UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended Commission File Number: 0-13273
---------
June 30, 2000
F & M BANK CORP.
Virginia 54-1280811
------------------------------------ ---------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Drawer F
Timberville, Virginia 22853
(540) 896-8941
--------------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirement for
the past 90 days. Yes ..X. No ....
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at June 30, 2000
------------------------------------ ----------------------------
Common Stock, par value - $5 2,445,952 shares
<PAGE>1
F & M BANK CORP.
INDEX
Page
PART I FINANCIAL INFORMATION 2
Item 1. Financial Statements
Consolidated Statements of Income - Six Months
Ended June 30, 2000 and 1999 2
Consolidated Statements of Income - Three Months
Ended June 30, 2000 and 1999 3
Consolidated Balance Sheets - June 30, 2000 and
December 31, 1999 4
Consolidated Statements of Cash Flows - Six Months
Ended June 30, 2000 and 1999 5
Consolidated Statements of Changes in Stockholders'
Equity - Six Months Ended June 30, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II OTHER INFORMATION 16
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibit and Reports on Form 8K 16
SIGNATURES 18
<PAGE> 2
Part I Financial Information
Item 1 Financial Statements
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars)
Six Months Ended
June 30,
2000 1999
---------- -------
Interest Income
Interest and fees on loans $ 6,282 $ 5,784
Interest on federal funds sold 17 78
Interest on interest bearing deposits 28 19
Interest and dividends on investment securities 1,253 1,212
---------- ---------
Total Interest Income 7,580 7,093
---------- ---------
Interest Expense
Interest on demand accounts 238 231
Interest on savings deposits 485 476
Interest on time deposits 2,032 1,813
---------- ---------
Total interest on deposits 2,755 2,520
Interest on short-term debt 214 145
Interest on long-term debt 480 567
---------- ---------
Total Interest Expense 3,449 3,232
---------- ---------
Net Interest Income 4,131 3,861
Provision for Loan Losses 59 25
---------- ---------
Net Interest Income after Provision for Loan
Losses 4,072 3,836
Noninterest Income
Service charges 267 220
Other 358 143
Security gains 771 845
---------- ---------
Total Noninterest Income 1,396 1,208
---------- ---------
Noninterest Expense
Salaries 1,071 951
Employee benefits 337 317
Occupancy expense 100 84
Equipment expense 140 121
Other 652 566
---------- ---------
Total Noninterest Expense 2,300 2,039
---------- ---------
Income before Income Taxes 3,168 3,005
Provision for Income Taxes 949 955
---------- ---------
Net Income $ 2,219 $ 2,050
========== =========
Per Share Data
Net Income $ .90 $ .83
Cash Dividends $ .29 $ .25
Equivalent Shares Outstanding 2,453,618 2,454,490
========== =========
The accompanying notes are an integral part of these statements.
<PAGE> 3
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars Except Per Share Amounts)
Three Months Ended
June 30,
2000 1999
---------- -------
Interest Income
Interest and fees on loans $ 3,193 $ 2,897
Interest on federal funds sold 1 40
Interest on interest bearing deposits 14 9
Interest and dividends on investment securities 649 614
---------- ---------
Total Interest Income 3,857 3,560
---------- ---------
Interest Expense
Interest on demand deposits 118 117
Interest on savings accounts 237 245
Interest on time deposits 1,055 886
---------- ---------
Total interest on deposits 1,410 1,248
Interest on short-term debt 129 76
Interest on long-term debt 235 279
---------- ---------
Total Interest Expense 1,774 1,603
---------- ---------
Net Interest Income 2,083 1,957
Provision for Loan Losses 30 15
---------- ---------
Net Interest Income after Provision for
Loan Losses 2,053 1,942
Noninterest Income
Service charges 141 118
Other 225 61
Security gains 277
---------- ---------
Total Noninterest Income 366 456
---------- ---------
Noninterest Expense
Salaries 534 491
Employee benefits 163 157
Occupancy expense 51 45
Equipment expense 65 60
Other 351 313
---------- ---------
Total Noninterest Expense 1,164 1,066
---------- ---------
Income before Income Taxes 1,255 1,332
Provision for Income Tax 342 415
---------- ---------
Net Income $ 913 $ 917
========== =========
Per Share Data
Net Income $ .37 $ .37
========== =========
Cash Dividends $ .15 $ .13
========== =========
Equivalent Shares Outstanding 2,451,937 2,454,143
========== =========
The accompanying notes are an integral part of these statements.
<PAGE> 4
F & M BANK CORP.
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
June 30, December 31,
ASSETS 2000 1999
---------- -------
Cash and due from banks $ 3,917 $ 4,799
Interest bearing deposits in banks 808 462
Securities held to maturity (note 2) 4,257 4,330
Securities available for sale (note 2) 38,707 36,169
Other investments 3,836 3,923
Loans, net of unearned discount (note 3) 147,090 140,318
Less allowance for loan losses (note 4) (1,136) (1,090)
-------- --------
Net Loans 145,954 139,228
Bank premises and equipment 3,254 3,158
Other real estate 426 426
Interest receivable 1,464 1,373
Other assets 1,716 1,470
------- -------
Total Assets $204,339 $195,338
======= =======
LIABILITIES
Deposits
Noninterest bearing demand $ 17,692 $ 17,193
Interest bearing
Demand 20,396 21,149
Savings deposits 28,553 29,566
Time deposits 81,009 71,599
------- -------
Total Deposits 147,650 139,507
Short-term debt 9,308 7,720
Long-term debt 16,967 18,548
Accrued expenses 4,518 4,277
------- -------
Total Liabilities 178,443 170,052
------- -------
STOCKHOLDERS' EQUITY
Common stock $5 par value, 2,445,952 and
2,455,962 shares issued and outstanding in
2000 and 1999, respectively 12,230 12,280
Surplus 697 868
Retained earnings 13,095 11,587
Accumulated other comprehensive income (loss) (126) 551
-------- -------
Total Stockholders' Equity 25,896 25,286
------- -------
Total Liabilities and Stockholders' Equity $204,339 $195,338
======= =======
The accompanying notes are an integral part of these statements.
<PAGE> 5
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
Six Months Ended
June 30,
2000 1999
---------- -------
Cash Flows from Operating Activities:
Net income $ 2,219 $ 2,050
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 129 93
Amortization of security premiums 15 122
Gain on security transactions (771) (845)
Provision for loan losses 59 25
Increase in interest receivable (91) (14)
Increase in other assets (179) (174)
Increase in accrued expenses 588 2,100
Losses on limited partnership investments 94 60
------- -------
Total Adjustments (156) 1,367
-------- -------
Net Cash Provided by Operating Activities 2,063 3,417
------- -------
Cash Flows from Investing Activities:
Proceeds from sales of investments available
for sale 1,685 2,032
Proceeds from maturity of investments available
for sale 2,390 8,008
Proceeds from maturity of investments held to
maturity 2,844
Purchase of investments available for sale (6,899) (14,259)
Purchase of investments held to maturity (7) (750)
Net decrease in federal funds sold 2,436
Net increase in loans (6,787) (1,032)
Purchase of property and equipment (303) (661)
Net decrease (increase) in interest bearing
bank deposits (346) 803
Sale of other real estate 79
------- -------
Net Cash Used in Investing Activities (10,188) (579)
-------- -------
Cash Flows from Financing Activities:
Net increase (decrease) in demand and
savings deposits (1,267) 2,524
Net increase (decrease) in time deposits 9,410 (2,757)
Net increase (decrease) in short-term debt 1,588 (776)
Repurchase of common stock (221) (40)
Repayment of long-term debt (1,581) (1,725)
Payment of dividends (686) (589)
-------- -------
Net Cash Provided by (Used in) Financing Activities 7,243 (3,363)
------- --------
Net Decrease in Cash and Cash Equivalents (882) (525)
Cash and Cash Equivalents, Beginning of Period 4,799 4,198
------- -------
Cash and Cash Equivalents, End of Period $ 3,917 $ 3,673
======= =======
Supplemental Disclosure
Cash paid for:
Interest expense $ 3,403 $ 3,250
Income taxes 785 740
The accompanying notes are an integral part of these statements.
<PAGE> 6
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands of Dollars)
Six Months Ended
June 30,
2000 1999
---------- -------
Balance, beginning of period $ 25,286 $ 24,078
Comprehensive Income:
Net income 2,219 2,050
Net change in unrealized appreciation on securities
available for sale, net of taxes (677) (735)
-------- -------
Total comprehensive income 1,542 1,315
Repurchase of common stock (221) (40)
Dividends declared (711) (614)
-------- -------
Balance, end of period $ 25,896 $ 24,739
======= =======
The accompanying notes are an integral part of these statements.
<PAGE> 7
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ACCOUNTING PRINCIPLES:
The consolidated financial statements conform to generally accepted
accounting principles and to general industry practices. In the
opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial
position as of June 30, 2000 and the results of operations for the
six-month and three month periods ended June 30, 2000 and June 30,
1999. The notes included herein should be read in conjunction with the
notes to financial statements included in the 1999 annual report to
stockholders of the F & M Bank Corp.
The Company does not expect the anticipated adoption of any newly
issued accounting standards to have a material impact on future
operations or financial position.
NOTE 2 INVESTMENT SECURITIES:
The amounts at which investment securities are carried in the
consolidated balance sheets and their approximate market values at
June 30, 2000 and December 31, 1999 follows:
2000 1999
-------------------- ------------------
Carrying Market Carrying Market
Value Value Value Value
Securities Held to Maturity
U. S. Treasury and
Agency obligations $ 2,464 $ 2,444 $ 2,469 $ 2,444
State and municipal
Other securities 1,778 1,711 1,781 1,717
Mortgaged-backed
securities 15 14 80 79
------- ------- ------- -------
Total $ 4,257 $ 4,169 $ 4,330 $ 4,240
======= ======= ======= =======
2000 1999
----------------- --------------------
Market Market
Value Cost Value Cost
Securities Available for Sale
U. S. Treasury and
Agency obligations $ 15,766 $ 16,061 $ 13,914 $ 14,274
Equity securities 11,492 11,106 12,339 10,811
Mortgage-backed
securities 2,190 2,219 2,571 2,584
Other securities 9,259 9,512 7,345 7,580
------- ------- ------- -------
Total $ 38,707 $ 38,898 $ 36,169 $ 35,249
======= ======= ======= =======
<PAGE> 8
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 LOANS:
Loans outstanding are summarized as follows:
June 30, December 31,
2000 1999
-------- -------
Real Estate
Construction $ 5,512 $ 5,481
Mortgage 89,353 84,019
Commercial and agricultural 31,728 31,686
Installment and consumer demand notes 19,405 18,082
Credit cards 1,011 1,016
Other 81 34
------ -------
Total $147,090 $140,318
======= =======
NOTE 4 ALLOWANCE FOR LOAN LOSSES:
A summary of transactions in the allowance for loan losses for the
periods ended June 30, 2000 and 1999 follows:
Six Months Ended Three Months Ended
June 30, June 30,
2000 1999 2000 1999
-------- -------- -------- ------
Balance, beginning of period $1,090 $ 1,162 $1,127 $ 1,153
Provisions charged to operating
expenses 59 25 30 15
Net (charge offs) recoveries
Loan recoveries 21 26 6 9
Loan charge-offs (34) (133) (27) (97)
------ ------ ------ ------
Total Net Charge-offs* (13) (107) (21) (88)
------ ------ ------ ------
Balance, End of Period $1,136 $ 1,080 $1,136 $ 1,080
===== ====== ===== ======
* Components of net charge-offs:
Real estate - Mortgages $ (2) $ (2) $ (2) $ (2)
Commercial (2) (49) (3) (49)
Installment (9) (56) (16) (37)
------ ------ ------ ------
Total $ (13) $ (107) $ (21) $ (88)
====== ====== ====== ======
<PAGE> 9
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
The financial condition of F & M Bank Corp. remained strong throughout the
first six months of 2000. On an annualized basis, loans and deposits grew at a
rate of 9.65 and 11.67%, respectively. Net income for the first six months of
2000 increased $169,000 or 8.24%. Capital increased 2.41% due to the retention
of earnings, reduced by regular dividends of $711,000 and a $677,000 decrease in
unrealized gains on securities available for sale.
Results of Operations - Six Months Ending June 30, 2000
The dollar amount of the tax equivalent net-interest-margin increased
$270,000 or 6.81% compared to the same period in 1999. Yields on earning assets
increased twenty-one basis points, while the cost of funds increased eight basis
points. The increase in the yield on earning assets was primarily the result of
increased returns on investment. Loan rates were virtually flat and are
reflective of the strong competition for loans within the local market. The
increase in the cost of funds is a result of increases in the volume of short
term debt and higher rates paid for this type of debt. A schedule of the net
interest margin for 2000 and 1999 is shown on page 15 as Table 1.
Noninterest income increased $116,000 in the first six months of 2000. This
is in spite of a $74,000 decrease in gains realized on securities transactions.
Other noninterest income increased $190,000 or 52.34% in 2000 and was the result
of increases in income from deposit account service charges, increased revenue
from sales of insurance products, and increased returns on investments in low
income housing projects. These returns on low income housing projects were the
result of rehabilitation tax credits on historic properties which were
recognized as income in the second quarter, and are not expected to be recurring
items in future years.
Noninterest expense increased 12.80% in 2000. The principal reason for this
was a 11.04% increase in salaries and employee benefits expenses. These
increases can be attributed to increases in base salaries, employee benefits and
increased accruals for bonuses attributable to a new incentive program beginning
in 2000. Other noninterest expenses increased 15.69% or $121,000. Areas
affecting this increase include depreciation attributable to the new operations
center, accruals for year-end contributions and higher professional fees.
Result of Operations - Quarter Ending June 30, 2000
Net income for the quarter ending June 30, 2000 decreased $4,000 or .44%,
due to a decline in securities gains (net of income taxes) of $172,000 in 1999
compared to none in the current year. Net interest income increased $171,000 due
mainly to increases in the level of earning assets. Noninterest income decreased
during 2000 due to decreased securities gains compared to 1999. Although the
Company's overhead costs increased due to the factors noted above, the level of
increase slowed from 16.75% in the first quarter to 9.19% in the second quarter.
This decrease is primarily the result of cost savings achieved following
enactment of operating changes subsequent to the completion of an efficiency
study.
Financial Condition
Securities
The Company's securities portfolio is held to assist the Company in
liquidity and asset liability management. The securities portfolio consists of
investment securities (commonly referred to as "securities held to maturity")
and securities available for sale. Securities are classified as investment
securities when management has the intent and ability to hold the securities to
maturity. Investment securities are carried at amortized cost. Securities
available for sale include securities that may be sold in response to general
market fluctuations, general liquidity needs and other similar factors.
<PAGE> 10
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Securities (Continued)
Securities available for sale are recorded at market value. Unrealized
holding gains and losses on available for sale securities are excluded from
earnings and reported (net of deferred income taxes) as a separate component of
shareholders' equity. As of June 30, 2000, the amortized cost of all
securities available for sale exceeded their market value by $191,000 ($126,000
after the consideration of income taxes). This decrease is primarily the
result of unrecognized losses in the value of the Bank's bond portfolio.
Management has traditionally held debt securities (regardless of
classification) until maturity and thus it does not expect these fluctuations
in value to have a direct impact on earnings.
Investments in securities increased $2,378,000 (5.35%) in the first six
months of 2000. The Bank has invested in relatively short-term maturities in its
bond portfolio due to uncertainty in the direction of rates. This philosophy
allows for greater flexibility in an environment of rapidly changing rates and
has served the Company well over the years. Recent purchases of debt securities
have been in the four to five year maturity range at rates significantly above
the average rate of the entire securities portfolio. Of the investments in
securities available for sale, 30% are invested in equity securities, most of
which are dividend producing and subject to the corporate dividend exclusion for
taxation purposes. The Company believes these investments render adequate
returns and have resulted in significant increases in value.
Loan Portfolio
The Company operates in an agriculturally dominated area, which includes the
counties of Rockingham, Page and Shenandoah in the western portion of Virginia.
The Company does not make a significant number of loans to borrowers outside its
primary service area. The Company is very active in local residential
construction mortgages. Commercial lending includes loans to small and medium
sized businesses within its service area.
An inherent risk in the lending of money is that the borrower will not be
able to repay the loan under the terms of the original agreement. The allowance
for loan losses (see subsequent section) provides for this risk and is reviewed
periodically for adequacy. The risk associated with real estate and installment
notes to individuals is based upon employment, and the local and national
economies. All of these affect the ability of borrowers to repay indebtedness.
The risk associated with commercial lending is substantially based on the
strength of the local and national economies.
While lending is geographically diversified within the service area, the
Company does have some concentration in agricultural loans (primarily poultry
farming). In addition to direct agricultural loans, a significant percentage of
residential real estate loans and consumer installment loans are made to
borrowers employed in the agricultural sector of the economy. The Company
continues to monitor its past due loans closely and has not experienced higher
delinquencies in this sector compared to the overall loan portfolio.
The first six months of 2000 resulted in an increase of $6,772,000 in the
loan portfolio. Most of the increase was in residential mortgages. Although
competition from other local banks remains a concern, an increase in secondary
market loan rates has enabled the Bank to be more competitive with its three and
five year adjustable rate mortgage loans.
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Loan Portfolio (Continued)
Non-performing loans include non-accrual loans, loans 90 days or more past
due and restructured loans. Non-accrual loans are loans on which interest
accruals have been suspended or discontinued permanently. Restructured loans are
loans on which the original interest rate or repayment terms have changed due to
financial hardship. Non-performing loans totaled $1,608,000 at June 30, 2000
compared to $1,917,000 at December 31, 1999. Approximately 75% of these
nonperforming loans are secured by real estate. Although the potential exists
for some loan losses, management believes the bank is generally well secured and
continues to actively work with these customers to effect payment. As of June
30, 2000, the Company did not hold any real estate that was acquired through
foreclosure.
Allowance for Loan Losses
Management evaluates the loan portfolio in light of national and local
economic trends, changes in the nature and value of the portfolio and industry
standards. Specific factors considered by management in determining the adequacy
of the level of the allowance include internally generated loan review reports,
past due reports, historical loan loss experience and individual borrowers
financial health. This review also considers concentrations of loans in terms of
geography, business type and level of risk. Management evaluates nonperforming
loans relative to their collateral value and makes the appropriate adjustments
to the allowance for loan losses when needed.
The allowance for credit losses of $1,136,000 at June 30, 2000 was up
$46,000 from its level at December 31, 1999. The allowance was equal to .77% and
.78% of total loans at June 30, 2000 and December 31, 1999, respectively.
The provision for loan losses and changes in the allowance for loan losses
are shown in note 4, page 8.
Deposits and Long-Term Debt
The Company's main source of funds is customer deposits received from
individuals, governmental entities and businesses located within the Company's
service area. Deposit accounts include demand deposits, savings, money market
and certificates of deposit. The Company experienced a $8,143,000 increase in
deposits in the first six months of 2000. All the deposit growth was in time
deposits. Much of this increase resulted from proceeds from the buyout of a
large, local agricultural cooperative which were deposited in our institution.
The Company offers repurchase agreements (a/k/a "repos") to customers
desiring such investments. Repos are designed for companies and individuals
desiring a higher rate of return than traditional deposit accounts and who will
accept the risk of not being covered by FDIC insurance.
Borrowings from the Federal Home Loan Bank of Atlanta (FHLB) continue to be
an important source of funding real estate loan growth in the area. The
Company's subsidiary bank borrows funds on a fixed rate basis. These borrowings
are used to fund either a fifteen-year fixed rate loan or a twenty-year loan, of
which the first ten years have a fixed rate. This program allows the bank to
<PAGE> 12
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Deposits and Long-Term Debt (Continued)
match the maturity of its fixed rate real estate portfolio with the maturity
of its debt and thus reduce its exposure to interest rate changes. Due to
higher rates charged by the FHLB and funds generated from increased deposits,
no additional funds have been borrowed in 2000. Normal repayments have totaled
$1,581,000 so far this year.
Capital
The Company seeks to maintain a strong capital position to expand
facilities, promote public confidence, support current operations and grow at a
manageable level. As of June 30, 2000, the Company's total risk based capital
and total capital to total assets ratios were 18.73% and 12.67%, respectively.
Both ratios are in excess of regulatory minimums and exceed the ratios of the
Company's peers. Earnings have been sufficient to allow an increase in regular
quarterly dividends in 2000 over those in 1999.
Liquidity
Liquidity is the ability to meet present and future financial obligations
through either the sale or maturity of existing assets or the acquisition of
additional funds through liability management. Liquid assets include cash,
interest-bearing deposits with banks, investments and loans maturing within one
year. The Company's ability to obtain deposits and purchase funds at favorable
rates determines its liquidity exposure. As a result of the Company's management
of liquid assets and the ability to generate liquidity through liability
funding, management believes that the Company maintains overall liquidity
sufficient to satisfy its depositors' requirements and meet its customers'
credit needs.
Additional sources of liquidity available to the Company include, but are
not limited to, loan repayments, the ability to obtain deposits through the
adjustment of interest rates and the purchase of federal funds. To further meet
its liquidity needs, the Company also maintains lines of credit with
correspondent financial institutions. The Company's subsidiary bank also has a
line of credit with the Federal Home Loan Bank of Atlanta that allows for
secured borrowings. In the past, growth in deposits and proceeds from the
maturity of investment securities have been sufficient to fund most of the net
increase in loans and investment securities.
Interest Rate Sensitivity
Liquidity as of June 20, 2000 remains adequate. The Bank historically has
had a stable core deposit base and, therefore, does not have to rely on volatile
funding sources. Because of the stable core deposit base, changes in interest
rates should not have a significant effect on liquidity. During 2000, the Bank
has used maturing investments and deposit growth to meet its liquidity needs.
The Company monitors its interest rate sensitivity periodically and makes
adjustments as needed. There are no off balance sheet items that will impair
future liquidity. A summary of asset and liability repricing opportunities is
shown on page 16 as Table II.
<PAGE> 13
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Stock Repurchase
On April 20, 2000, the Company announced that the Board of Directors had
authorized the repurchase of up to 50,000 shares of the Company's outstanding
common stock. Repurchases are authorized to be made by the Company from time to
time in the open market or privately negotiated transactions during the
subsequent twelve months as, in the opinion of management, market conditions
warrant. The repurchased shares will be held as unissued stock and will be
available for general corporate purposes. Through the end of the second quarter,
a total of 10,010 shares have been repurchased.
Effect of Newly Issued Accounting Standards
The Company does not believe that any newly issued but as yet unapplied
accounting standards will have a material impact on the Company's financial
position or operations.
Securities and Exchange Commission Web Site
The Securities and Exchange Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission, including F & M Bank
Corp., and the address is (http://www.sec.gov).
<PAGE> 14
TABLE I
F & M BANK CORP.
NET INTEREST MARGIN ANALYSIS
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999
Average Income/ Rates Average Income/ Rates
Balance Expense Balance Expense
<S> <C> <C> <C> <C> <C> <C>
Rate Related Income
Loans 1 $142,813 $ 6,301 8.82% $132,268 $ 5,799 8.84%
Federal funds sold 580 17 5.86% 3,386 78 4.64%
Bank deposits 1,135 28 4.93% 918 19 4.17%
Investments
Taxable 3 31,624 1,011 6.39% 33,556 1,002 5.97%
Partially
taxable 2,3 10,555 326 6.18% 9,342 298 6.38%
------ ---- ----- ----- ----- -----
Total Earning Assets 186,707 7,683 8.23% 179,470 7,196 8.02%
------- ------- ------ ------- ------- -------
Interest Expense
Demand deposits 20,928 238 2.27% 20,890 231 2.21%
Savings 29,526 485 3.29% 29,753 476 3.20%
Time deposits 76,758 2,032 5.29% 68,283 1,813 5.31%
Short-term debt 7,630 214 5.61% 7,117 145 4.07%
Long-term debt 17,613 480 5.45% 20,846 567 5.48%
------ ------- ------ ------- -------
Total Interest Bearing
Liabilities 152,455 3,449 4.52% 146,889 3,232 4.44%
------- ------- ------ ------- ------- -------
Net Interest Margin 1 $ 4,234 $ 3,964
======= =======
Net Yield on Interest
Earning Assets 1 4.54% 4.42%
====== =======
1 Interest income on loans includes loan fees.
2 An incremental tax rate of 34% was used to calculate the tax equivalent
income on nontaxable and partially taxable investments.
3 Average balance information is reflective of historical cost and has
not been adjusted for changes in market value.
</TABLE>
<PAGE> 14 (CONTINUED)
TABLE I (CONTINUED)
F & M BANK CORP.
NET INTEREST MARGIN ANALYSIS
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, 2000 June 30, 1999
Average Income/ Rates Average Income/ Rates
Balance Expense Balance Expense
<S> <C> <C> <C> <C> <C> <C>
Rate Related Income
Loans 1 $145,620 $ 3,202 8.80% $132,636 $ 2,896 8.66%
Federal funds sold 57 1 7.01% 3,524 40 4.50%
Bank deposits 1,021 14 5.48% 885 9 4.04%
Investments
Taxable3 33,088 524 6.33% 33,064 498 6.02%
Partially
taxable 2,3 10,479 167 6.37% 10,198 162 6.35%
------ -------- ------- ------ ------- ------
Total Earning Assets 190,265 3,908 8.22% 180,307 3,605 8.00%
------- ------- ----- ------- ------- ------
Interest Expense
Demand deposits 20,714 118 2.28% 21,282 117 2.18%
Savings 29,144 237 3.25% 31,154 245 3.12%
Time deposits 78,364 1,055 5.39% 66,234 886 5.31%
Short-term debt 8,628 129 5.98% 7,576 76 3.98%
Long-term debt 17,227 235 5.46% 20,388 279 5.47%
------ ------- ------ ------ ------- ------
Total Interest Bearing
Liabilities 154,077 1,774 4.61% 146,634 1,603 4.40%
------- ------- ----- ------- ------- ------
Net Interest Margin 1 $ 2,134 $ 2,002
======= =======
Net Yield on Interest
Earning Assets 1 4.49% 4.44%
====== ======
1 Interest income on loans includes loan fees.
2 An incremental tax rate of 34% was used to calculate the tax equivalent
income on nontaxable and partially taxable investments.
3 Average balance information is reflective of historical cost and has
not been adjusted for changes in market value.
</TABLE>
<PAGE> 15
TABLE II
F & M BANK CORP.
INTEREST SENSITIVITY ANALYSIS
JUNE 30, 2000
(In Thousands of Dollars)
0 - 3 4 - 12 1 - 5 Over 5 Not
Months Months Years Years Classified Total
Uses of Funds
Loans:
Commercial $16,439 $ 3,749 $11,240 $ 300 $ $31,728
Installment 177 949 16,861 1,499 19,486
Real estate 12,745 11,952 53,484 16,684 94,865
Credit cards 1,011 1,011
Interest bearing
bank deposits 808 808
Investment securities 125 2,917 28,319 111 15,328 46,800
------ ------ ------ ------ ------ ------
Total 31,305 19,567 109,904 18,594 15,328 194,698
------ ------ ------- ------ ------ -------
Sources of Funds
Interest bearing
deposits 4,362 10,143 5,891 20,396
Regular savings 5,711 11,421 11,421 28,553
Certificates of
deposit $100,000
and over 2,631 2,972 5,047 10,650
Other certificates of
deposit 21,931 21,704 26,724 70,359
Short-term borrowings 9,308 9,308
Long-term debt 240 2,003 14,724 16,967
------ ------ ------ ------ ----- ------
Total 33,870 34,989 55,338 32,036 156,233
------ ------ ------ ------ ----- -------
Discrete Gap (2,565) (15,422) 54,566 (13,442) 15,328 38,465
Cumulative Gap (2,565) (17,987) 36,579 23,137 38,465
Ratio of Cumulative Gap (1.32)% (9.24)% 18.79% 11.88% 19.76%
to Total Earning Assets
Table II reflects the earlier of the maturity or repricing dates for various
assets and liabilities at June 30, 2000. In preparing the above table no
assumptions are made with respect to loan prepayments or deposit runoffs. Loan
principal payments are included in the earliest period in which the loan matures
or can be repriced. Principal payments on installment loans scheduled prior to
maturity are included in the period of maturity or repricing. Proceeds from the
redemption of investments and deposits are included in the period of maturity.
Estimated maturities of deposits, which have no stated maturity dates, were
derived from guidance contained in FDICIA 305.
<PAGE> 16
Part II Other Information
Item 1. Legal Proceedings - Not Applicable
Item 2. Changes in Securities - Not Applicable
Item 3. Defaults Upon Senior
Securities - Not Applicable
Item 4. Submission of Matters to a Vote
of Security Holders - On April 8, 2000, the stockholders
held their annual meeting. The
following item was approved by the
shareholders by the required majority:
1) Election of the Board of Directors as
proposed in the proxy material without
any additions or exceptions.
Item 5. Other Information - Not Applicable
Item 6. Exhibits and Reports on 8-K
(a)Exhibits
3 i Articles of Incorporation of F & M Bank Corp. are
incorporated by reference to Exhibits to F & M Bank
Corp.'s Form S14 filed February 17, 1984.
3 ii Bylaws of F & M Bank Corp. are incorporated by reference
to Exhibits to F & M Bank Corp.'s Form S14 filed February
17, 1984.
21 Subsidiaries of the small business issuers are incorporated
by reference to Exhibits to F & M Bank Corp.'s 1995 Form
10-KSB filed March 26, 1996.
27 Financial Data Schedule attached.
(b)Reports on Form 8-K
The Company did not file any reports on form 8-K for the quarter
ended June 30, 2000.
<PAGE> 17
EXHIBIT INDEX
Exhibit
Index Page Number
27 Financial Data Schedule for the quarter ending
June 30, 2000 19
<PAGE> 18
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
F & M BANK CORP.
JULIAN D. FISHER
Julian D. Fisher
President and Chief Executive Officer
NEIL W. HAYSLETT
Neil W. Hayslett
Vice President and Chief
Financial Officer
Date August 10, 2000
-------------------
