F & M Bank Corp.
Annual Report 2006

Plain-text annual report

Dear Stockholdcr, I am pleased to present the operating results for F 8r M Bank Corp for the year 2006. Although net incorne was good, it is a slight decrease from the previous year. This was due to a number of factors. First, the flat yield curve, mcaning both short and long term rates were basically the same, began to put pressure on the nct interest margin in the second half of the year. Also, the competition for deposit dollars from both financial and non f h m i i l institutions required us to pay premiurri rates for dcposits, putting further pressurc on our net intcrcst margin. Furtherniorc, due to the interest rate environment, we did not have iiicoiiic from our Loan Participation program which had gencrared significant returns in prcvious years. Net incorne from this program was $130,000.00 in 2005. Net Income was also negatively a f k t e d by an approximately $60,000 tax adjustment related to goodwill from our purchase of the Edinburg and Woodstock branches in 2001. Lastly, the opening of two conipletcly new branches and the relocation of the Plaza branch to the new Crossroads location increased our operating cxpenses significantly. Although the new branches are not yet at the hreakeven point, they have shown good deposit growth, which has been used to support loan growth overall. As is typical with new branches, the majority of the deposits are in CDs which have a higher cost. As the branches rnature, we should be able to add more DDR a n d Savings accounts which will bring down thc cost of deposits. Also, as their loans increase, they will become profitahle. Net income for 2006 was $4.523 million or a dccrease of $251,000 (5.25%) over the prior year 2005. Earnings per share decreased from $1.33 to $1 .YO. Both our Return on Average Assets aiid Return on Average Equity at 1.26% and 12.13% were down, but still in line with our Pccr Group. L ~ ~ I I S Held for Investment increased by $32.063 million (I 1.6%) to $309.461 million. Deposits also increased significantly by $22.2 12 million (8.3%) to $283.522 million. The diffcrcnce between the loan growth and deposit growth was financed by an increase in our borrowings from the Federal Home Loan Bank. Credit quality remained good with charge offs dropping to .04% of: Loans Held Ibr Investnicnt in 2006 frorn .07% in 2005. Nonperforming assets increased to .58% of total assets which is rriore in line with our five year average. Management has reviewed the nonperforming loans and determined that they are primarily secured with rcal estate with little potential for losses. The Allowance for Loan Losses remained relatively steady at .58% of Idoaris Held for Investment, which is below our bank peer group; howcver, we feel it is adequate hased on our excellent history of loan losses. Dividends increased from $.78 to $.82 per sharc, an increase of 5.13%. In 2006 we paid out 43.12% of our earnings in dividends. O u r stock price hit $30.00 per sharc in 2006, up from a low of$24.15 per share in 2005. Since the end of the year it has incrcGed to a high of $33.00 per share. As mentioned above, wc opened two new branches in 2006. One is locatcd o n Port Republic Road in Harrisonburg and the other is located in the East Luray Shopping Center in Luray. We have had good deposit growth in these branches and we arc beginning to see new loan growth. Also, we have now closed the Elliton l'laza branch and our Mortgage and Investment Services that were located in Harrisonburg. Both of these operations are now located in the new Crossroads Branch located on Route 33 just east of Harrisonburg. If you have lint stopped hy these new locations, I would encourage you to do so to get to know the staff and look over the facilities. As we approach our upcorning 100 year anniversary next year, we are starting to niakc plans for cclcbration. We have just ahout put the finishing touches on a history which should be available in the fall of this year. 1 want to thank Julian Fisher, Larry Hoover and Nancy Bondurant Jones for their work in putting this historic book together. When you put together an Annual Keport, you tend to concentrate on Facts aiid f?gures, but I want to recognize what I consider io he the Bank's greatest assets and that is our crnployees. In 2006 wc had a nuinber of individuals who had employment milestones of twenty plus years with the Bank. They arc listed latcr on in this report. When you see thcm, thank them for their dedication to Farmers fk Merchants Bank and our customers. In total we have twenty crnployees with more than twenty years of servicc. This miourits to approximately 15% of our staff. The cntire staff is what has made the bank successful for almost 100 years and will continue to make l i s successful in the future. So when you visit one of our branches, lei the staff know how much they iiiean to our success and thank them [or their service. In summary, I think 1: & M Bank Corp. has a very bright future. We have a good network of branches aiid a staff that is committed to good ciistoincr service. I want to also thank you for the conlidence and support that you have given us through the years. I k a n W Withers l'residen t/CEO I (Dollars in thousands, except per share data) Income Statement Data: 2006 2005 2004 2003 2002 Interest and Dividend Income Interest Expense $ 22,526 9,09 1 $ 19,878 6,998 $ 16,804 5,396 ~ $ 16,683 6.010 $ 17,846 7.390 Net Interest Income Provision for Loan Losses 13,435 240 12,880 360 11,408 240 10,673 226 10,456 387 Net Intcrcst Income after Provision for Loan Losses Noninterest Income Securities Gains (Losses) Noninterest Expenses Income bcfore Incornc Taxes Income Tax Expense 13,195 2,754 193 9,688 6,454 1,925 12,520 2,643 71 8,608 6,626 1,846 11,168 2,254 532 7,741 6,2 13 1,863 10,447 2,308 179 7,256 5,678 1,666 10,069 1,380 (182) 6,448 4,8 19 1,315 Net Income 4,529 $ 4,780 $ 4,350 $ 4,012 ~~ $ ,- 3,504 Per Share Data: Net Income Dividends Declared Book Value Balance Sheet Data: 1,30 $ .82 1&05 1.99 .78 15.22 $ 1.80 .74 14.21 Assets Loans Held for Tiivestment Loans Held for Sale Securi ti cs Deposits Short-'ltrm Debt Long-Tcrm Debt Shareholders' Equity Average Shares Ou rstanding $ 375,924 305446 1 37,373 289,522 11,717 29,247 38,105 2,386 $ 346,328 277,398 3,528 34,921 267,310 14,345 22,808 36,567 2,404 $ 369,957 248,972 47,150 38,800 246,505 57,362 26,462 34,260 2,4 14 $ $ $ 1.66 .70 13.35 1.44 .66 12.19 309,126 21 1,231 - 61,230 240,7 15 6,389 24,784 32,3 19 2,418 $ 303,149 201,980 69,602 228,284 8,308 32,312 29,541 2,429 Financial Ratios: Rcturn on Averagc Assets1 Return on Avcrage Equity' Net Interest Margin Efficicncy Ratio' Dividend Payout Ratio 1.26%) 12.13% 4.17% 57.4 5 9'0 43.1 2% 1.34% 13.56% 3.95% 53.07% 38.70%) 1.31% 13.11% 3.82% 54.02% 4 1.06% 1.29% 13.13% 3.82% 53.96% 42.17% - Capital and Credit Quality Ratios: Average Equity to Average Assets' Allowance fur Loan Losses to Loans' Nonperforming Assets to Total Assets Net Charge-offs to Total Loans' 10.36% .58% .58% .040/0 ' Ratios are primarily based 011 daily average balances. 9.86YO .60% .20% .07% 1.21 (Yo 12.12 Yo 4.03 Yo 5 1.28 Yo 45.72 '3/0 9.98 Yo .73 % .86 Yo .10 % The Efficiency Ratio equals nonintcrcst expenses divided by the sum of tax cquivalent net intcrcst income and noninterest incomc. Noninterest expenses cxclude intangible asset amortization. Nonintcrost income excludes gains (losses) on securities transactions. Calculated based on Loans Held for Investment, excludes Loans Held for Sale. ' Balance Sheet: Total Assets Balance Sheet: Loans Held For Investment $400,000- v" I 2002 1 2003 1 200! /U A w e h $303,149 $309,126 $369,'357 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 6.n I . 2 0 0 5 4 . _. -_ -. 2 3346,328 $375,Y24 q 2004 1 $248.972- 1 .$277,398 2005 1 2006 1 $309,461 Dividends Per Share Earnings Per Share $2 00 v"'""l 1. Dividends 2003 -$$70 I I $0.74 1 2005 $0.78 1 I 2006 $0.82 I .Ear.:nFI ' 2002 $1.44 1 2003 $1.66 1 1 2004 $1.80 I 2005 $1.99 1 2006 $I%-- I Financial Ratios: Return on Average Assets Financial Ratios: Return on Average Equity 1.34% 1.32% 1.30% 1.28% 1.26% 1.24% 1.22% 1.20% 1.18% 1.16% 4 4 A a/. "'-'"I LReturn 1 2 0 0 2 2 0 0 3 1.21%- - 1.29% 14.00%1'1 13.50% 13.00% 12.50% 12 .OO% 11 3 0 % 4.1 nnw I I . Y Y 10 R e t u r n 1 I 1 2004 1.31% 2005 1.34% 1- 2006 1.26% 1 -- -- - ---I 2002 12.12% 2003 1 . -13.13% I 2004 . -. 13.11% O n March 3 1, 2006, Judy Mathias rerired from Farmers & Merchants Judy started her career in 1974 in loan accounting and Bank. progressed to an Assistant Vice PrcsidentlLoan Officer when she retired. A dinner w a held in her honor recognizing her thirty-two years of service helping Farmers & Merchants reniain successful. She has since come back to work part time doing loan review during the winter months. During the warm summer months Judy has been enjoying her family, traveling and camping with her husband Wayne. Judy Mathids Sylvia Bowman 40 years Mary Sue Fahmey 35 years Mary Sue Prophet 35 years SiJCih Owen 30 years Debbie Andes 20 years Jean C o f i a n 20 years 4 F&M Bank C h p . 2000 Annual Report Luray July 10, 2006 Port Road April 3, 2006 Crossroads August 28,2006 Front row (lej to right): Dean Withers, Ellen Fitzwater. Thomas Cline; Back row: Ronald Wampler, Juliun Fisher, Richard Myers, Michael Pugb and fohn Crist; (Not pictured): Dan Harshman. ‘1’HC)MAS I,. CLINF, RTCIIAKD S. MYEKS President, Truck 8. Equipment Gorp. President, Mac Lease, lnc. President, Dick Myers Chev rolet- J’o n tiac MICHAEL W. PUGH J O H N N. CIXIST Partner, Hoover Penrod, I’LL’, Attorneys President, Old Dominion Real& Inc. President, Colonial Appraisal Service, Inc. JULIAN ri. FISHER Chairman of the Board, Farmers &Merchants Bank and F & M Bank Corp. E1.LEN K. FTTZWA’TER Partner, Financial Manager. F & K Leming, L. L. C. DANIEI , J . HARS HMAN Manager, Town of Edinhurx 6 FLM Hank Corp. 2000 Annual Report RONALD E. WAMPLEK Part-time Salesman for Dayton Equipment Retired Farmer Partner, Dove Ohio Farms, LLC. and WWTD Ohio Farms, LLC DEAN W. WITHERS President, Farmers & Merchants Bank and F B M Bank C o p Julian D. Fisher Chairman o f the Board Neil W. Hayslett Sr. Vice President and Chief Financid Oficer Thomas L. Cline vice Chairman of the Board Ellen C. Branner Sr. Vice I-’resident/Human Resources Dean W. Withers Srephanie E. Shillingburg President and C’hicj‘Executive Oficer Sr. Vice I’residendKetaiL Services Larry A. Caplingcr Sr. Vzce President and Secretary of tbe Hoard Curtis M. Arey Sylvia ’1: Bowman Carolyn J. Dove Sally H. Erickson Ralph C, Foltz, Jrq Henry E. Hawkins Jeffrey L. Lani Susan K. Olson Mary Sue Prophet Kitty H. Purcell Robert R. Reedy, Jr. s Ellen M. Grataski Kathy L. Grubbs Joshua l? Hale Mary Ellen Harrison Teresa D. Helmick Cathy M. Lindaniood Sheila E Owen Cindy A. Sherman Jacqueline M. Shifflett Darlene K. Sites Deborah D. Vance F&M Rank Corp. 2006 Annual Keport 7 I Luray Branch Beth R. Lucas Cynthia E. Lyles Cassandra N. Mauck Yvette E McCoy Victoria L. Young Administrative Offices Susan E. Babkirk Judy L. Custer Keith M. Deeds Karmen Derrow Joseph M. Erickson Jcan Y. Estep Frances Z. Foltz Keata L. Harpine ‘ h i K. Hasley Linda D. Jenkins J. Whitney Keister Anthony W. Keyser Judith A. Mathias Edmond A. Mcnorman Donna M. McKenzie Karen Y. Moyer Lawrence J. Purcell Edgar H. Rcid, TI1 Kathy S. Sherman Joyce K. Shifler Ronald W Strickler Krista Suter Betty A. Turner Lynette D. Wine Amy Z. Wittig Tirnberville Branch Carolyn E Berry Thomas L. Campbell Jean R. Coffman Jeri C. Conncr Phyllis B. Delawder Stacy A. Dove Mary S. Fahrney Brenda S. George Sharrie L. Harrison Pamela H. Mantz Margo S. Miller JoAnnc H. Runion Tina L. Weaver R. Gail Whitmore Elkton Branch Carolyn I,. Alexander Crystal L. Breeden Bonnie L. Uovel W. Brent Meadows Cynthia L. Merica Donna G. O’Byrne Michelle L. Printz Dana S. Smith Broadway Branch Jacqueline M. Day Chris A. Gunter Sharon Y. 1,antz Carol L. Miller Tamara K. Miller Susan R. Mitchell Eleanor C. Nicholson Melody A, Priest Carolyn S. Polk Susan H. Seal Frances L. Showalter Berlin E. Smith Kathryn V. Smith G. Jean Whorten 8 F&M flank C h p . 2006 Annual Kcport Bridgewater Branch Barbara W. Bartley Betty I. Rryanr Alice L. Grow Brian S. Harter Kimberly D. Hubbard Christina G. Humphries Teresa L. Knicely Anna M. Pavlovskaya Elaine L. Tomlinson Claire M. Wrenn Edinburg Branch Eleanor S. Bowman J. Robert Moore Carolyn L. Silvious Brenda D. Swartr, Peggy R. Wakeman Janet D. Ware Woodstock Branch Linda J. Bailey Mary I? Mastrangelo Judith L. Shumalcer Christy L. Trail Crossroads Offce Kimberly A. Hammer Sarah H. Irons ‘I’ercsa G. Lam Jonah J. Pence Sandra K. Kobinctte Mcndy N. Samuels J . Paige Swecker Robin M. Weaver Victoria L. Wcndt Alice S . Yates Port Road Branch Janeea L. Garber Ashley L. Huffman Judith V. Lyles Wanda K. Weaver Natalie S. Wimer 

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