SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
________________
Date of Report (Date of Earliest Event Reported) September 7, 1999
F&M BANCORP
(Exact Name of Registrant as Specified in Charter)
Maryland 0-12638 52-1316473
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
110 Thomas Johnson Drive, Frederick, Maryland 21702
(Address of Principal Executive Offices) (Zip Code)
(Registrant's Telephone Number, Including Area Code) (301) 694-4000
ITEM 5. OTHER EVENTS
On September 7, 1999, F&M Bancorp, a Maryland corporation (the
"Registrant"), announced that it had entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Patapsco Valley Bancshares, Inc., a
Maryland corporation ("Patapsco"), pursuant to which the Registrant will
acquire Patapsco (the "Acquisition").
The press release issued by the Registrant with respect to the
announcement of the proposed Acquisition is attached hereto as Exhibit 99.1
and is incorporated herein by reference in its entirety. Also attached
hereto as Exhibit 99.2 and incorporated herein by reference is the
presentation provided by the Registrant to investment analysts on September
7, 1999 with respect to the proposed Acquisition.
The press release and the analyst presentation incorporated
herein by reference contain certain forward looking statements with respect
to the financial condition, results of operations and business of the
Registrant following the consummation of the Acquisition, including
statements relating to the cost savings, revenue enhancements and other
efficiencies that are expected to be realized as a result of the
Acquisition. Factors that may cause actual results to differ materially
from those contemplated by such forward looking statements include, among
others, the following possibilities: (1) expected cost savings, revenue
enhancements or other efficiencies from the Acquisition cannot be fully
realized; (2) deposit attrition, customer loss or revenue loss following
the Acquisition is greater than expected; (3) competitive pressure in the
banking and financial services industry increases significantly; (4)
changes in the interest rate environment reduce margins; and (5) general
economic conditions, either nationally or in Maryland, are less favorable
than expected.
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS
(c) Exhibits
99.1 Press Release issued by F&M Bancorp on September 7,
1999
99.2 Analyst Presentation
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
F&M BANCORP
By: /s/ Gordon M. Cooley
Name: Gordon M. Cooley
Title: Secretary and General Counsel
Date: September 8, 1999
EXHIBIT INDEX
Exhibit
Number Description
99.1 Press Release issued by F&M Bancorp on September 7,
1999
99.2 Analyst Presentation
EXHIBIT 99.1
September 7, 1999
F&M BANCORP AND PATAPSCO VALLEY BANCSHARES, INC.
------------------------------------------------
ANNOUNCE DEFINITIVE MERGER AGREEMENT
------------------------------------
COMBINED COMPANY DEPOSIT MARKET SHARE TO RANK IN MARYLAND TOP 10
Frederick, MD, September 7, 1999 - F&M Bancorp (NASDAQ:FMBN), headquartered
in Frederick, MD, and Patapsco Valley Bancshares, Inc. (OTCBB:PVYB),
headquartered in Ellicott City, MD, jointly announced that they have signed
a definitive agreement for F&M Bancorp to acquire Patapsco Valley
Bancshares, Inc..
The definitive merger agreement provides for a fixed exchange ratio of 1.18
shares of F&M Bancorp's common stock for each share of Patapsco's common
stock. Based on the closing price of F&M Bancorp common stock on September
3, 1999 and the number of shares of common stock of Patapsco currently
outstanding, the transaction has a value of approximately $47 million, or
$34.00 per share of Patapsco common stock. The transaction is intended to
be tax-free to the stockholders of Patapsco and will be accounted for as a
pooling of interests.
Upon completion of the merger, which is subject to the approval of
Patapsco's shareholders and applicable regulatory authorities, Patapsco's
subsidiary, Commercial and Farmers Bank ("CFBank"), will be merged into F&M
Bancorp's commercial banking subsidiary, Farmers & Mechanics National Bank.
All branch locations are expected to remain open.
"We are very pleased to have CFBank become part of the contiguous extension
of our franchise," commented Faye E. Cannon, president and chief executive
officer of F&M Bancorp. "CFBank and Farmers & Mechanics National Bank are
financial institutions deeply rooted in the communities we serve. As
community banks, both organizations have a rich history of providing
quality service to customers by establishing strong relationships and
delivering products that meet their needs. Our combined organizations will
strengthen the capabilities of both banks, offering individual and business
customers the convenience of broader geographic access, enhanced products
and services, and increased traditional and non-traditional delivery
channels. By leveraging CFBank's strong market share throughout the very
attractive markets of Howard County, we expect continued strong growth for
our organizations."
Ms. Cannon continued, stating, "Throughout its history, CFBank has a
time-honored tradition of reinvesting in its community, a characteristic
shared by Farmers & Mechanics. Through the combined resources of both
companies, Farmers & Mechanics looks forward to maintaining this commitment
to give back to these communities which are the foundation of our success."
"F&M Bancorp represents an ideal merger partner for us," noted John S.
Whiteside, Patapsco's president and chief executive officer. "Their
investment in products and technology will continue to support our high
standards for quality and competitive customer service. Our knowledge and
experience in our marketplace will also contribute to the success of this
merger. Teaming with F&M Bancorp enables us to capitalize on their
economies of scale and broad product array, bringing added value to our
customers and our shareholders."
F&M Bancorp expects to realize merger synergies by reducing the operating
expenses of the combined company as well as by increasing revenues through
sales opportunities in the attractive, contiguous Howard County market. The
combined organization is expected to offer growth potential through the
respective strengths of the merging banks in a variety of business lines
including retail banking services, commercial and small business lending,
mortgage banking, personal financial planning, brokerage, trust and
investment management services, and a full line of personal and business
insurance products. The transaction is expected to close in late 1999, or
early 2000, and is anticipated to be accretive to F&M Bancorp's earnings
per share by the end of 2000.
CFBank operates seven full-service community offices in Howard County, MD
and one in Baltimore County, MD. Subsidiaries include Founders Mortgage
Company, C&F Insurance Agency, Inc., and Central Maryland Service
Corporation, a data processing company. At June 30, 1999, Patapsco had
total assets of $174 million, deposits of $149 million and stockholders'
equity of $17 million.
F&M Bancorp had total assets of $1.462 billion at June 30, 1999. Its wholly
owned subsidiaries, Farmers & Mechanics National Bank, Frederick, MD, and
Home Federal Savings Bank, Hagerstown, MD, offer a wide variety of
traditional and non-traditional financial services including trust and
investment management, financial planning, brokerage, mortgage banking,
consumer and business electronic banking, and consumer and commercial
business insurance products through Keller-Stonebraker Insurance, Inc. and
Potomac Basin Group Associates, Inc.. The banks operate 44 full-service
community offices and 61 ATMs across central and western Maryland and
south-central Pennsylvania.
# # # #
This news release contains, among other things, certain forward-looking
statements regarding the combined company following the merger, including
statements relating to cost savings, enhanced revenue and accretion to
reported earnings that may be realized from the merger. Such
forward-looking statements involve certain risks and uncertainties,
including a variety of factors that may cause the combined company's actual
results to differ materially from the anticipated results or other
expectations expressed in such forward-looking statements. Factors that
might cause such a difference include, but are not limited to: (1) expected
cost savings from the merger may not be fully realized within the expected
time frame, if at all; (2) revenues following the merger may be lower than
expected, or deposit attrition, operating costs or customer loss and
business disruption following the merger may be greater than expected; (3)
competitive pressures among depository and other financial institutions may
increase significantly; (4) costs or difficulties related to the
integration of the business of the companies may be greater than expected;
(5) changes in the interest rate environment may reduce margins; (6)
general economic or business conditions, either nationally or in the states
or regions in which the companies do business, may be less favorable than
expected, resulting in, among other things, a deterioration in credit
quality or a reduced demand for credit; (7) legislative or regulatory
changes may adversely affect the businesses in which the companies are
engaged; and (8) changes may occur in the securities markets.
CONTACT: Media Representatives Analysts and Investors
------------------------------- ---------------------------
FAYE E. CANNON, President & CEO DAVID L. SPILMAN, Treasurer
F&M Bancorp F&M Bancorp
301-694-4078 888-694-4170
# # # #
EXHIBIT 99.2
[F&M Bancorp Logo]
&
[Patapsco Valley Logo]
"An Efficiency-Driven Market Expansion Acquisition"
September 7, 1999
[F&M Bancorp Logo] [Patapsco Valley Logo]
Certain statements made by the management of F&M Bancorp in these materials
are not statements of historical fact, but are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These "forward-looking statements" involve risks and uncertainties which
may cause actual results to differ materially from those in such
statements.
Factors that could cause actual results to differ materially from those
contemplated by such forward-looking statements include, among others, the
following possibilities:
1. Expected cost savings from the merger cannot be realized or realized
within the expected time frame
2. Revenues following the merger are lower than expected
3. Competitive pressure among financial services companies increases
significantly
4. Costs or difficulties related to the integration of F&M Bancorp and
Patapsco Valley are greater than expected
5. Changes in the interest rate environment reduce interest margins
6. General economic conditions, internationally, nationally, or in Maryland
are less favorable than expected
7. Legislation or regulatory requirements or changes adversely affect the
businesses in which the combined company would be engaged
PRESENTATION OVERVIEW
o The Companies
o Transaction Summary
o Transaction Benefits
o Pro Forma Financial Summary
[F&M Bancorp Logo] [Map of Maryland showing the
locations of F&M Bancshares'
current branches in Allegany,
Baltimore, Carroll, Frederick,
Howard, Montgomery and
Washington Counties and in Adams
County, Pennsylvania.]
F&M BANCORP HIGHLIGHTS
- - Holding company for Farmers & Mechanics Bank and Home Federal Savings
Bank
- - Significant investments in technology for market segmentation and life
cycle banking
- - Diversified portfolio of loans including student, mortgage and commercial
loans
- - Wide range of products and services including insurance, trust services,
and internet banking
- - Leading market share in Frederick County with 30%
Assets: $1,462 Million
Deposit 1,160
Loans: 899
Source: Company filings. Data as of 6/30/99.
[Patapsco Valley Logo] [Map of Maryland showing the
locations of Patapsco Valley
current branches in Baltimore
and Howard Counties.]
PATAPSCO VALLEY BANCSHARES HIGHLIGHTS
Holding company for:
o Commercial & Farmers Bank--Maryland state-charted bank with 8 locations
o Founders Mortgage Co.--Originates and sells commercial and residential
mortgages through 5 offices
o C&F Insurance Agency--Full line insurance agency
o Central Maryland Service Corporation--Data processing company
Assets: $174 Million
Deposits: 149
Loans: 117
Latest Qtr. ROAA: 0.25 %
Latest Qtr. Efficiency: 91.32
Source: Company filings. Data as of 6/30/99
PATAPSCO VALLEY MARKET DEMOGRAPHICS:
Average Household Income ($) Projected Population Growth 1998-2003 (%)
[Chart showing the following: [Chart showing the following:
Patapsco Valley: 72,802 Patapsco Valley: 10.0
F&M Bancorp: 59,941 F&M Bancorp: 7.8
Maryland: 62,732 Maryland: 2.8
U.S.: 53,198] U.S.: 4.3]
Souce: SNL Securities, L.C. & Claritas.
Demographics are deposit weighted by county as of 6/30/98.
TRANSACTION SUMMARY:
Offer:
- -----------------------------------
Consideration: Common Stock
Exchange Ratio: 1.18 F&M Bancorp shares per Patapsco
Valley share
Implied Value per Share: (1) $34.07
Total Transaction Value: (2) $47 million
Implied Multiples
- -----------------------------------
Premium to Market: (3) 34.9%
Price / Book Value: (4) 279.2
Price / LTM EPS: (5) 78.8 x
Price / LQA EPS: (6) 106.5
Miscellaneous Provisions
- -----------------------------------
Lock-up Option: F&M Bancorp may buy up to 19.9% of Patapsco's shares
at a price of $27.50
Termination Provisions: Transaction subject to:
(1) Regulatory approvals
(2) Approval of Patapsco Valley shareholders
(3) Material breach of the Agreement
(4) F&M's average price declines by 25% or more near
the effective date and such decline exceeds 15%
relative to an index of comparable bank stocks
(1) Based on F&M Bancorp's closing price of $28.88 per share as of 9/3/99.
(2) Based on 1.38 million Patapsco fully diluted shares.
(3) Based on Patapsco Valley closing price of $25.25 per share as of 9/3/99.
(4) Based on Patapsco Valley stated book value per share of $12.20 as of
6/30/99.
(5) Based on Patapsco Valley's last twelve months EPS of $0.43.
(6) Based on Patapsco Valley's Q2 1999 EPS of $0.08
TRANSACTION BENEFITS:
o Deepens penetration of attractive, high growth Howard County market
- Increases deposit market share rank from 16th to 5th with a 6.1% share
- Howard County is the 2nd fastest-growing county in Maryland
o Brings F&M Bancorp into the top 10 in statewide deposit market share
o Significant opportunities for synergies based on historical target
inefficiency
o Further leverages technology and market segmentation investments
o Accretive to EPS
PRO FORMA FRANCHISE HIGHLIGHTS:
<TABLE>
<CAPTION>
Howard County Howard County - Pro Forma
Rank Company Share Rank Company Share
- ----------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Allied Irish Banks 21.41% 1. Allied Irish Banks 21.41%
2. Bank of America Corp. 18.88 2. Bank of America Corp. 18.88
3. Columbia Bancorp 13.12 3. Columbia Bancorp 13.12
4. First Union Corp. 8.12 ----> 4. First Union Corp. 8.12
5. Mercantile Bankshares Corp. 5.69 5. F&M Bancorp Pro Forma 6.13
6. Patapsco Valley Bancshares 5.24 6. Mercantile Bankshares Corp. 5.69
16. F&M Bancorp 0.89 7. Suntrust Banks, Inc. 5.01
</TABLE>
Maryland Statewide - Pro Forma
Rank Company Share
--------------------------------------------
1. Bank of America Corp. 16.11%
2. Allied Irish Banks 11.41
3. Mercantile Bankshares Corp 9.19
4. Suntrust Banks, Inc. 9.03
5. First Union Corp. 7.88
6. Saul Centers, Inc. 7.00
7. Provident Bankshares Corp. 5.08
8. BB&T Corp. 2.75
9. First Virginia Banks Inc. 2.12
10. F&M Bancorp Pro Forma 2.09
Source: SNL Securities.
Data as of 6/30/98.
PRO FORMA MARKET DEMOGRAPHIC HIGHLIGHTS:
Average Household Income ($) Projected Population Growth 1998-2003 (%)
[Chart showing the following: [Chart showing the following:
F&M Bancorp: 59,941 F&M Bancorp: 7.8
Patapsco Valley: 72,802 Patapsco Valley: 10.0
F&M Pro Forma: 61,254] F&M Pro Forma: 8.0]
Source: SNL Securities and Claritas.
Data as of 6/30/98; deposit weighted by county.
FINANCIAL BENEFITS:
o Significant expense savings of more than 30%
- Target expenses exceed 6% of assets in latest twelve months
compared with nationwide average of 3.5%
- Synergies in both bank and non-bank businesses
o Strong interest margin fueled by core deposits
o Leverages F&M infrastructure expenditures and marketing expertise
o Accretive to earnings per share by the end of the year 2000
PRO FORMA FINANCIAL SUMMARY:
F&M Patapsco Pro Forma
------ -------- ---------
Branches: 44 8 52
Assets: $1,462 $174 $1,636
Deposits: 1,160 149 1,309
Loans: 899 117 1,016
Market Capitalization: 267 35 314
Source: Company filings. Data as of 6/30/99. Pricing data as of 9/3/99.
Dollars in millions.
<TABLE>
<CAPTION>
PATAPSCO VALLEY HISTORICAL PERFORMANCE:
Six Months Ended Fiscal Years Ended December 31,
-------------------- ------------------- ------------------- ------------------
6/30/99 1998 1997 1996
-------------------- ------------------- ------------------- ------------------
Summary of Operations:
<S> <C> <C> <C> <C>
Net interest income 4,065 8,053 7,592 6,609
Provision for loan losses 0 0 0 0
-------------------- ------------------- ------------------- ------------------
Net interest income after provision 4,065 8,053 7,592 6,609
Non interest income 1,574 3,037 1,002 752
Non interest expense 5,302 9,460 6,178 4,997
-------------------- ------------------- ------------------- ------------------
Income before taxes 338 1,631 2,416 2,364
Income taxes 107 554 869 861
==================== =================== =================== ==================
Net income $231 $1,077 $1,548 $1,502
==================== =================== =================== ==================
Per Share Data:
Net income (diluted) $0.17 $0.80 $1.16 $1.16
Cash dividends 0.26 0.51 0.54 0.48
Book value per common share 12.20 12.37 11.91 11.26
Weighted average shares outstanding 1,362 1,346 1,334 1,295
Ratios:
Loans to deposits 78.64 % 84.13 % 86.99 % 74.53 %
Reserves/non-performing assets 182.18 82.41 124.33 252.50
Non-performing assets to assets 0.42 0.79 0.87 0.43
Equity/assets 9.60 9.90 11.33 10.98
Leverage ratio 8.62 10.30 11.30 11.10
Tier 1 Capital ratio 12.72 12.80 13.80 16.00
Total Capital ratio 13.90 13.80 15.00 17.30
Net interest margin 5.18 5.73 6.21 5.55
Efficiency ratio 94.01 85.29 71.88 67.89
Return on assets 0.27 0.71 1.17 1.17
Return on stockholders' equity 2.75 6.54 9.78 10.57
Selected Period-End Balances:
Assets $173,636 $169,843 $140,229 $133,900
Gross Loans 117,198 123,734 103,951 85,404
Deposits 149,036 147,067 119,495 114,588
Shareholders' equity 16,670 16,822 15,894 14,698
Sources: Company filings and quarterly press releases, as reported.
Dollars in thousands, except per share figures.
Data excludes non-recurring items.
</TABLE>
