UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[ X ] Quarterly report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended September 30, 2005
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 000-13273
F & M BANK CORP.
Virginia 54-1280811
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
P. O. Box 1111
Timberville, Virginia 22853
(Address of Principal Executive Offices) (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 registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act) Yes No X
---- -----
Indicate by check mark whether the registrant is defined as a shell company
(as defined in Rule 12b-2 of the Act) Yes No X
------ -----
State the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
Class Outstanding at October 31, 2005
Common Stock, par value - $5 2,405,473 shares
1
F & M BANK CORP.
INDEX
Page
PART I FINANCIAL INFORMATION 2
Item 1. Financial Statements
Consolidated Statements of Income - Nine Months
Ended September 30, 2005 and 2004 2
Consolidated Statements of Income - Three Months
Ended September 30, 2005 and 2004 3
Consolidated Balance Sheets - September 30, 2005
and December 31, 2004 4
Consolidated Statements of Cash Flows - Nine Months
Ended September 30, 2005 and 2004 5
Consolidated Statements of Changes in Stockholders'
Equity - Nine Months Ended September 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. Unregistered Sales of Equity Securities and Use of Proceeds 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. Exhibits 22
SIGNATURES 23
2
Part I Financial Information
Item 1 Financial Statements
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars Except per Share Amounts)
(Unaudited)
Nine Months Ended
September 30,
2005 2004
---------- ---------
Interest Income
Interest and fees on loans held for Investment $12,918 $10,535
Interest and fees on loans held for sale 702 305
Interest on federal funds sold 56 21
Interest on interest bearing deposits 69 142
Dividends on equity securities 333 344
Interest on debt securities 529 879
------ ------
Total Interest Income 14,607 12,226
------ ------
Interest Expense
Interest on demand deposit 164 152
Interest on savings accounts 380 337
Interest on time deposits over $100,000 689 512
Interest on all other time deposits 2,236 1,962
------ ------
Total interest on deposits 3,469 2,963
Interest on short-term debt 743 149
Interest on long-term debt 902 756
------ ------
Total Interest Expense 5,114 3,868
------ ------
Net Interest Income 9,493 8,358
Provision for Loan Losses 270 180
------ ------
Net Interest Income after Provision for Loan Losses 9,223 8,178
------ ------
Noninterest Income
Service charges 772 690
Insurance and other commissions 214 267
Other 826 473
Income on bank owned life insurance 186 188
Security gains 31 409
------ ------
Total Noninterest Income 2,029 2,027
------ ------
Noninterest Expense
Salaries 2,609 2,403
Employee benefits 930 886
Occupancy expense 315 301
Equipment expense 332 318
Intangibles amortization 207 207
Other 1,900 1,562
------ -------
Total Noninterest Expense 6,293 5,677
------ ------
Income before Income Taxes 4,959 4,528
Income Taxes 1,435 1,361
------ ------
Net Income $ 3,524 $ 3,167
------ ======
Per Share Data
Net Income $ 1.46 $ 1.31
======= =======
Cash Dividends $ .58 $ .55
======= =======
Weighted Average Shares Outstanding 2,409,310 2,416,526
========= =========
The accompanying notes are an integral part of these statements.
3
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands of Dollars Except per Share Amounts)
(Unaudited)
Three Months Ended
September 30,
2005 2004
---------- ------
Interest Income
Interest and fees on loans held for investment $ 4,564 $ 3,515
Interest and fees on loans held for sale 354 305
Interest on federal funds sold 32 3
Interest on interest bearing deposits 24 49
Dividends on equity securities 115 118
Interest on debt securities 169 247
------ ------
Total Interest Income 5,258 4,237
------ ------
Interest Expense
Interest on demand deposits 65 49
Interest on savings accounts 139 118
Interest on time deposits over $100,000 259 174
Interest on time deposits 791 643
------ ------
Total interest on deposits 1,254 984
Interest on short-term debt 396 112
Interest on long-term debt 284 266
------ ------
Total Interest Expense 1,934 1,362
------ ------
Net Interest Income 3,324 2,875
Provision for Loan Losses 90 60
------ ------
Net Interest Income after Provision for Loan Losses 3,234 2,815
------ ------
Noninterest Income
Service charges 276 223
Insurance and other commissions 84 101
Other 263 183
Income on bank owned life insurance 56 63
Security gains (losses) 8 88
------ ------
Total Noninterest Income 687 658
------ ------
Noninterest Expense
Salaries 909 801
Employee benefits 310 293
Occupancy expense 106 104
Equipment expense 110 105
Intangible amortization 69 69
Other 650 538
------ ------
Total Noninterest Expense 2,154 1,910
------ ------
Income before Income Taxes 1,767 1,563
Income Taxes 557 471
------ ------
Net Income $ 1,210 $ 1,092
------ ======
Per Share Data
Net Income $ .50 $ .45
======= =======
Cash Dividends $ .20 $ .19
======= =======
Weighted Average Shares Outstanding 2,407,199 2,413,758
========= =========
The accompanying notes are an integral part of these statements.
4
F & M BANK CORP.
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
September 30, December 31,
ASSETS 2005 2004
------------ ---------
(Unaudited) (Audited)
Cash and due from banks $ 7,624 $ 7,938
Interest bearing deposits in banks 3,241 9,231
Fed funds sold 1,904 1,017
Securities held to maturity (note 2) 110 110
Securities available for sale (note 2) 28,816 30,756
Other investments 7,816 7,934
Loans held for sale 22,354 47,150
Loans held for investment (note 3) 280,773 248,972
Less allowance for loan losses (note 4) (1,634) (1,511)
------- --------
Net Loans Held for Investment 279,139 247,461
Bank premises and equipment 4,818 4,824
Interest receivable 1,331 1,231
Deposit intangible 1,495 1,702
Goodwill 2,639 2,639
Bank owned life insurance (note 5) 5,269 5,083
Other assets 2,755 2,881
------ -------
Total Assets $369,311 $369,957
======= =======
LIABILITIES
Deposits
Noninterest bearing demand $ 44,205 $ 40,694
Interest bearing
Demand 38,893 37,425
Savings deposits 45,866 48,883
Time deposits over $100,000 31,259 24,661
Time deposits 101,310 94,842
------- -------
Total Deposits 261,533 246,505
Short-term debt 41,178 57,362
Long-term debt 25,123 26,462
Accrued expenses 5,449 5,368
------ -------
Total Liabilities 333,283 335,697
------- -------
STOCKHOLDERS' EQUITY
Common stock, $5 par value, 2,405,473 and
2,412,530 issued
and outstanding, in 2005 and 2004, respectively 12,027 12,058
Surplus 4 128
Retained earnings 24,400 22,273
Accumulated other comprehensive income (loss) (403) (199)
------- --------
Total Stockholders' Equity 36,028 34,260
------ -------
Total Liabilities and Stockholders' Equity $369,311 $369,957
======= =======
The accompanying notes are an integral part of these statements.
5
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
Nine Months Ended
September 30,
2005 2004
--------- --------
Cash Flows from Operating Activities:
Net income $ 3,524 $ 3,167
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 368 348
Amortization of security premiums 105 269
Net (increase) decrease in loans held for sale 24,796 (54,738)
Gain on security transactions (31) (409)
Income from life insurance investment (186) (188)
Provision for loan losses 270 180
Decrease in interest receivable (101) 307
Decrease in other assets 126 232
Intangible amortization 207 207
Increase in accrued expenses 169 636
Losses on limited partnership investments 229 183
------ ------
Total Adjustments 25,952 (52,973)
------ --------
Net Cash Provided by Operating Activities 29,476 (49,806)
------ --------
Cash Flows from Investing Activities:
Proceeds from maturity of investments
held to maturity 760
Proceeds from sales of investments available
for sale 1,649 20,817
Proceeds from maturity of investments available
for sale 12,610 15,650
Purchase of investments available for sale (12,820) (20,231)
Net change in interest bearing bank deposits 5,989 2,001
Net change in federal funds sold (887) 5,035
Net increase in loans held for investment (31,947) (25,665)
Purchase of property and equipment (361) (211)
------- -------
Net Cash Used in Investing Activities (25,767) (1,844)
-------- -------
Cash Flows from Financing Activities:
Net change in demand and savings deposits 1,963 10,336
Net change in time deposits 13,065 (3,706)
Net change in short-term debt (16,184) 48,822
Repurchase of common stock (228) (194)
Repayment of long-term debt (6,338) (5,436)
Proceeds of long-term debt 5,000 4,000
Proceeds from issuance of common stock 73
Payment of dividends (1,374) (1,328)
------- -------
Net Cash Provided by Financing Activities (4,023) 52,494
------- ------
Net Decrease (Increase) in Cash and Cash Equivalents (314) 844
Cash and Cash Equivalents, Beginning of Period 7,938 5,665
------ ------
Cash and Cash Equivalents, End of Period $ 7,624 $ 6,509
====== ======
Supplemental Disclosure
Cash paid for:
Interest expense $ 5,013 $ 3,926
Income taxes 970 700
The accompanying notes are an integral part of these statements.
6
F & M BANK CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands of Dollars)
(Unaudited)
Nine Months Ended
September 30,
2005 2004
---------- -------
Balance, beginning of period $34,260 $32,319
Comprehensive Income
Net income 3,524 3,167
Net change in unrealized appreciation on securities
available for sale, net of taxes (204) (351)
------- -------
Total comprehensive income 3,320 2,816
Repurchase of common stock (228) (194)
Common stock sold to ESOP 73
Dividends declared (1,397) (1,328)
------- -------
Balance, end of period $36,028 $33,613
====== ======
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 accounting
principles generally accepted in the United States 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 September 30, 2005 and the results
of operations for the nine and three month periods ended September 30,
2005 and September 30, 2004. The notes included herein should be read
in conjunction with the notes to financial statements included in the
2004 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
September 30, 2005 and December 31, 2004 are as follows:
2005 2004
-------------------- -----------------
Market Market
Cost Value Cost 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 $15,850 $ 16,027 $ 16,011 $16,086
Equity securities 6,360 6,548 6,485 6,619
Mortgage-backed
securities 3,896 3,979 5,425 5,472
Corporate Bonds 2,344 2,500 2,466 2,500
Municipals 366 375 369 375
------ ------- ------- ------
Total $28,816 $ 29,429 $ 30,756 $31,052
====== ======= ======= ======
8
F & M BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
NOTE 3 LOANS HELD FOR INVESTMENT:
Loans outstanding at September 30, 2005 and December 31, 2004 are
summarized as follows:
2005 2004
Real Estate
Construction $ 33,792 $ 17,365
Residential 141,755 147,281
Commercial and agricultural 83,661 62,786
Installment loans to individuals 19,967 20,006
Credit cards 1,475 1,478
Other 123 56
------ -------
Total $280,773 $248,972
======= =======
NOTE 4 ALLOWANCE FOR LOAN LOSSES:
A summary of transactions in the allowance for loan losses follows:
Nine Months Ended Three Months Ended
September 30, September 30,
2005 2004 2005 2004
---- ---- ---- ----
Balance, beginning of period $1,511 $1,484 $1,659 $1,512
Provisions charged to
operating expenses 270 180 90 60
Net (charge-offs) recoveries:
Loan recoveries 46 66 10 17
Loan charge-offs (193) (182) (125) (41)
------ ----- ------ -----
Total Net Charge-Offs * (147) (116) (115) (24)
------ ----- ------ -----
Balance, End of Period $1,634 $1,548 $1,634 $1,548
===== ===== ===== =====
*Components of Net Charge-Offs
Real Estate (7)
Commercial (100) (61) (105) (4)
Installment (47) (48) (10) (20)
------ ----- ------ -----
Total $ (147) $ (116) $ (115) $ (24)
====== ===== ====== =====
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. The Bank has determined that the benefits offered are necessary
in order to attract and retain good employees.
To help offset the growth in these costs, the Bank decided to enter
into BOLI contracts. Dividends received on these policies are
tax-deferred and are anticipated to be tax exempt as the death
benefits under the policies are exempt from income taxation. Rates of
return on a tax-equivalent basis are very favorable when compared to
other long-term assets which the Bank could obtain.
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. Two new branches have
been approved by the regulatory authorities. One office is approximately two
miles east of the Harrisonburg city limits on Route 33. This office will be
owned by the Bank and is currently under construction. The second office will be
located on Port Republic Road in Harrisonburg. It is a leased facility; build
out of the existing shell will begin during the fourth quarter. Both offices are
expected to open during the first half of 2006. Also, during the third quarter
of 2005, the Bank began operating a courier service which picks up commercial
deposits on a daily basis in the Harrisonburg area. 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 or this Form 10Q.
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 (Continued)
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 (Continued)
Overview
Net income for the third quarter of 2005 was $1,210,000 or $.50 per share,
compared to $1,092,000 or $.45 in the third quarter of 2004, an increase of
10.81%. Core operating earnings, (exclusive of securities transactions, net of
tax effect) totaled $1,230,000 in 2005 and $1,034,000 in 2004, an increase of
18.96%. For the nine months ended September 30, 2005, net income was $3,524,000
or $1.46 per share compared to $3,167,000 or $1.31 in 2004. This was an increase
of 11.27%. During the third quarter, noninterest income, exclusive of securities
transactions, increased 19.12% and noninterest expense increased 12.78% during
the same period.
Results of Operations
Year to Date
The 2005 year to date tax equivalent net interest margin increased
$1,134,000 or 13.33% compared to the same period 2004. The yield on earning
assets increased .41%, while the cost of funds increased .39% compared to the
same period in 2004. These increases resulted as maturing assets and liabilities
began repricing 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 4.00% in .25%
increments beginning in June 2004 and continuing with each successive meeting,
including November 2005. Although the Interest Sensitivity Analysis on page 20
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 portion 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 can be found in
Table I on page 19.
Noninterest income, exclusive of securities transactions, increased
$380,000 or 23.49% through three quarters of 2005. Items contributing to the
increase include a $104,000 increase in overdraft fees, a $30,000 increase in
card-related (credit, debit, merchant and ATM) fees, a $123,000 increase in
secondary market loan origination fees and a $106,000 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 has been 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 of income tax expense for the period.
13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Noninterest expense increased $616,000 in 2005. Of the total, $250,000 (a
7.60% increase) can be attributed to salaries and employee benefits. This
increase includes normal salary increases, growth in staff, and an increase in
the cost of group insurance of 14.62% Exclusive of personnel expenses, other
noninterest expenses increased at an annualized rate of 15.33% in 2005 compared
to 2004. Areas of increase include $31,000 in audit and examination fees,
$34,000 in FDIC insurance assessment, $65,000 in legal and professional fees,
$34,000 in bank franchise tax, $40,000 in ATM and data processing expenses, and
$26,000 in postage, freight and supplies. Noninterest expense as an annualized
percentage of average assets equals 2.24% and is comparable to the prior year.
Operating costs continue to compare very favorably to the peer group. As stated
in the most recently available Bank Holding Company Performance Report, peer
group noninterest expenses averaged approximately 3.02% of average assets. The
Company's operating costs have always compared favorably to the peer group due
to an excellent asset to employee ratio and below average facilities costs.
Quarter Ending September 30
The Company's net income increased $118,000 to $1.210 million compared to
the third quarter of 2004. After adjusting to exclude securities transactions,
core earnings and earnings per share increased $196,000 or 18.96%. Net interest
income increased $449,000, while the tax equivalent net interest margin
increased 21 basis points to 4.00%. The growth in the margin is a result of
volume increases as earning assets increased $32,305,000 compared to the same
period in the prior year. The average balance of loans held for investment
increased $45,619,000.
Loans held for sale consist of short term mortgage participations that
have an average life of approximately fifteen days. These loans have been funded
primarily though an increase in short-term debt (overnight borrowings). The
growth in the loan portfolio within the Bank's primary service areas was funded
through a combination of a decrease in interest bearing bank deposits, a
decrease in the securities portfolio of the Bank and deposit growth.
Noninterest income, exclusive of securities transactions, increased 19.12%
due primarily to substantially higher income from overdraft fees (up $57,000)
and secondary market mortgage origination income (up $53,000). Personnel
expenses increased 11.43% and other noninterest expenses increased 14.58% in the
quarter for the same reasons cited in the nine month discussion.
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 market rates of interest that at quarter end was
benchmarked at 3.75% 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. Balances in interest bearing bank deposits have decreased due to
growth in the loan portfolio.
14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Securities
The Company's securities portfolio serves several purposes. Portions of
the portfolio are held to assist the Company with liquidity, asset liability
management, as security for certain public funds and repurchase agreements and
for long-term growth potential.
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, 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 September 30, 2005, the cost of all securities available for sale
exceeded their market value by $613,000. 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 securities. 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 $1,815,000 in the first nine
months of 2005; this decrease was the result of pool pay downs on mortgage
backed securities and the previously mentioned declines in market values due to
rising short term rates. The remainder of the portfolio is made up of primarily
agency and mortgage-backed securities with an average portfolio life of
approximately one and quarter years. This short average life results in less
portfolio volatility and positions the Bank to redeploy assets in response to
rising rates. Scheduled maturities in 2006 total $12,000,000 and these bonds
have and average yield of approximately 2.75%. Based on current market rates, as
these bonds mature, the funds will be reinvested at rates that are approximately
200 BP higher.
The Company's equity securities portfolio was $188,000 below cost at
September 30, 2005. Gains totaling $31,000 have been taken within the equities
portfolio during 2005. The decline in the value of the equities portfolio is
consistent with the overall market volatility during the first nine months of
the year. To minimize risk the Company holds a diversified portfolio of equity
investments in a number of large, regional financial institutions, a diversified
portfolio of REITs and a variety of other predominantly blue-chip securities.
Management continues to believe that these investments offer adequate current
returns (dividends) and have the potential for future increases in value.
A review of these investments as of September 30, 2005, revealed one
investment that appeared to be impaired based on the criteria management has
employed for the last several years to assess impairment. The security was
written down by $32,000 ($21,000 net of tax). No other security was impaired as
of quarter end and management continues to re-evaluate the portfolio for
impairment on a quarterly basis.
15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Loan Portfolio
The Company operates in a predominately rural area that includes the
counties of Rockingham, Page and Shenandoah in the western portion of Virginia.
The local economy benefits from a variety of businesses including agri-business,
manufacturing, service businesses and several universities/colleges. The Bank is
an active residential mortgage and residential construction lender and generally
makes commercial loans to small and mid size businesses and farms within its
primary 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 substantially based
on the strength of the local and national economies.
While lending is geographically diversified within the service area, the
Company does have loan concentrations in agricultural (primarily poultry
farming), construction, hotels, churches, assisted living facilities and the
aforementioned mortgage participations. 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 for sale through the use of short-term
borrowings from the FHLB. 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 third quarter, these loan participations have averaged $28,978,000,
with a maximum and quarter end balance of 42,823,000 and $22,354,000,
respectively. The Bank has made a commitment to purchase up to a maximum of
$45,000,000 of these loans.
The first nine months of 2005 resulted in an increase of $31,800,000 in
the Bank's core loan portfolio. The increase in the loan portfolio is reflective
of the strong local economy. The growth has been concentrated within the real
estate portfolio, both residential and commercial properties. Within the last
year and a half, 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.
16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
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 which have had the original interest rate or repayment terms changed due
to financial hardship. Nonperforming loans totaled $1,142,000 at September 30,
2005 compared to $2,243,000 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 its customers to effect payment. As of September
30, 2005, the Company does not hold any real estate which was acquired through
foreclosure.
The following is a summary of information pertaining to risk elements and
impaired loans:
September 30, December 31,
2005 2004
----------- ---------
Nonaccrual loans $ 229,000 $ 864,000
Loans past due 90 days or more
and still accruing interest 913,000 1,379,000
Restructured loans 0 0
-------- --------
$1,142,000 $2,243,000
Percent of loans held for
investment .41% .90%
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 loan 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, the industry in
which the borrower is involved 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 loans by type. 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.
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. This 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. 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.
17
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
The allowance for loan losses of $1,634,000 at September 30, 2005 is equal
to .58% of loans held for investment. This compares to an allowance of
$1,511,000 (.61%) at December 31, 2004. Management has funded the allowance at a
rate of $30,000 per month throughout the year of 2005, for a total of $270,000.
Total charge-offs, net of recoveries, equal $147,000 year to date. This is
equivalent to an annualized loss rate of .07% of total loans. In recent years,
the company has had an average loss rate of .08% which is less than one half the
loss rate of its peer group.
The overall level of the allowance is well below its peer group average.
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 and Other Borrowings
The Company's main source of funding is comprised of 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. Total deposits have increased $15,028,000
since December 31, 2004. Time deposits increased $13,066,000 during this period
while demand deposits and savings deposits increased $1,962,000. 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 loans held for sale and also to finance the increase in short-term
residential and commercial construction loans.
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 $5,646,000 through September 30, 2005. Additional borrowings of
$5,000,000 were obtained to assist in funding the growth in the loans held for
investment.
18
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
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 seeks to maintain a strong capital base to expand facilities,
promote public confidence, support current operations and grow at a manageable
level. As of September 30, 2005, the Company's total risk based capital and
total capital to total assets ratios were 13.37% and 9.76%, respectively. Both
ratios are in excess of regulatory minimums and exceed the ratios of the
Company's peers. Earnings have been satisfactory to allow an increase in the
third quarter dividend in 2005 of 5.26%.
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, the ability to obtain deposits through the
adjustment of interest rates and the purchasing 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.
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.
As of September 30, 2005, the Company had a cumulative Gap Rate Sensitivity
Ratio of (4.44%) 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.
A summary of asset and liability repricing opportunities is shown in Table
II.
Stock Repurchase
On June 12, 2003, the Board authorized the repurchase of 50,000 shares of
the Company's outstanding common stock. Management has been authorized to
repurchase shares from time to time in the open market or through privately
negotiated transactions when market conditions warrant. The repurchased shares
are accounted for as retired stock. Through the end of the third quarter of
2005, a total of 31,189 shares have been repurchased and retired. During the
third quarter of 2005 4,328 shares were repurchased, at an average cost of
$24.68 per share.
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.
Existence of 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
TABLE I
F & M BANK CORP.
NET INTEREST MARGIN ANALYSIS
(Dollar Amounts in Thousands)
Nine Months Ended Nine Months Ended Three Months Ended Three Months Ended
September 30, 2005 September 30, 2004 September 30, 2005 September 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
investments (1)(,2) $268,020 $ 12,975 6.45% $221,247 $ 10,569 6.37% $275,890 $4,621 6.70% $230,271 $3,617 6.28%
Loans held for sale 20,911 702 4.48% 13,256 316 3.18% 28,978 354 4.89% 28,583 218 3.05%
Federal funds sold 2,447 56 3.05% 2,891 21 .97% 3,718 32 3.44% 1,089 3 1.10%
Bank deposits 4,305 69 2.14% 9,229 142 2.05% 3,191 24 3.01% 8,577 49 2.29%
Investments
Taxable(3) 23,042 580 3.36% 37,192 881 3.16% 22,272 185 3.32% 30,541 243 3.18%
Partially
taxable(2,3) 6,988 362 6.91% 9,675 435 5.99% 6,991 131 7.50% 9,674 159 6.57%
Tax exempt (2,3) 375 13 4.62% 375 13 4.53% 375 4 4.27% 375 4 4.27%
------ ------- ----- ------ ------ ---- ------ ---- ---- ------ ---- ----
Total Earning Assets 326,088 14,757 6.03% 293,865 12,377 5.62% 341,415 5,351 6.27% 309,110 4,293 5.54%
------ ------- ----- ------ ------ ---- ------ ---- ---- ------ ---- ----
Interest Expense
Demand deposits 38,837 164 .56% 38,035 152 .53% 39,403 65 .66% 38,331 49 .51%
Savings 47,958 380 1.06% 49,564 337 .91% 46,743 139 1.19% 51,229 118 .92%
Time deposits 128,279 2,925 3.04% 119,459 2,474 2.76% 132,077 1,050 3.18% 118,224 817 2.76%
Short-term debt 31,282 743 3.17% 16,184 149 1.23% 43,883 396 3.61% 29,165 112 1.54%
Long-term debt 28,121 902 4.28% 23,501 756 4.29% 26,357 284 4.31% 24,276 266 4.38%
------ ------- ----- ------ ------ ---- ------ ---- ---- ------ ---- ----
Total Interest Bearing
Liabilities 274,477 5,114 2.48% 246,743 3,868 2.09% 288,463 1,934 2.68% 261,225 1,362 2.09%
------ ------- ----- ------ ------ ---- ------ ---- ---- ------ ---- ----
Net Interest Income (1) $ 9,643 $8,509 $3,417 $2,931
======= ====== ====== ======
Net Yield on Interest
Earning Assets (1) 3.94% 3.86% 4.00% 3.79%
===== ===== ====== ======
(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 assets.
(3) Average balance information is reflective of historical cost and has not
been adjusted for changes in market value.
20
TABLE II
F & M BANK CORP.
INTEREST SENSITIVITY ANALYSIS
September 30, 2005
(In Thousands of Dollars)
The following table presents the Company's interest sensitivity.
0 - 3 4 - 12 1 - 5 Over 5 Not
Months Months Years Years Classified Total
Uses of Funds
Loans
Commercial $50,302 $ 6,882 $22,462 $ 4,015 $ $ 83,661
Installment 1,760 999 18,392 414 21,565
Real estate for
investments 20,399 12,294 122,383 20,471 175,547
Real estate
for sale 22,354 22,354
Credit cards 1,475 1,475
Federal funs sold 1,904 1,904
Interest bearing
bank deposits 1,458 891 595 2,944
Investment securities 952 9,399 11,818 14,573 36,742
------ ----- ------- ------ ------ -------
Total 100,604 30,465 175,650 24,900 14,573 346,192
------ ----- ------- ------ ------ -------
Sources of Funds
Interest bearing
demand deposits 11,484 22,100 5,308 38,892
Savings deposits 9,173 27,520 9,173 45,866
Certificates of
deposit
$100,000 and
over 4,983 11,899 14,377 31,259
Other certificates
of deposit 19,681 37,015 44,614 101,310
Short-term
borrowings 41,178 41,178
Long-term borrowings 3,615 5,884 12,753 871 23,123
------ ----- ------- ------ ------ -------
Total 69,457 75,455 121,364 15,352 281,628
------ ----- ------- ------ ------ -------
Discrete Gap 31,147 (44,990) 54,286 9,548 14,573 64,564
Cumulative Gap 31,147 (13,843) 40,443 49,991 64,564
Ratio of Cumulative
Gap to Total 9.00% (4.00)% 11.68% 14.44% 18.65%
Earning Assets
Table II reflects the earlier of the maturity or repricing dates for various
assets and liabilities as of September 30, 2005. In preparing the above table,
no assumptions were made with respect to loan prepayments. Loan principal
payments are included in the earliest period in which the loan matures or can
reprice. 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.
21
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
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 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. 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 F &
M Bank Corp.'s internal controls pertaining to its financial reporting and
control of its assets or in other factors that could significantly affect these
controls since the date of their evaluation.
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 during the normal course of business to reasonably ensure
that fraudulent activity of either a material amount 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. Unregistered Sales of Equity Securities
and Use of Proceeds - Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable
Item 4. Submission of Matters to a Vote of
Security Holders - Not Applicable
Item 5. Other Information - Not Applicable
Item 6. Exhibits
(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 2001 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 Rule
13a-14(a) (filed herewith).
31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a) (filed herewith).
32 Certifications of Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sabanes-Oxley Act of
2002 (filed herewith).
23
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.
/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
November 14, 2005