricted by
reference to or inference from the terms of any other clause of this or any
other Article of the charter of the Corporation, or construed as or deemed by
inference or otherwise in any manner to exclude or limit any powers conferred
upon the Board of Directors under the General Laws of the State of Maryland now
or hereafter in force; provided, however, that any amendment to, repeal of or
adoption of any provision inconsistent with Article SEVENTH or sub-paragraph
(7) of Article,
EIGHTH, or this subparagraph of Article EIGHTH, paragraph (a) shall have
been authorized by not less than 80% of the aggregate votes entitled to be cast
thereon (considered for this purpose as a single class), by vote at a meeting
or in writing with or without a meeting.
(9) Except as provided in these Articles of Incorporation,
notwithstanding any provision of law requiring the authorization of any action
by a greater proportion than a majority of the total number of shares of all
classes of capital stock or of the total number of shares of any class of
capital stock, such action shall be valid and effective if authorized by the
affirmative vote of the holders of a majority of the total number of shares of
all classes outstanding and entitled to vote thereon, except as otherwise
provided in the charter.
NINTH: The duration of the Corporation shall be perpetual.
SECOND: (a) As of immediately before the amendment and restatement the
total number of shares of capital stock of all classes which the Corporation
has authority to issue is 10,000,000 shares, all of which shares are now
classified as Common Stock (par value $5.00 per share).
(b) As amended the total number of shares of capital stock of all
classes which the Corporation has authority to issue is 50,000,000 shares, all
of which shares are now classified as Common Stock (par value $5.00 per share).
(c) The aggregate par value of all shares having a par value is
$50,000,000 before the amendment and $250,000,000 as amended.
(d) The shares of capital stock of the Corporation are now all of
one class, and the description, as amended, of such class, including the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption is set forth in Article FIRST of these Articles of Amendment and
Restatement.
THIRD: The foregoing amendment and restatement to the Charter of the
Corporation has been advised by the Board of Directors and approved by the
stockholders of the Corporation.
IN WITNESS WHEREOF, F&M BANCORP has caused these presents to be signed in
its name and on its behalf by its President and witnessed by its Secretary on
May 1997.
WITNESS: F&M BANCORP
_________________________ BY:_______________________________
Gordon M. Cooley, Secretary Faye E. Cannon, President
THE UNDERSIGNED, President of F&M Bancorp, who executed on behalf of the
Corporation the foregoing Articles of Amendment and Restatement of which this
certificate is made a part, hereby acknowledges in the name and on behalf of
said Corporation the foregoing Articles of Amendment and Restatement to be the
corporate act of said Corporation and hereby certifies that to the best of her
knowledge, information, and belief the matters and facts set forth therein with
respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
Faye E. Cannon, President
F&M BANCORP
BY-LAWS
ARTICLE 1.
STOCKHOLDERS
SECTION 1.01. Annual Meeting. The Corporation shall hold an annual meeting of
its stockholders to elect directors and transact any other business within its
powers, either at 10:00 a.m. on the second Tuesday of April in each year if
not a legal holiday, or at such other time on such other day falling on or
before the 30th day thereafter as shall be set by the Board of Directors.
Except as the Charter or statute provides otherwise, any business may be
considered at an annual meeting without the purpose of the meeting having been
specified in the notice. Failure to hold an annual meeting does not invalidate
the Corporation's existence or affect any otherwise valid corporate acts.
SECTION 1.02. Special Meeting. At any time in the interval between annual
meetings, a special meeting of the stockholders may be called by the Chairman of
the Board or the President or by a majority of the Board of Directors by vote at
a meeting or in writing (addressed to the Secretary of the Corporation) with or
without a meeting. Special meetings of the stockholders shall be called by the
Secretary at the request of the stockholders only on the written request of
stockholders entitled to cast at least a majority of all the votes entitled to
be cast at the meeting and then only as may be required by law.
SECTION 1.03. Place of Meetings. Meetings of stockholders shall be held at
such place in the United States as is set from time to time by the Board of
Directors. In the absence of such designation, the meetings shall be held at
the main office of the Corporation.
SECTION 1.04. Notice of Meetings, Waiver of Notice. Not less than ten nor more
than 90 days before each stockholders' meeting, the Secretary shall give written
notice of the meeting to each stockholder entitled to vote at the meeting and
each other stockholder entitled to notice of the meeting. The notice shall
state the time and place of the meeting and, if the meeting is a special
meeting or notice of the purpose is required by statute, the purpose of the
meeting. Notice is given to a stockholder when it is personally delivered to
him or her, left at his or her residence or usual place of business, or mailed
to him or her at his or her address as it appears on the records of the
Corporation. Notwithstanding the foregoing provisions, each person who is
entitled to notice waives notice if he or she before or after the meeting signs
a waiver of the notice which is filed with the records of stockholders'
meetings, or is present at the meeting in person or by proxy. A meeting of
stockholders convened on the date for which it was called may be adjourned from
time to time without prior notice to a date not more than 120 days after the
original record date.
SECTION 1.05. Quorum; Voting. Unless statute or the Charter provides otherwise,
at a meeting of stockholders the presence in person or by proxy of stockholders
entitled to cast a majority of all the votes entitled to be cast at the meeting
constitutes a quorum, and a majority of all the votes cast at a meeting at
which a quorum is present is sufficient to approve any matter which properly
comes before the meeting, except that a plurality of all the votes cast at a
meeting at which a quorum is present is sufficient to elect a director.
SECTION 1.06. Adjournments. Whether or not a quorum is present, a meeting of
stockholders convened on the date for which it was called may be adjourned from
time to time without further notice by a majority vote of the stockholders
present in person or by proxy to a date not more than 120 days after the
original record date. Any business which might have been transacted at the
meeting as originally notified may be deferred and transacted at any such
adjourned meeting at which a quorum shall be present.
SECTION 1.07. General Right to Vote; Proxies. Unless the Charter provides for a
greater or lesser number of votes per share or limits or denies voting rights,
each outstanding share of stock, regardless of class, is entitled to one vote
on each matter submitted to a vote at a meeting of stockholders. In all
elections for directors, each share of stock may be voted for as many
individuals as there are directors to be elected and for whose election the
share is entitled to be voted. A stockholder may vote the stock the stockholder
owns of record either in person or by proxy. A stockholder may sign a writing
authorizing another person to act as proxy. Signing may be accomplished by the
stockholder or the stockholder's authorized agent signing the writing or causing
the stockholder's signature to be affixed to the writing by any reasonable
means, including facsimile signature. A stockholder may authorize another
person to act as proxy by transmitting, or authorizing the transmission of, a
telegram, cablegram, datagram, or other means of electronic transmission to the
person authorized to act as proxy or to a proxy solicitation firm, proxy support
service organization, or other person authorized by the person who will act as
proxy to receive the transmission. Unless a proxy provides otherwise, it is not
valid more than I 1 months after its date. A proxy is revocable by a
stockholder at any time without condition or qualification unless the proxy
states that it is irrevocable and the proxy is coupled with an interest. A
proxy may be made irrevocable for so long as it is coupled with an interest.
The interest with which a proxy may be coupled includes an interest in the stock
to be voted under the proxy or another general interest in the Corporation or
its assets or liabilities.
SECTION 1.08. List of Stockholders. At each meeting of stockholders, a full,
true and complete list of all stockholders entitled to vote at such meeting,
showing the number and class of shares held by each and certified by the
transfer agent for such class or by the Secretary, shall be furnished by the
Secretary.
SECTION 1.09. Conduct of Business. Nominations of persons for election to the
Board of Directors and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (a) pursuant to
the Corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any stockholder of the Corporation who was a stockholder of
record at the time of giving notice provided for in Section 1.11, who is
entitled to vote at the meeting and who complied with the notice procedures set
forth in Section 1. 11. The chairman of the meeting shall have the power and
duty to determine whether a nomination or any business proposed to be brought
before the meeting was made in accordance with the procedures set forth in this
Section and Section 1. II and, if any proposed nomination or business is not in
compliance with this Section and Section 1. II, to declare that such defective
nomination or proposal be disregarded.
SECTION 1.10. Conduct of Voting. At all meetings of stockholders, unless the
voting is conducted by inspectors, the proxies and ballots shall be received,
and all questions touching the qualification of voters and the validity of
proxies, the acceptance or rejection of votes and procedures for the conduct of
business not otherwise specified by these By-Laws, the Charter or law, shall be
decided or determined by the chairman of the meeting. If demanded by
stockholders, present in person or by proxy, entitled to cast 10% in number of
votes entitled to be cast, or if ordered by the chairman, the vote upon any
election or question shall be taken by ballot and, upon like demand or order,
the voting shall be conducted by two inspectors, in which event the proxies and
ballots shall be received, and all questions touching the qualification of
voters and the validity of proxies and the acceptance or rejection of votes
shall be decided, by such inspectors. Unless so demanded or ordered, no vote
need be by ballot and voting need not be conducted by inspectors. The
stockholders at any meeting may choose an inspector or inspectors to act at such
meeting, and in default of such election the chairman of the meeting may appoint
an inspector or inspectors. No candidate for election as a director at a
meeting shall serve as an inspector thereat.
SECTION 1.11. Stockholder Proposals. For any stockholder proposal to be
presented in connection with an annual meeting of stockholders of the
Corporation (other than proposals made under Rule 14a-8 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), including any proposal
relating to the nomination of a director to be elected to the Board of
Directors of the Corporation, the stockholders must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not less than 60 days nor more than 90
days prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is
advanced by more than 30 days or delayed by more than 60 days from such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the 90th day prior to such annual meeting and not later than
the close of business on the later of the 60th day prior to such annual meeting
or the tenth day following the day on which public announcement of the date of
such meeting is first made. Such stockholder's notice shall set forth (a) as
to each person whom the stockholder proposes to nominate for election or
reelection as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Exchange Act (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (b) as
to any other business that the stockholder proposes to bring before the meeting,
a brief description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meeting and any material
interest in such business of such stockholder and of the beneficial owner, if
any, on whose behalf the proposal is made; and (c) as to the stockholder giving
the notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made, (i) the name and address of such stockholder, as they appear
on the Corporation's books, and of such beneficial owner and (ii) the class and
number of shares of stock of the Corporation which are owned beneficially and
of record by such stockholders and such beneficial owner.
SECTION 1.12. Informal Action by Stockholders. Any action required or permitted
to be taken at a meeting of stockholders may be taken without a meeting if
there is filed with the records of stockholders meetings an unanimous written
consent which sets forth the action and is signed by each stockholder entitled
to vote on the matter and a written waiver of any right to dissent signed by
each stockholder entitled to notice of the meeting but not entitled to vote at
it.
ARTICLE II.
BOARD OF DIRECTORS
SECTION 2.01. Function of Directors. The business and affairs of the
Corporation shall be managed under the direction of its Board of Directors.
All powers of the Corporation may be exercised by or under authority of the
Board of Directors, except as conferred on or reserved to the stockholders by
statute or by the Charter or By-Laws.
SECTION 2.02. Number of Directors. The Corporation shall have at least three
directors; provided that, if there is no stock outstanding, the number of
Directors may be less than three but not less than one, and, if there is stock
outstanding and so long as there are less than three stockholders, the number
of Directors may be less than three but not less than the number of
stockholders. The Corporation shall have the number of directors provided in
the Charter until changed as herein provided. A majority of the entire Board of
Directors may alter the number of directors set by the Charter to not exceeding
25 nor less than the minimum number then permitted herein, but the action may
not affect the tenure of office of any director.
SECTION 2.03. Age Limitation of Directors. No person, except a person who was
a director of Farmers and Mechanics National Bank on March 11, 1975, shall be
eligible to stand for election as a director after attaining seventy (70)
years of age.
SECTION 2.04. Election and Tenure of Directors. The directors shall be divided
into three classes as nearly equal in number as possible. At each successive
annual meeting of stockholders, the holders of stock present in person or by
proxy at such meeting and entitled to vote thereat shall elect members of each
successive class to serve for three year terms and until their successors are
elected and qualify. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the number
of directors in each class as nearly equal as possible, and any additional
director of any class shall, subject to Section 2.06, hold office for a term
that shall coincide with the remaining term of that class, but in no case
shall a decrease in the number of directors shorten the term of any incumbent
director.
SECTION 2.05. Removal of Director. Any director or the entire Board of
Directors may be removed only in accordance with the provisions of the Charter.
SECTION 2.06. Vacancy on Board. Subject to the rights of the holders of any
class of stock separately entitled to elect one or more directors, the
stockholders may elect a successor to fill a vacancy on the Board of Directors
which results from the removal of a director. A director elected by the
stockholders to fill a vacancy which results from the removal of a director
serves for the balance of the term of the removed director. Subject to the
rights of the holders of any class of stock separately entitled to elect one
or more directors, a majority of the remaining directors, whether or not
sufficient to constitute a quorum, may fill a vacancy on the Board of Directors
which results from any cause except an increase in the number of directors, and
a majority of the entire Board of Directors may fill a vacancy which results
from an increase in the number of directors. A director elected by the Board
of Directors to fill a vacancy serves until the next annual meeting of
stockholders and until his or her successor is elected and qualifies.
SECTION 2.07. Regular Meetings. After each meeting of stockholders at which
directors shall have been elected, the Board of Directors shall meet as soon
as practicable for the purpose of organization and the transaction of other
business; and in the event that no other time is designated by the
stockholders, the Board of Directors shall meet at 2:00 p.m. on the date of
such stockholders meeting or immediately following the close of such meeting,
whichever is later, on the day of such meeting. Such first regular meeting
shall be held at the principal office of the Corporation. No notice of such
first meeting shall be necessary if held as hereinabove provided. Any other
regular meeting of the Board of Directors shall be held on such date and at
any place as may be designated from time to time by the Board of Directors.
SECTION 2.08. Special Meetings. Special meetings of the Board of Directors may
be called at any time by the Chairman of the Board or the President or by a
majority of the Board of Directors by vote at a meeting, or in writing with or
without a meeting. A special meeting of the Board of Directors shall be held on
such date and at any place as may be designated from time to time by the Board
of Directors. In the absence of designation such meeting shall be held at such
place as may be designated in the call.
SECTION 2.09. Notice of Meeting. Except as provided in Section 2.07, the
Secretary shall give notice to each director of each regular and special
meeting of the Board of Directors. The notice shall state the time and place
of the meeting. Notice is given to a director when it is delivered personally
to him, sent by mail, telephone, telegram, facsimile, or other electronic
means by which receipt of notice can be verified, at least 24 hours before the
time of the meeting. Unless the By-Laws or a resolution of the Board of
Directors provides otherwise, the notice need not state the business to be
transacted at or the purposes of any regular or special meeting of the Board
of Directors. No notice of any meeting of the Board of Directors need be
given to any director who attends except where a director attends a meeting
for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened, or to any director who,
in writing executed and filed with the records of the meeting either before or
after the holding thereof, waives such notice. Any meeting of the Board of
Directors, regular or special, may adjourn from time to time to reconvene at
the same or some other place, and no notice need be given of any such adjourned
meeting other than by announcement.
SECTION 2.10. Action by Directors. Unless statute or the Charter or By-Laws
requires a greater proportion, the action of a majority of the directors
present at a meeting at which a quorum is present is action of the Board of
Directors. A majority of the entire Board of Directors shall constitute a
quorum for the transaction of business. In the absence of a quorum, the
directors present by majority vote and without notice other than by
announcement may adjourn the meeting from time to time until a quorum shall
attend. At any such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting as
originally notified. Any action required or permitted to be taken at a meeting
of the Board of Directors may be taken without a meeting, if an unanimous
written consent which sets forth the action is signed by each member of the
Board and filed with the minutes of proceedings of the Board.
SECTION 2.11. Meeting by Conference Telephone. Members of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting
can hear each other at the same time. Participation in a meeting by these
means constitutes presence in person at a meeting.
SECTION 2.12. Compensation. By resolution of the Board of Directors a fixed
sum and expenses, if any, for attendance at each regular or special meeting of
the Board of Directors or of committees thereof, and other compensation for
their services as such or on committees of the Board of Directors, may be paid
to directors. A director who serves the Corporation in any other capacity also
may receive compensation for such other services, pursuant to a resolution of
the directors.
ARTICLE III.
COMMITTEES
SECTION 3.01. Committees. The Board of Directors will appoint from among its
members an Executive Committee, Compensation Committee, Audit Committee,
Nominating Committee, and may appoint such other committees deemed necessary,
composed of two or more directors and delegate to these committees any of the
powers of the Board of Directors, except the power to authorize dividends on
stock, elect directors, issue stock other than as provided in the next
sentence, recommend to the stockholders any action which requires stockholder
approval, amend these By-Laws, or approve any merger or share exchange which
does not require stockholder approval. If the Board of Directors has given
general authorization for the issuance of stock providing for or establishing
a method or procedure for determining the maximum number of shares to be
issued, a committee of the Board, in accordance with that general
authorization or any stock option or other plan or program adopted by the
Board of Directors, may authorize or fix the terms of stock subject to
classification or reclassification and the terms on which any stock may be
issued, including all terms and conditions required or permitted to be
established or authorized by the Board of Directors.
SECTION 3.02. Committee Procedure. Each committee shall function in
accordance with the charter established by that committee and ratified by the
Board of Directors. Regular meetings of each committee shall be held at such
time as provided for herein and upon such notice as the committee shall
determine. Special meetings of each committee may be held at any time and
place upon the call of the Chairman of the Board, the President, the Chairman
of the committee, or any two other members of the committee, and upon such
notice as the committee may prescribe. A majority of the members of a
committee shall constitute a quorum for the transaction of business and the
act of a majority of those present at a meeting at which a quorum is present
shall be the act of the committee. The members of a committee present at any
meeting, whether or not they constitute a quorum, may appoint a director to act
in the place of an absent member. Any action required or permitted to be taken
at a meeting of a committee may be taken without a meeting, if an unanimous
written consent which sets forth the action is signed by each member of the
committee and filed with the minutes of the committee. Minutes of meetings of
each committee shall be available to the Board of Directors. The members of a
committee may conduct any meeting thereof by conference telephone in
accordance with the provisions of Section 2.1 1.
SECTION 3.03. Emergency. In the event of a state of disaster of sufficient
severity to prevent the conduct and management of the affairs and business of
the Corporation by its directors and officers as contemplated by the Charter
and these By-Laws, any two or more available members of the then incumbent
Executive Committee shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Corporation in
accordance with the provisions of Section 3.01. In the event of the
unavailability, at such time, of a minimum of two members of the then incumbent
Executive Committee, the available directors shall elect an Executive Committee
consisting of any two members of the Board of Directors, whether or not they be
officers of the Corporation, which two members shall constitute the Executive
Committee for the full conduct and management of the affairs of the Corporation
in accordance with the foregoing provisions of this Section. This Section shall
be subject to implementation by resolution of the Board of Directors passed
from time to time for that purpose, and any provisions of these By-Laws (other
than this Section) and any resolutions which are contrary to the provisions of
this Section or to the provisions of any such implementary resolutions shall be
suspended until it shall be determined by any interim Executive Committee
acting under this Section that it shall be to the advantage of the Corporation
to resume the conduct and management of its affairs and business under all the
other provisions of these By-Laws.
ARTICLE IV.
OFFICERS
SECTION 4.01. Officers. The Corporation shall have a President, Secretary,
and Treasurer who will be elected by the Board of Directors. The Corporation
may also have a Chairman of the Board and/or a Vice Chairman, if elected by the
directors, one or more Vice-Presidents, one or more Assistant Vice-Presidents,
one or more Assistant Secretaries, one or more Assistant Treasurers, and such
other assistant and subordinate officers as are elected by the Board of
Directors or appointed by the President. A person may hold more than one office
in the Corporation but may not serve concurrently as both President and Vice-
President of the Corporation. The Chairman of the Board and/or Vice Chairman
shall be a director, and the other officers may be directors.
SECTION 4.02. Chairman of the Board. The Chairman of the Board, if one be
elected, shall present at all meetings of the Board of Directors and of the
stockholders at which he or she shall be present. He or she shall have and may
exercise such powers as are from time to time assigned by the Board of
Directors.
SECTION 4.03. Vice Chairman of the Board. The Vice Chairman of the Board, if
one be elected, shall in the absence of the Chairman of the Board and the
President preside at all meetings of the Board of Directors and of the
stockholders at which he or she shall be present. He or she shall have and
may exercise such powers as are from time to time assigned by the Board of
Directors.
SECTION 4.04. President. In the absence of the Chairman of the Board, the
President shall preside at all meetings of the stockholders and of the Board of
Directors at which he or she shall be present; shall have general charge and
supervision of the assets and affairs of the Corporation; may sign and execute,
in the name of the Corporation, all authorized deeds, mortgages, bonds,
contracts or other instruments, except in cases in which the signing and
execution thereof shall have been expressly delegated to some other officer or
agent of the Corporation; and, in general, unless the Board of Directors so
empowers another, shall perform such duties as are customarily performed by the
chief executive officer of a corporation, and may perform such other duties as
are from time to time assigned by the Board of Directors.
SECTION 4.05. Vice-Presidents. The Vice- President or Vice-Presidents, at the
request of the President or in his or her absence or during his or her
inability to act, shall perform the duties and exercise the functions of the
President, and when so acting shall have the powers of the President. If there
be more than one Vice-President, the President or the Board of Directors may
determine which one or more of the Vice-Presidents shall perform any of such
duties or exercise any of such functions; otherwise any of the Vice-Presidents
may perform any of such duties or exercise any of such functions. The Vice-
President or Vice-Presidents shall have such other powers and perform such
other duties, and have such additional descriptive designations in their titles
(if any), as are from time to time assigned to them by the Board of Directors
or the President.
SECTION 4.06. Secretary. The Secretary shall keep the minutes of the meetings
of the stockholders, of the Board of Directors and of any committees, in books
provided for the purpose; he or she shall see that all notices are duly given
in accordance with the provisions of these By-Laws or as required by law; he
or she shall be custodian of the records of the Corporation; he or she shall
witness all documents on behalf of the Corporation, the execution of which is
duly authorized, see that the corporate seal is affixed where such document is
required or desired to be under its seal, and, when so affixed, may attest the
same; and, in general, he or she shall perform all duties customarily performed
by a secretary of a corporation, and shall perform such other duties and have
such other powers as are from time to time assigned to him or her by the Board
of Directors or the President.
SECTION 4.07. Treasurer. The Treasurer shall have charge of and be responsible
for all funds, securities, receipts and disbursements of the Corporation, and
shall deposit, or cause to be deposited, in the name of the Corporation, all
moneys or other valuable effects in such banks, trust companies or other
depositories as shall, from time to time, be selected by the Board of
Directors; he or she shall render to the President and to the Board of
Directors, whenever requested, an account of the financial condition of the
Corporation. In general, he or she shall perform all the duties customarily
performed by a treasurer of a corporation, and such other duties as are from
time to time assigned to him by the Board of Directors or the President.
SECTION 4.08. Compensation. The Board of Directors shall have power (which
power will be delegated to the Compensation Committee, if one is formed) to fix
the salaries and other compensation and remuneration, of whatever kind, of
officers of the Corporation. To the extent the Compensation Committee does not
establish salaries for officers, the President will fix salaries for all other
officers and employees of the Corporation and all subsidiaries.
SECTION 4.09. Tenure and Removal of Officers. All officers serve at the
pleasure of the Board of Directors. The Board of Directors may remove an
officer or agent at any time and may delegate this power to the chief
executive officer.
ARTICLE V.
STOCK
SECTION 5.01. Certificates for Stock. Each stockholder is entitled to
certificates which represent and certify the shares of stock he or she holds
in the Corporation. Each stock certificate shall include on its face the name
of the corporation that issues it, the name of the stockholder or other person
to whom it is issued, and the class of stock and number of shares it represents.
It shall be in such form, not inconsistent with law or with the Charter, as
shall be approved by the Board of Directors or any officer or officers
designated for such purpose by resolution of the Board of Directors. Each stock
certificate shall be signed by the Chairman of the Board, the President, or a
Vice-President, and countersigned by the Secretary, an Assistant Secretary, the
Treasurer, or an Assistant Treasurer. Each certificate may be sealed with the
actual corporate seal or a facsimile of it or in any other form and the
signatures may be either manual or facsimile signatures. A certificate is valid
and may be issued whether or not an officer who signed it is still an officer
when it is issued. . It shall also include on its face or back (a) a statement
of any restrictions on transferability and (b) a statement which provides in
substance that the Corporation will finish to any stockholder on request and
without charge a full statement of the designations and any preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption of the stock
of each class which the Corporation is authorized to issue, of the differences
in the relative rights and preferences between the shares of each series of a
preferred or special class in series which the Corporation is authorized to
issue, to the extent they have been set, and of the authority of the Board of
Directors to set the relative rights and preferences of subsequent series of a
preferred or special class of stock and any restrictions on transferability.
Such request may be made to the Secretary or to its transfer agent. A
certificate may not be issued until the stock represented by its is fully paid.
SECTION 5.02. Transfers. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates of stock; and
may appoint transfer agents and registrars thereof. The duties of transfer
agent and registrar may be combined.
SECTION 5.03. Record Dates or Closing of Transfer Books. The Board of
Directors may set a record date or direct that the stock transfer books be
closed for a stated period for the purpose of making any proper determination
with respect to stockholders, including which stockholders are entitled to
notice of a meeting, vote at a meeting, receive a dividend, or be allotted
other rights. The record date may not be prior to the close of business on the
day the record date is fixed nor, subject to Section 1.06, more than 90 days
before the date on which the action requiring the determination will be taken;
the transfer books may not be closed for a period longer than 20 days; and, in
the case of a meeting of stockholders, the record date or the closing of the
transfer books shall be at least ten days before the date of the meeting.
SECTION 5.04. Stock Ledger. The Corporation shall maintain a stock ledger
which contains the name and address of each stockholder and the number of
shares of stock of each class which the stockholder holds. The stock ledger
may be in written form or in any other form which can be converted within a
reasonable time into written form for visual inspection. The original or a
duplicate of the stock ledger shall be kept at the offices of a transfer
agent for the particular class of stock, or, if none, at the principal office
in the State of Maryland or the principal executive offices of the Corporation.
SECTION 5.05. Certification of Beneficial Owners. The Board of Directors may
adopt by resolution a procedure by which a stockholder of the Corporation may
certify in writing to the Corporation that any shares of stock registered in
the name of the stockholder are held for the account of a specified person
other than the stockholder. The resolution shall set forth the class of
stockholders who may certify; the purpose for which the certification may be
made; the form of certification and the information to be contained in it; if
the certification is with respect to a record date or closing of the stock
transfer books, the time after the record date or closing of the stock transfer
books within which the certification must be received by the Corporation; and
any other provisions with respect to the procedure which the Board considers
necessary or desirable.
On receipt of a certification which complies with the procedure adopted by the
Board in accordance with this Section, the person specified in the
certification is, for the purpose set forth in the certification, the holder
of record of the specified stock in place of the stockholder who makes the
certification.
SECTION 5.06. Lost Stock Certificates. The Board of Directors of the
Corporation may determine the conditions for issuing a new stock certificate
in place of one which is alleged to have been lost, stolen, or destroyed, or
the Board of Directors may delegate such power to any transfer agent, officer,
or officers of the Corporation. In their discretion, the Board of Directors
or such officer or officers may require the owner of the certificate to give
bond, with sufficient surety, to indemnify the Corporation against any loss or
claim arising as a result of the issuance of a new certificate. In their
discretion, the Board of Directors or such officer or officers may refuse to
issue such hew certificate save upon the order of some court having
jurisdiction in the premises.
ARTICLE VI.
FINANCE
SECTION 6.01. Checks,, Drafts, Etc. All checks, drafts and orders for the
payment of money, notes and other evidences of indebtedness, issued in the
name of the Corporation, shall, unless otherwise provided by resolution of
the Board of Directors, be signed by the Chairman of the Board, President, a
Vice-President, the Treasurer, the Secretary, or other assistant or
subordinate officers.
SECTION 6.02. Annual Statement of affairs. The President shall prepare
annually a full and correct statement of the affairs of the Corporation, to
include a balance sheet and a financial statement of operations for the
preceding fiscal year. The statement of affairs shall be submitted at the
annual meeting of the stockholders and, within 20 days after the meeting,
placed on file at the Corporation's principal office.
SECTION 6.03. Fiscal Year. The fiscal year of the Corporation shall be the
twelve calendar months period ending December 31 in each year, unless
otherwise provided by the Board of Directors.
SECTION 6.04. Dividends. If declared by the Board of Directors at any meeting
thereof, the Corporation may pay dividends on its shares in cash, property, or
in shares of the capital stock of the Corporation, unless such dividend is
contrary to law or to a restriction contained in the Charter.
ARTICLE VII.
INDEMNIFICATION
SECTION 7.01. Procedure. Any indemnification, or payment of expenses in
advance of the final disposition of any proceeding, shall be made promptly,
and in any event within 60 days, upon the written request of the director or
officer entitled to seek indemnification (the "Indemnified Party"). The right
to indemnification and advances hereunder shall be enforceable by the
Indemnified Party in any court of competent jurisdiction, if (i) the
Corporation denies such request, in whole or in part, or (ii) no disposition
thereof is made within 60 days. The Indemnified Party's costs and expenses
incurred in connection with successfully establishing his or her right to
indemnification, in whole or in part, in any such action shall also be
reimbursed by the Corporation. It shall be a defense to any action for advance
for expenses that (a) a determination has been made that the facts then known
to those making the determination would preclude indemnification or (b) the
Corporation has not received both (i) an undertaking as required by law to
repay such advances in the event it shall ultimately be determined that the
standard of conduct has not been met and (ii) a written affirmation by the
Indemnified Party of such Indemnified Party's good faith belief that the
standard of conduct necessary for indemnification by the Corporation has been
met.
SECTION 7.02. Exclusivity, Etc. The indemnification and advance of expenses
provided by the Charter and these By-Laws shall not be deemed exclusive of any
other rights to which a person seeking indemnification or advance of expenses
may be entitled under any law (common or statutory), or any agreement, vote of
stockholders or disinterested directors or other provision that is consistent
with law, both as to action in his or her official capacity and as to action
in another capacity while holding office or while employed by or acting as
agent for the Corporation, shall continue in respect of all events occurring
while a person was a director or officer after such person has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of such person. The Corporation shall not be
liable for any payment under this By-Law in connection with a claim made by a
director or officer to the extent such director or officer has otherwise
actually received payment under insurance policy, agreement, vote or otherwise,
of the amounts otherwise indemnifiable hereunder. All rights to indemnification
and advance of expenses under the Charter of the Corporation and hereunder
shall be deemed to be a contract between the Corporation and each director or
officer of the Corporation who serves or served in such capacity at any time
while this By-Law is in effect. Nothing herein shall prevent the amendment of
this By-Law, provided that no such amendment shall diminish the rights of any
person hereunder with respect to events occurring or claims made before its
adoption or as to claims made after its adoption in respect of events occurring
before its adoption. Any repeal or modification of this By-Law shall not in any
way diminish any rights to indemnification or advance of expenses of such
director or officer or the obligations of the Corporation arising hereunder
with respect to events occurring, or claims made, while this By-Law or any
provision hereof is in force.
SECTION 7.03. Severability; Definitions. The invalidity or unenforceability
of any provision of this Article VIII shall not affect the validity or
enforceability of any other provision hereof. The phrase "this By-Law" in
this Article VIII means this Article VIII in its entirety.
ARTICLE VIII.
SUNDRY PROVISIONS
SECTION 8.01. Books and Records. The Corporation shall keep correct and
complete books and records of its accounts and transactions and minutes of
the proceedings of its stockholders and Board of Directors and of any
executive or other committee when exercising any of the powers of the Board
of Directors. The books and records of the Corporation may be in written
form or in any other form which can be converted within a reasonable time into
written form for visual inspection. Minutes shall be recorded in written form
but may be maintained in the form of a reproduction. The original or a
certified copy of these By-Laws shall be kept at the principal office of the
Corporation.
SECTION 8.02. Corporate Seal. The Board of Directors shall provide a suitable
seal, bearing the name of the Corporation, which shall be in the charge of the
Secretary. The Board of Directors may authorize one or more duplicate seals
and provide for the custody thereof If the Corporation is required to place
its corporate seal to a document, it is sufficient to meet the requirement of
any law, rule, or regulation relating to a corporate seal to place the word
(seal) adjacent to the signature of the person authorized to sign the document
on behalf of the Corporation.
SECTION 8.03. Bonds. The Board of Directors may require any officer, agent or
employee of the Corporation to give a bond to the Corporation, conditioned
upon the faithful discharge of his or her duties, with one or more sureties
and in such amount as may be satisfactory to the Board of Directors.
SECTION 8.04. Voting Stock in Other Corporations. Stock of other corporations
or associations, registered in the name of the Corporation, may be voted by
the President, a Vice-President, or a proxy appointed by either of them. The
Board of Directors, however, may by resolution appoint some other person to
vote such shares, in which case such person shall be entitled to vote such
shares upon the production of a certified copy of such resolution.
SECTION 8.05. Communication. Any notice or other document which is required
by these By-Laws to be mailed shall be considered personally delivered when
sent by United States mail, facsimile, or other electronic means.
SECTION 8.06. Execution of Documents. All instruments or documents may
executed, acknowledged, verified, delivered, or accepted on behalf of the
Corporation by the President. The President may grant specific or general
authority relating to any signing, execution, acknowledgment, verification,
delivery, or acceptance on behalf of the Corporation to other officers,
employees, or agents.
SECTION 8.07. Amendments. In accordance with the Charter, these By-Laws may
be repealed, altered, amended or rescinded by the stockholders of the
Corporation only by vote of not less than 80% of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose (provided that notice of such proposed
repeal, alteration, amendment or rescission is included in the notice of such
meeting). In addition, the Board of Directors may repeal, alter, amend or
rescind these By-Laws by vote of two-thirds of the Board of Directors at a
legal meeting held in accordance with the provisions of these By-Laws.
Exhibit 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Six Month Period Ended, Quarter Ended
June 30, June 30,
1997 1996 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings Per share:
Primary $0.94 $0.85 $0.48 $0.44
Fully diluted $0.93 $0.85 $0.48 $0.43
</TABLE>
Primary and fully diluted earnings per share are calculated using the following
number of adjusted weighted average shares outstanding:
<TABLE>
<CAPTION>
Six Month Period Ended, Quarter Ended
June 30, June 30,
1997 1996 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings Per share:
Primary $6,013,654 $6,004,395 $6,017,467 $5,998,686
Fully diluted $6,017,746 $6,010,577 $6,021,212 $6,011,436
</TABLE>
The weighted average number of shares outstanding is adjusted to recognize the
dilutive effect, if any, of outstanding employee stock options on both a
primary and fully diluted basis.
The calculations of earnings per share above are based on the weighted average
number of shares outstanding, adjusted for the 5 percent stock dividend paid
August 8, 1997, including all common stock and common stock equivalents in
conformity with the instructions for Item 601 of Regulation S-K. The
calculation of earnings per share for financial reporting purposes is based on
the weighted average number of shares outstanding of 5,974,072 and 5,951,796 at
June 30, 1997 and June 30, 1996, respectively, without giving effect to the
common stock equivalents resulting from the assumed exercise of stock options,
which do not dilute earnings per share by more than 3 percent, in conformity
with generally accepted accounting principles.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 33,908
<INT-BEARING-DEPOSITS> 4,327
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 155,342
<INVESTMENTS-CARRYING> 98,526
<INVESTMENTS-MARKET> 99,318
<LOANS> 691,887
<ALLOWANCE> 9,731
<TOTAL-ASSETS> 1,033,656
<DEPOSITS> 810,457
<SHORT-TERM> 50,728
<LIABILITIES-OTHER> 10,107
<LONG-TERM> 6,320
0
0
<COMMON> 29,904
<OTHER-SE> 67,045
<TOTAL-LIABILITIES-AND-EQUITY> 1,033,656
<INTEREST-LOAN> 29,488
<INTEREST-INVEST> 7,011
<INTEREST-OTHER> 122
<INTEREST-TOTAL> 36,621
<INTEREST-DEPOSIT> 13,728
<INTEREST-EXPENSE> 16,502
<INTEREST-INCOME-NET> 20,119
<LOAN-LOSSES> 900
<SECURITIES-GAINS> 2
<EXPENSE-OTHER> 17,486
<INCOME-PRETAX> 8,005
<INCOME-PRE-EXTRAORDINARY> 8,005
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,624
<EPS-PRIMARY> .94
<EPS-DILUTED> .93
<YIELD-ACTUAL> 4.61
<LOANS-NON> 7,162
<LOANS-PAST> 855
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 8,344
<ALLOWANCE-OPEN> 9,639
<CHARGE-OFFS> 2,209
<RECOVERIES> 1,401
<ALLOWANCE-CLOSE> 9,731
<ALLOWANCE-DOMESTIC> 7,993
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,738
</TABLE>
