UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2005
Commission File No. 0-13273
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F & M BANK CORP.
(Exact name of registrant as specified in its charter)
Virginia 54-1280811
- ------------------------------------- --------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Drawer 1111
Timberville, Virginia 22853
(Address of Principal Executive Offices, Including Zip Code)
(540) 896-8941
--------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirement for the past 90 days. Yes X No
----- -------
Indicate by check mark whether the issuer is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes No X
----- -----
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. As of June 30, 2005, 2,409,801
shares of Common Stock, $5 Par Value
1
F & M BANK CORP.
INDEX
Page
PART I FINANCIAL INFORMATION 2
Item 1. Financial Statements
Consolidated Statements of Income - Three Months
Ended June 30, 2005 and 2004 2
Consolidated Statements of Income - Six Months
Ended June 30, 2005 and 2004 3
Consolidated Balance Sheets - June 30, 2005 and
December 31, 2004 4
Consolidated Statements of Changes in Stockholders'
Equity - Three Months Ended June 30, 2005 and 2004 5
Consolidated Statements of Cash Flows - Three Months
Ended June 30, 2005 and 2004 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
Item 4. Controls and Procedures 21
PART II OTHER INFORMATION 22
Item 1. Legal Proceedings 22
Item 2. Changes in Securities 22
Item 3. Defaults upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibit and Reports on Form 8-K 22
SIGNATURES 23
2
Part I Financial Information Item 1 Financial Statements
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars)
Three Months Ended
June 30,
2005 2004
------- -------
Interest Income
Interest and fees on loans held for investment $ 4,287 $ 3,560
Interest and fees on loans held for sale 216
Interest on federal funds sold 8 8
Interest on interest bearing deposits 18 42
Dividends on equity securities 117 117
Interest on debt securities 177 291
------- ------
Total Interest Income 4,823 4,018
------- ------
Interest Expense
Interest on demand accounts 55 52
Interest on savings deposits 131 111
Interest on time deposits over $100,000 222 173
Interest on all other time deposits 764 646
------- ------
Total interest on deposits 1,172 982
Interest on short-term debt 217 28
Interest on long-term debt 304 236
------- ------
Total Interest Expense 1,693 1,246
------- ------
Net Interest Income 3,130 2,772
Provision for Loan Losses 90 60
------- ------
Net Interest Income after Provision for Loan Losses 3,040 2,712
------- ------
Noninterest Income
Service charges 291 243
Insurance and other commissions 75 83
Other 243 183
Income on bank owned life insurance 68 63
Security gains (losses) 23 146
------- ------
Total Noninterest Income 700 718
------- ------
Noninterest Expense
Salaries 870 795
Employee benefits 316 296
Occupancy expense 107 102
Equipment expense 116 108
Intangibles amortization 69 69
Other 620 567
------- ------
Total Noninterest Expense 2,098 1,937
------- ------
Income before Income Taxes 1,642 1,493
Income Taxes 495 451
------- ------
Net Income $ 1,147 $ 1,042
======= ======
Per Share Data
Net Income $ .48 $ .43
======= ======
Cash Dividends $ .19 $ .18
======= ======
Equivalent Shares Outstanding 2,410,053 2,416,678
========= =========
The accompanying notes are an integral part of these statements.
3
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars)
Six Months Ended
June 30,
2005 2004
------- --------
Interest Income
Interest and fees on loans held for investment $ 8,354 $ 7,020
Interest and fees on loans held for sale 348
Interest on federal funds sold 24 18
Interest on interest bearing deposits 45 93
Dividends on equity securities 218 226
Interest on debt securities 360 632
------- ------
Total Interest Income 9,349 7,989
------- ------
Interest Expense
Interest on demand accounts 99 103
Interest on savings deposits 241 219
Interest on time deposits over $100,000 430 338
Interest on all other time deposits 1,445 1,319
------- ------
Total interest on deposits 2,215 1,979
Interest on short-term debt 347 37
Interest on long-term debt 618 490
------- ------
Total Interest Expense 3,180 2,506
------- ------
Net Interest Income 6,169 5,483
Provision for Loan Losses 180 120
------- ------
Net Interest Income after Provision for Loan Losses 5,989 5,363
------- ------
Noninterest Income
Service charges 496 467
Insurance and other commissions 130 166
Other 563 347
Income on bank owned life insurance 130 126
Security gains (losses) 23 321
------- ------
Total Noninterest Income 1,342 1,427
------- ------
Noninterest Expense
Salaries 1,700 1,602
Employee benefits 620 593
Occupancy expense 209 197
Equipment expense 222 213
Intangibles amortization 138 138
Other 1,250 1,082
------- -------
Total Noninterest Expense 4,139 3,825
------- ------
Income before Income Taxes 3,192 2,965
Income Taxes 878 890
------- ------
Net Income $ 2,314 $ 2,075
======= =======
Per Share Data
Net Income $ .96 $ .86
======= ======
Cash Dividends $ .38 $ .36
======= ======
Equivalent Shares Outstanding 2,410,388 2,417,925
========= =========
The accompanying notes are an integral part of these statements.
4
F & M BANK CORP.
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
June 30, December 31,
ASSETS 2005 2004
-------- ---------
Cash and due from banks $ 6,729 $ 7,938
Interest bearing deposits in banks 3,257 9,231
Federal funds sold 1,017
Securities held to maturity (note 2) 110 110
Securities available for sale (note 2) 29,614 30,756
Other investments 8,443 7,934
Loans held for sale 41,719 47,150
Loans held for investment (note 3) 270,404 248,972
Less allowance for loan losses (note 4) (1,659) (1,511)
-------- --------
Net Loans Held for Investment 268,745 247,461
Bank premises and equipment 4,861 4,824
Interest receivable 1,253 1,231
Goodwill 2,639 2,639
Core deposit intangible 1,564 1,702
Bank owned life insurance (note 5) 5,213 5,083
Other assets 2,670 2,881
-------- --------
Total Assets $ 376,817 $ 369,957
======== ========
LIABILITIES
Deposits
Noninterest bearing demand $ 41,669 $ 40,694
Interest bearing
Demand 36,921 37,425
Savings deposits 47,564 48,883
Time deposits over $100,000 30,578 24,661
Time deposits 100,490 94,842
-------- --------
Total Deposits 257,222 246,505
Short-term debt 50,944 57,362
Long-term debt 27,224 26,462
Accrued expenses 6,035 5,368
-------- --------
Total Liabilities 341,425 335,697
-------- --------
STOCKHOLDERS' EQUITY
Common stock $5 par value, 2,409,201 and
2,411,541 shares
issued and outstanding, respectively 12,049 12,058
Surplus 90 128
Retained earnings 23,672 22,273
Accumulated other comprehensive income (419) (199)
-------- --------
Total Stockholders' Equity 35,392 34,260
-------- --------
Total Liabilities and Stockholders' Equity $ 376,817 $ 369,957
======== ========
The accompanying notes are an integral part of these statements.
5
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands of Dollars)
Six Months Ended
June 30,
2005 2004
------ -------
Balance, beginning of period $ 34,260 $ 32,319
Comprehensive Income:
Net income for period 2,314 2,075
Net change in unrealized appreciation
(depreciation) on
investment securities available for sale,
net of taxes (220) (583)
-------- --------
Total comprehensive income 2,094 1,492
Repurchase of common stock (120) (133)
Common stock sold to ESOP 73
Dividends declared (915) (872)
-------- --------
Balance, end of period $ 35,392 $ 32,806
======== ========
The accompanying notes are an integral part of these statements.
6
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
Six Months Ended
June 30,
2005 2004
------ -------
Cash Flows from Operating Activities:
Net income $ 2,314 $ 2,075
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 242 207
Amortization of security premiums 70 214
Net (increase) decrease in loans held for sale 5,431 821
Provision for loan losses 180 120
Intangibles amortization 138 138
(Increase)decrease in interest receivable (22) 178
Decrease in other assets 211 341
Increase(decrease) in accrued expenses 767 108
(Gain)Loss on security transactions (23) (321)
Amortization of limited partnership investments 137 122
Income from life insurance investment (130) (126)
------- -------
Net adjustments 7,001 1,802
------- -------
Net Cash Provided by Operating Activities 9,315 3,877
------- -------
Cash Flows from Investing Activities:
Purchase of investments available for sale (12,817) (18,054)
Proceeds from sales of investments
available for sale 807 10,330
Proceeds from maturity of investments
available for sale 12,138 8,906
Net increase in loans (21,464) (15,724)
Purchase of property and equipment (278) (145)
Change in federal funds sold 1,017 5,035
Net (increase) decrease in interest
bearing bank deposits 5,974 (1,344)
------- -------
Net Cash Used in Investing Activities (14,623) (10,996)
------- -------
Cash Flows from Financing Activities:
Net increase (decrease) in demand and savings
deposits (847) 7,291
Net increase (decrease) in time deposits 11,563 (3,658)
Net increase (decrease) in short-term debt (7,975) 5,137
Cash dividends paid (915) (872)
Repurchases of common stock (120) (133)
Change in federal funds purchased 1,557
Proceeds from long-term debt 5,000 4,000
Proceeds from issuance of common stock 73
Repayment of long-term debt (4,237) (3,764)
------- -------
Net Cash Provided by Financing Activities 4,099 8,001
------- -------
Net Increase (Decrease) in Cash and Cash Equivalents (1,209) 882
Cash and Cash Equivalents, Beginning of Period 7,938 5,665
------- -------
Cash and Cash Equivalents, End of Period $ 6,729 $ 6,547
======= =======
Supplemental Disclosure
Cash paid for:
Interest expense $ 3,095 $ 2,553
Income taxes $ 595 700
The accompanying notes are an integral part of these statements.
7
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ACCOUNTING PRINCIPLES:
The consolidated financial statements include the accounts of F & M
Bank Corp. and its subsidiaries (the "Company"). Significant
intercompany accounts and transactions have been eliminated in
consolidation.
The consolidated financial statements conform to 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, 2005 and the results of operations for the six
and three-month periods ended June 30, 2005 and June 30, 2004.
These unaudited consolidated financial statements and notes should
be read in conjunction with the audited consolidated financial
statements and notes included in the Company's annual report on Form
10-K for the year ended December 31, 2004.
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, 2005 and December 31, 2004 follows:
2005 2004
------------------------ ------------------------
Carrying Market Carrying Market
Value Value Value Value
Securities Held to Maturity
U. S. Treasury and
Agency obligations $ 110 $ 110 $ 110 $ 110
------ ------ ------- -------
Total $ 110 $ 110 $ 110 $ 110
======= ======= ======= =======
2005 2004
------------------------ -----------------------
Market Market
Value Cost Value Cost
Securities Available for Sale
U. S. Treasury and
Agency obligations $ 15,888 $ 16,046 $ 16,011 $ 16,086
Equity securities 6,571 6,849 6,485 6,619
Mortgage-backed
securities 4,390 4,462 5,425 5,472
Corporate bonds 2,400 2,500 2,466 2,500
Municipals 365 375 369 375
------- ------- ------- ------
Total $ 29,614 $ 30,232 $30,756 $31,052
======= ======= ====== ======
8
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 LOANS:
Loans outstanding at June 30, 2005 and December 31, 2004 are
summarized as follows:
2005 2004
Real Estate
Construction $26,569 $ 17,365
Mortgage 148,408 147,281
Commercial and agricultural 74,091 62,786
Consumer 19,559 20,006
Credit cards 1,403 1,478
Other 374 56
------ ------
Total $270,404 $248,972
======= ========
NOTE 4 ALLOWANCE FOR LOAN LOSSES:
A summary of transactions in the allowance for loan losses for the
three months ended June 30, 2005 and 2004 follows:
Six Months Ended Three Months Ended
June 30, June 30,
2005 2004 2005 2004
----- ----- ------ -------
Balance, beginning of period $1,511 $ 1,484 $1,566 $ 1,517
Provisions charged to operating
expenses 180 120 90 60
Net (charge offs) recoveries:
Loan recoveries 36 49 19 9
Loan charge-offs (68) (141) (16) (74)
----- ------ ----- ------
Total Net (Charge-offs)
Recoveries * (32) (92) 3 (65)
----- ----- ----- ------
Balance, End of Period $1,659 $ 1,512 $1,659 $ 1,512
===== ====== ===== ======
* Components of net (charge-offs) recoveries:
Real estate - Residential $ $ (7) $ $ (7)
Commercial 5 (57) 5 (9)
Installment loans to
individuals (37) (28) (2) (49)
----- ----- ----- ------
Total $ (32) $ (92) $ 3 $ (65)
===== ====== ===== ======
9
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 BANK OWNED LIFE INSURANCE (BOLI)
The Bank currently offers a variety of benefit plans to all full
time employees. While the costs of these plans are generally tax
deductible to the Bank, the cost has been escalating greatly in recent
years. In order to attract and retain good employees, the Bank has
determined that additional benefits are necessary.
To help offset the growth in these costs, the Bank decided to enter
into the BOLI contracts. Dividends received on these policies are
tax-deferred and the death benefits under the policies are tax exempt.
Rates of return on a tax-equivalent basis are very favorable when
compared to other long-term assets which the Bank could obtain. The
Bank is both owner and beneficiary of the policies.
10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
F & M Bank Corp. (Company) is a one-bank holding company organized under
Virginia law which provides financial services through its wholly-owned
subsidiaries Farmers & Merchants Bank (Bank) and TEB Life Insurance Company
(TEB). Farmers & Merchants Financial Services (FMFS) is a wholly-owned
subsidiary of the Bank.
The Bank is a full service commercial bank offering a wide range of banking
and financial services through its seven branch offices. TEB reinsures credit
life and accident and health insurance sold by the Bank in connection with its
lending activities. FMFS provides title insurance, brokerage services and
property/casualty insurance to customers of the Bank.
The Company's primary trade area services customers in Rockingham County,
Shenandoah County, the southern part of Page County and the northern part of
Augusta County.
Management's discussion and analysis is presented to assist the reader in
understanding and evaluating the financial condition and results of operations
of the Company. The analysis focuses on the consolidated financial statements,
footnotes, and other financial data presented. The discussion highlights
material changes from prior reporting periods and any identifiable trends which
may affect the Company. Amounts have been rounded for presentation purposes.
This discussion and analysis should be read in conjunction with the Consolidated
Financial Statements and the Notes to the Consolidated Financial Statements
presented in Item 1, Part 1 of this Form 10-Q.
Forward-Looking Statements
Certain statements in this report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements are statements that include projections,
predictions, expectations or beliefs about future events or results or otherwise
are not statements of historical fact. Such statements are often characterized
by the use of qualified words (and their derivatives) such as "expect,"
"believe," "estimate," "plan," "project," or other statements concerning
opinions or judgment of the Company and its management about future events.
Although the Company believes that its expectations with respect to
certain forward-looking statements are based upon reasonable assumptions within
the bounds of its existing knowledge of its business and operations, there can
be no assurance that actual results, performance or achievements of the Company
will not differ materially from any future results, performance or achievements
expressed or implied by such forward-looking statements. Actual future results
and trends may differ materially from historical results or those anticipated
depending on a variety of factors, including, but not limited to, the effects of
and changes in: general economic conditions, the interest rate environment,
legislative and regulatory requirements, competitive pressures, new products and
delivery systems, inflation, changes in the stock and bond markets, technology,
and consumer spending and savings habits.
We do not update any forward-looking statements that may be made from time
to time by or on behalf of the Company.
11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Critical Accounting Policies
General
The Company's financial statements are prepared in accordance with
accounting principles generally accepted in the United States ("GAAP"). The
financial information contained within the statements is, to a significant
extent, financial information that is based on measures of the financial effects
of transactions and events that have already occurred. A variety of factors
could affect the ultimate value that is obtained either when earning income,
recognizing an expense, recovering an asset or relieving a liability. The
Company uses historical loss factors as one factor in determining the inherent
loss that may be present in its loan portfolio. Actual losses could differ
significantly from the historical factors that are used. The fair value of the
investment portfolio is based on period end valuations but changes daily with
the market. In addition, GAAP itself may change from one previously acceptable
method to another method. Although the economics of these transactions would be
the same, the timing of events that would impact these transactions could
change.
Allowance for Loan Losses
The allowance for loan losses is an estimate of the losses that may be
sustained in the loan portfolio. The allowance is based on two basic principles
of accounting: (i) Statement of Financial Accounting Standard ("SFAS") No. 5,
Accounting for Contingencies, which requires that losses be accrued when they
are probable of occurring and estimable and (ii) SFAS No. 114, Accounting by
Creditors for Impairment of a Loan, which requires that losses be accrued based
on the differences between the value of collateral, present value of future cash
flows or values that are observable in the secondary market and the loan
balance.
Goodwill and Intangibles
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 141, Business Combinations and SFAS No.
142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. Additionally, it further clarifies the criteria for the
initial recognition and measurement of intangible assets separate from goodwill.
SFAS No. 142 is effective for fiscal years beginning after December 15, 2001 and
prescribes the accounting for goodwill and intangible assets subsequent to
initial recognition. The provisions of SFAS No. 142 discontinue the amortization
of goodwill and intangible assets with indefinite lives. Instead, these assets
will be subject to at least an annual impairment review and more frequently if
certain impairment indicators are in evidence. SFAS No. 142 also requires that
reporting units be identified for the purpose of assessing potential future
impairments of goodwill.
Core deposit intangibles are amortized on a straight-line basis over ten
years. The Company adopted SFAS 147 on January 1, 2002 and determined that the
core deposit intangible will continue to be amortized over the estimated useful
life.
Securities Impairment
The Company evaluates each of its investments in securities, debt and
equity, under guidelines contained in SFAS 115, Accounting for Certain
Investments in Debt and Equity Securities. These guidelines require the Company
to determine whether a decline in value, below original cost, is other than
temporary. In making its determination, management considers current market
conditions, historical trends in the individual securities, and historical
trends in the total market. Expectations are developed regarding potential
returns from dividend reinvestment and price appreciation over a reasonable
holding period (five years).
12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net income in the second quarter 2005 was $1,147,000 or $.48 per share,
compared to $1,042,000 or $.43 per share the second quarter of 2004, an increase
of 10.08%. Core operating earnings, (exclusive of securities gains, net of tax
effect) totaled $1,132,000 in 2005 and $944,000 in 2004, an increase of 19.92%.
For the six months ended June 30, 2005, net income was $2,314,000 or $.96 per
share compared to $2,075,000 in 2004 or $.86 per share. Net interest income
through the end of the second quarter increased 12.51% compared with the prior
year. Noninterest income decreased 5.96% and noninterest expense increased 8.21%
during the same period.
On an annualized basis, return on average assets through the end of the
second quarter 2005 was 1.33% and return on average shareholders' equity was
13.32%. As of June 30, 2005, assets increased 1.85%, deposits increased 4.35%
and loans held for investment increased 8.61% compared to amounts at December
31, 2004. The allowance for loan losses at the end of the second quarter was
$1,659,000 or .61% of loans held for investment while shareholders' equity
totaled $35,392,000. A quarterly dividend of $.19 per share was paid to
shareholders of record.
Results of Operations
Year to Date
The 2005 year to date tax equivalent net interest margin increased
$683,000 or 12.24% compared to the same period in 2004. The yield on earning
assets increased .29%, while the cost of funds increased .26% compared to the
same period of 2004. These increases resulted as maturing assets and liabilities
began to reprice at higher rates.
Following two and a half years of accommodative monetary policy by the
Federal Reserve's Federal Open Market Committee (FOMC); which began in January
2001 the FOMC reversed its monetary policy by stating "With underlying inflation
still expected to be relatively low, the Committee believes that policy
accommodation can be removed at a pace that is likely to be measured." The FOMC
has raised the federal funds target rate from 1.00% to 3.25% in .25% increments
beginning in June 2004 and continuing with each successive meeting, including
June 2005. Although the Interest Sensitivity Analysis on page 19 indicates the
Company is in a liability sensitive position in the one year time horizon,
management anticipates the increase in rates should prove beneficial to the net
interest margin in future periods. A large percentage of rate sensitive
liabilities (checking and savings) do not reprice immediately with changes in
market rates, but are adjusted at the discretion of management based on funding
needs and competitive factors.
A schedule of the net interest margin for 2005 and 2004 is shown on
page 19 as Table 1.
Noninterest income decreased $85,000 in the first six months of 2005.
Exclusive of securities transactions, other noninterest income items increased
$213,000, or 19.26%. Service charges on deposit accounts have increased
following the implementation of an overdraft privilege program which commenced
during the second quarter of 2003. Items contributing to this increase include a
$48,000 increase in overdraft fees following an increase in per item charges, a
$70,000 increase in secondary market loan origination fees and a $103,000
increase in returns on low income housing investments. The returns on these
investments are principally in the form of tax credits and included $93,000
related to the recognition of deferred state tax credits. These credits have
been classified as a return on investment rather than as a reduction of income
tax expense. This was done to reflect the fact that the Company entered into
these investments with the expectation that tax credits would be the primary
source of investment return and to avoid a distortion to income tax expense for
the period.
Noninterest expense increased $314,000 or 8.21% through June 30, 2005. Of
the total, $125,000 (an 5.69% increase) can be attributed to salaries and
employee benefits. This increase includes normal salary increases, related
benefit accruals and increased staffing.
13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Quarter Ending June 30
The Company's net income increased $105,000 to $1.147 million in 2005 as
compared to the second quarter of 2004. After adjusting to exclude securities
transactions, core earnings and earnings per share increased $188,000 or $.08
per share, respectively. Net interest income increased $358,000, while the tax
equivalent net interest margin increased 6 bps to 3.93%. For the quarter,
noninterest income, exclusive of securities transactions, increased
significantly to $677,000 compared to $572,000 in 2004. The increase was
primarily the result of an increase in origination fees generated on mortgage
loans sold on the secondary market and increased overdraft charges. Noninterest
expense increased 8.31%, or $161,000 in 2005. Of this amount, $95,000 related to
increases in salaries and benefits expenses. Total salaries and benefits
increased 8.70%, and include normal increases in base salaries, an increase in
staffing, and increases in the associated benefit accruals.
Financial Condition
Federal Funds Sold and Interest Bearing Bank Deposits
The Company's subsidiary bank invests a portion of its excess liquidity in
either federal funds sold or interest bearing bank deposits. Federal funds sold
offer daily liquidity and pay a market rate of interest that at quarter end was
benchmarked at 3.25% by the Federal Reserve. Actual rates received vary slightly
based upon money supply and demand among banks. Interest bearing bank deposits
are held either in money market accounts or as short-term certificates of
deposits. At quarter end the Bank did not hold any balances in federal funds
sold and balances in interest bearing bank deposits have declined due to
continued strong loan demand.
Securities
The Company's securities portfolio is held to assist the Company in
liquidity and asset liability management. The securities portfolio consists of
securities held to maturity and securities available for sale. Securities are
classified as held to maturity when management has the intent and ability to
hold the securities to maturity. These securities are carried at their 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. 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, 2005, the cost of all securities available for sale exceeded
their market value by $618,000. This includes declines in value in both the
equity securities held by the Company and in the value of government obligations
held by the Bank. Declines in the value of the bond portfolio are the result of
recent changes in short term rates within the market for fixed income
secuirites. Management has traditionally held debt securities (regardless of
classification) until maturity and thus it does not expect the fluctuations in
value of these securities to have a direct impact on earnings.
Investments in debt securities decreased $1,228,000 in the first six months
of 2005; this decrease was the result of pool pay downs on mortgage backed
securities and declines in market values due to the recent increase in market
rates for similar investments. The Company generally invests in relatively
short-term maturities due to the uncertainty in the direction of interest rates.
14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The decline in the value of the equities portfolio is consistent with the
overall market volatility during the first six months of the year. To minimize
risk the Company holds a diversified portfolio of equity securities, including
blue chip stocks listed in the Dow Jones Industrial Average (DJIA), Real Estate
Investment Trusts (REITs), Financial Stocks, Pharmaceuticals, and Utilities.
Many of these equities have attractive dividend yields and are owned both for
the income stream and potential growth in value. A review of these investments
as of June 30, 2005, did not reveal any additional impairment to be recognized
in excess of that which was recognized in either 2002 or 2004.
Loan Portfolio
The Company operates in an agriculturally dominated area in the western
portion of Virginia which includes the counties of Rockingham, Page and
Shenandoah. 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.
The allowance for loan losses (see subsequent section) provides for the risk
that borrowers will be unable to repay their obligations and is reviewed
quarterly for adequacy. The risk associated with real estate and installment
notes to individuals is based upon employment, the local and national economies
and consumer confidence. All of these affect the ability of borrowers to repay
indebtedness. The risk associated with commercial lending is primarily based on
the strength of the local economy.
While lending is geographically diversified within the service area, the
Company has loan concentrations in agricultural loans (primarily poultry
farming), construction, hotels, churches, assisted living facilities and
mortgage participations with Gateway Bank (California). Management and the Board
of Directors review these concentrations quarterly.
Management has entered into an agreement with Gateway Bank (of California)
to purchase short-term real estate loan participations. These loans have been
purchased by Gateway from mortgage brokers and will be held until sold to the
ultimate holder in the secondary market. All loans have firm take-out
commitments and are held for periods ranging from two to sixty days, but
averaging approximately fifteen days. These loans originate in several states
throughout the country, however, a significant portion are from the state of
California. These loans have been included with mortgage loans that the Bank has
originated within its own market and designated on the balance sheet as "Loans
Held for Sale".
Management has funded its loans held for sale primarily through short-term
borrowings. The yield on these loans is based on a discount to the prime rate,
but offers a premium over other comparable short-term investments. During the
second quarter, these loan participations averaged $19,684,000, with a maximum
balance and quarter end balance of $41,719,000. During the quarter, the Bank
increased its commitment to purchase loans from Gateway Bank from $30,000,000 to
$45,000,000. Short-term borrowings from the FHLB to fund this program (and other
short term needs) averaged $19,874,000 for the second quarter, with a maximum
balance and quarter end balance of $43,500,000.
The first six months of 2005 resulted in a $21,432,000 increase in the
portfolio of loans held for investment. The increase in the loan portfolio is
reflective of the strong local economy. This growth has been concentrated within
the real estate portfolio, both residential and commercial properties. Within
the last year the bank hired two commercial lenders that brought experience from
larger regional banks. Both these lenders have been successful in bringing loan
customers from their former banks which has added to the recent growth in the
portfolio.
15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Nonperforming loans include nonaccrual loans, loans 90 days or more past
due and restructured loans. Nonaccrual loans are loans on which interest
accruals have been suspended or discontinued permanently. Restructured loans are
loans, on which the original interest rate or repayment terms have been changed
due to financial hardship. Nonperforming loans totaled $1,561,000 at June 30,
2005 compared to $2,243,000 of loans at December 31, 2004. Approximately 90% of
these past due loans are secured by real estate. Although the potential exists
for some loan losses, management believes the bank is generally well secured and
continues to actively work with these customers to effect payment.
The following is a summary of information pertaining to risk elements and
impaired loans:
June 30, December 31,
2005 2004
----------- ---------
Nonaccrual loans $ 971,000 $ 864,000
Loans past due 90 days or more
and still accruing interest 590,000 1,379,000
Restructured loans 0 0
----------- ---------
$ 1,561,000 $2,243,000
Percent of total loans .58% .90%
As of June 30, 2005 the Company did not hold any real estate that was
acquired through foreclosure.
Allowance for Loan Losses
Management evaluates the allowance for loan losses on a quarterly basis in
light of national and local economic trends, changes in the nature and volume of
the loan portfolio and the trend of past due and criticized loans. Specific
factors evaluated include internally generated loan review reports, past due
reports, historical loss experience and changes in the financial strength of
individual borrowers that have been included on the Banks watch list or schedule
of classified loans.
In evaluating the portfolio, loans are segregated into loans with
identified potential losses, and pools of loans by type (commercial,
residential, consumer, credit cards). Loans with identified potential losses
include examiner and bank classified loans. Classified relationships in excess
of $100,000 are reviewed individually for impairment under FAS 114. A variety of
factors are taken into account when reviewing these credits, including borrower
cash flow, payment history, fair value of collateral, company management,
industry and economic factors. Loan relationships that are determined to have no
impairment are placed back into the appropriate loan pool and reviewed under FAS
5.
Loan pools are further segmented into watch list, past due over 90 days and
all other. Watch list loans include loans that are 60 days past due, and may
include restructured loans, borrowers that are highly leveraged, loans that have
been upgraded from classified or loans that contain policy exceptions (term,
collateral coverage, etc.). Loss estimates on these loans reflect the increased
risk associated with these assets due to any of the above factors. The past due
pools contain loans that are currently 90 days or more past due. Loss rates
assigned reflect the fact that these loans bear a significant risk of
charge-off. Loss rates vary by loan type to reflect the likelihood that
collateral values will offset a portion of the anticipated losses.
16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The remainder of the portfolio falls into pools by type of homogenous loans
that do not exhibit any of the above described weaknesses. Loss rates are
assigned based on historical loss rates over the prior five years. A multiplier
has been applied to these loss rates to reflect the time for loans to season
within the portfolio and the inherent imprecision of these estimates.
All potential losses are evaluated within a range of low to high. An
unallocated reserve has been established to reflect other unidentified losses
within the portfolio. It helps to offset the increased risk of loss associated
with fluctuations in past due trends, changes in the local and national
economies, and other unusual events (ie. Avian influenza). The Board approves
the loan loss provision for the following quarter based on this evaluation and
an effort is made to keep the actual allowance at or above the midpoint of the
range established by the evaluation process.
The allowance for loan losses of $1,659,000 at June 30, 2005 is equal to
..61% of total loans. This compares to an allowance of $1,511,000 (.61%) at
December 31, 2004. Management has increased its funding of the allowance
compared to the first six months of 2004 by $60,000. Total funding for the year
of $180,000 exceeded net charge-offs by $148,000.
The allowance of .61% of loans outstanding remains well below the peer
group average of 1.27%. Management feels this is appropriate based on its loan
loss history and the composition of its loan portfolio; the current allowance
for loan losses is equal to approximately seven years of average loan losses.
Based on historical losses, delinquency rates, collateral values of delinquent
loans and a thorough review of the loan portfolio, management is of the opinion
that the allowance for loan losses fairly states the estimated losses in the
current portfolio.
Deposits
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 realized annualized deposit growth of
8.7% through June 30. Certificates of deposit increased $11,565,000, while all
other deposit types decreased a total of $848,000. Rising rates for certificates
of deposit appear to have contributed to the decline in other deposits as both
interest bearing demand deposits and savings deposits have declined slightly.
Due to the growth in its loan portfolio and competition for deposits within its
market, the Bank has advertised two short term certificate of deposit rate
specials to attract new funds. The Bank also continues to advertise a free
checking account product. The growth in deposits appears to be a result of
advertising of these accounts.
Short-term debt
Short-term debt consists of federal funds purchased, commercial repurchase
agreements (repos.) and daily rate credit from the Federal Home Loan Bank
(FHLB). Commercial customers deposit operating funds into their checking account
and by mutual agreement with the bank their excess funds are swept daily into
the repurchase accounts. These accounts are not considered deposits and are not
insured by the FDIC. The Bank pledges securities held in its investment
portfolio as collateral for these short-term loans. Federal funds purchased are
overnight borrowings obtained from the Bank's primary correspondent bank to
manage short-term liquidity needs. Daily rate credit from the FHLB has been used
to finance the loans held for sale.
17
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Long-term debt
Borrowings from the Federal Home Loan Bank of Atlanta (FHLB) continue to be
an important source of funding real estate loan growth. The Company's subsidiary
bank borrows funds on a fixed rate basis. These borrowings are used to fund
either a fifteen-year fixed rate loan or a twenty-year loan, of which the first
ten years have a fixed rate. This program allows the Bank to match the maturity
of its fixed rate real estate portfolio with the maturity of its debt and thus
reduce its exposure to interest rate changes. Scheduled repayments totaled
$3,776,000 in the first six months of the year. Additional borrowings totaled
$5,000,000.
In September 2002, the Company borrowed $3 million from SunTrust
Bank. This loan carries an interest rate of LIBOR + 1.10% and is variable.
Payments of $230,769 plus interest began in the second quarter of 2004 and will
continue for a period of thirteen quarters. Proceeds of this loan were used
primarily to provide a capital contribution to the Bank.
Capital
The Company maintains a strong capital base to expand facilities, promote
public confidence, support operations and grow at a manageable level. As of June
30, 2005, the Company's total risk based capital and tier 1 risk based capital
ratios were 12.94% and 12.29%, 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 dividends in 2005 and management has no
reason to believe this increased level of dividends will not continue.
Liquidity
Liquidity is the ability to meet present and future financial obligations
through either the sale or maturity of existing assets or the acquisition of
additional funds through liability management. Liquid assets include cash,
interest bearing deposits with banks, federal funds sold, investments and loans
maturing within one year. The Company's ability to obtain deposits and purchase
funds at favorable rates determines its liquidity exposure. As a result of the
Company's management of liquid assets and the ability to generate liquidity
through liability funding, management believes that the Company maintains
overall liquidity sufficient to satisfy its depositors' requirements and meet
its customers' credit needs.
Additional sources of liquidity available to the Company include, but are not
limited to, loan repayments, deposits obtained through the adjustment of
interest rates and purchases 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
has been sufficient to fund most of the net increase in loans and investment
securities.
Interest Rate Sensitivity
In conjunction with maintaining a satisfactory level of liquidity, management
must also control the degree of interest rate risk assumed on the balance sheet.
Managing this risk involves regular monitoring of interest sensitive assets
relative to interest sensitive liabilities over specific time intervals. The
Company monitors its interest rate sensitivity periodically and makes
adjustments as needed. There are no off balance sheet items that will impair
future liquidity.
18
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Table II (page 20) contains an analysis which shows the repricing
opportunities of earning assets and interest bearing liabilities as of June 30,
2005.
As of June 30, 2005, the Company had a cumulative Gap Rate Sensitivity Ratio
of (5.32%) for the one year repricing period. This generally indicates that
earnings would decrease in an increasing interest rate environment as
liabilities reprice more quickly than assets. However, in actual practice, this
may not be the case as loans tied to the prime rate of interest will reprice
immediately with an increase in short term market rates, while deposit rates
will remain stable until competitive market conditions dictate the necessity for
an increase in rates. Management constantly monitors the Company's interest rate
risk and has decided the current position is acceptable for a well-capitalized
community bank operating in a rural environment.
Stock Repurchase
On June 12, 2003, 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 were authorized to be made by the Company from time to
time in the open market or in privately negotiated transactions during the year
as, in the opinion of management, market conditions warrant. The repurchased
shares are accounted for as retired stock. Shares repurchased and retired
through June 30, 2005 total 26,861. Shares repurchased during the second quarter
of 2005 totaled 1,800 shares at an average cost of $25.36 per share.
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)
19
F & M BANK CORP.
NET INTEREST MARGIN ANALYSIS
(Dollar Amounts in Thousands)
Six Months Ended Six Months Ended Three Months Ended Three Months Ended
June 30, 2005 June 30, 2004 June 30, 2005 June 30, 2004
Average Income/ Rates Average Income/ Rates Average Income/ Rates Average Income/ Rates
Balance Expense Balance Expense Balance Expense Balance Expense
Rate Related Income
Loans held for
Investment 1 $263,900 $8,389 6.36% $216,791 $6,958 6.42% $268,531 $4,307 6.42% $230,447 $3,573 6.20%
Loans held for Sale 16,810 348 4.14% 5,536 92 3.32% 19,684 216 4.39% 400 3 3.00%
Federal funds sold 1,801 24 2.67% 3,792 18 .95% 1,079 8 2.97% 3,319 8 .96%
Bank deposits 4,703 45 1.91% 9,555 93 1.95% 3,720 18 1.94% 9,698 42 1.73%
Investments
Taxable 3 23,433 395 3.37% 40,517 638 3.15% 23,448 196 3.34% 37,558 291 3.10%
Partially taxable 2,3 7,111 231 6.50% 9,675 276 5.71% 6,977 127 7.28% 9,664 144 5.96%
Tax exempt 2,3 375 9 4.80% 375 9 4.80% 375 5 5.33% 375 5 5.33%
----- ------ ------ ------ ------- ------- ------- ------ ----- ------- ----- -------
Total Earning Assets 318,133 9,441 5.94% 286,241 8,084 5.65% 323,814 4,877 6.02% 291,461 4,066 5.58%
------- ----- ------ ------- ------- ------- ------- ------ ----- ------- ----- -------
Interest Expense
Demand deposits 38,860 99 .51% 37,887 103 .54% 38,431 55 .57% 37,859 52 .55%
Savings 48,575 241 .99% 48,731 219 .90% 48,122 131 1.09% 49,546 111 .90%
Time deposits 126,349 1,875 2.97% 120,077 1,657 2.76% 129,534 986 3.04% 119,720 819 2.74%
Short-term debt 24,971 347 2.78% 9,693 37 .76% 28,076 217 3.09% 12,641 28 .89%
Long-term debt 31,422 618 3.93% 23,114 490 4.24% 31,146 304 3.90% 22,466 236 4.20%
------- ----- ------ ------- ------ ------ ------- ------ ----- ------ ----- ------
Total Interest Bearing
Liabilities 270,177 3,180 2.35% 239,502 2,506 2.09% 275,309 1,693 2.46% 242,232 1,246 2.06%
------- ----- ------ ------- ------ ------ ------- ------ ----- ------ ----- -----
Net Interest Income 1 $6,261 $5,578 $3,184 $2,820
===== ====== ====== =====
Net Yield on Interest
Earning Assets 1 3.94% 3.90% 3.93% 3.87%
===== ===== ===== =====
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.
4 Average balances include non-accrual loans.
20
TABLE II
F & M BANK CORP.
INTEREST SENSITIVITY ANALYSIS
JUNE 30, 2005
(In Thousands of Dollars)
0 - 3 4 - 12 1 - 5 Over 5 Not
Months Months Years Years Classified Total
Uses of Funds
Loans held for
investment 59,388 23,140 168,733 19,143 270,404
Loans held for sale 41,719 41,719
Interest bearing
bank deposits 1,296 891 694 2,881
Investment securities 980 7,536 14,204 15,447 38,167
------- ------- ------- ------- ------ -------
Total 103,383 31,567 183,631 19,143 15,447 353,171
------- ------- ------- ------- ------ -------
Sources of Funds
Interest bearing demand
deposits 11,195 20,883 4,844 36,922
Savings deposits 9,513 28,538 9,513 47,564
Time deposits
$100,000 and over 2,858 12,941 14,779 30,578
Other time deposits 14,585 41,998 43,907 100,490
Short-term borrowings 50,944 50,944
Long-term debt 3,301 6,405 14,368 3,150 27,224
------- ------- ------- ------- ------ -------
Total 71,688 82,052 122,475 17,507 293,722
------- ------- ------- ------- ------ -------
Discrete Gap 31,695 (50,485) 61,156 1,636 15,447 59,449
Cumulative Gap 31,695 (18,789) 42,366 44,002 59,449
Ratio of Cumulative Gap
to Total Earning
Assets 8.97% (5.32)% 12.00% 12.46% 16.83%
Table II reflects the earlier of the maturity or repricing dates for
various assets and liabilities at March 31, 2005. In preparing the above table
no assumptions are made with respect to loan prepayments. 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 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.
21
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in market risk from the information
provided in Item 7A, Quantitative and Qualitative Disclosures About Market Risk,
of the Company's 2004 Form 10-K.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As a result of the enactment of the Sarbanes-Oxley Act of 2002, issuers
such as F & M Bank Corp. that file periodic reports under the Securities
Exchange Act of 1934 (the "Act") are now required to include in those reports
certain information concerning the issuer's controls and procedures for
complying with the disclosure requirements of the federal securities laws. Under
rules adopted by the Securities and Exchange Commission effective August 29,
2002, these disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by an issuer in the reports it files or submits under the Act, is
communicated to the issuer's management, including its principal executive
officer or officers and principal financial officer or officers, or persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure.
We have established our disclosure controls and procedures to ensure that
material information related to the Company is made known to our principal
executive officers and principal financial officer on a regular basis, in
particular during the periods in which our quarterly and annual reports are
being prepared. These disclosure controls and procedures consist principally of
communications between and among the Chief Executive Officer and the Chief
Financial Officer, and the other executive officers of the Company and its
subsidiaries to identify any new transactions, events, trends, contingencies or
other matters that may be material to the Company's operations. As required, we
will evaluate the effectiveness of these disclosure controls and procedures on a
quarterly basis, and most recently did so as of the end of the period covered by
this report.
The Company's Chief Executive Officer and Chief Financial Officer, based on
their evaluation as of the end of the period covered by this quarterly report of
the Company's disclosure controls and procedures (as defined in Rule 13(a)-14(e)
of the Securities Exchange Act of 1934), have concluded that the Company's
disclosure controls and procedures are adequate and effective for purposes of
Rule 13(a)-14(e) and timely, alerting them to financial information relating to
the Company required to be included in the Company's filings with the Securities
and Exchange Commission under the Securities Exchange Act of 1934.
Changes in Internal Controls
During the period reported upon, there were no significant changes in the
internal controls of F & M Bank Corp. pertaining to its financial reporting and
control of its assets or in other factors that could significantly affect these
controls.
Due to the nature of the Company's business as stewards of assets of
customers, internal controls are of the utmost importance. The Company has
established procedures undertaken during the normal course of business to
reasonably ensure that fraudulent activity of either an amount material to these
results or in any amount is not occurring. In addition to these controls and
review by executive officers, the Company retains the services of S. B. Hoover,
LLP, a public accounting firm, to complete regular internal audits, which
examine the processes and procedures of the Company and the Bank to ensure that
these processes are reasonably effective to prevent internal or external fraud
and that the processes comply with relevant regulatory guidelines of all
relevant banking authorities. The findings of S.B. Hoover are presented to
management of the Bank and to the Audit Committee of the Company.
22
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 On May 14, 2005, the shareholders
of Security Holders - held their annual meeting. The
following items were 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.
Votes Votes
"For" by "Against"
Proxy by Proxy
John N. Crist 1,661,523 6,173
Julian D. Fisher 1,654,939 12,757
Daniel J Harshman 1,661,623 6,073
Dean W. Withers 1,654,939 12,757
2) Appointment of Larrowe & Company,
P.L.C. as independent auditors as
proposed in the proxy materials;
1,651,829 votes "for",
6,510 votes "against", and 9,357
abstained.
Item 5. Other Information - Not Applicable
Item 6. Exhibits and Reports on 8-K
(a) Exhibits
3(i) Restated Articles of Incorporation of F & M Bank Corp. are
incorporated by reference to Exhibits to F & M Bank Corp.'s
Form 10K filed March 1, 2002.
3(ii) Amended and Restated Bylaws of F & M Bank Corp. are
incorporated by reference to Exhibits to F & M Bank Corp.'s
Form 10K filed March 1, 2002.
31.1 Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Chapter 63,
Title 18 USC Section 1350(A) and (B))
31.2 Certification of Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Chapter 63,
Title 18 USC Section 1350(A) and (B))
32.1 Statement of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (Title 18 USC Section 1350).
23
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 BANK CORP.
/s/ Dean W. Withers
---------------------------------------------
Dean W. Withers
President and Chief Executive Officer
/s/ Neil W. Hayslett
-----------------------------------------------
Neil W. Hayslett
Senior Vice President and Chief Financial
Officer
August 10, 2005