• ^ ^ ^ 5 t ^M
1908-2008 tA
A N N I V E R S A RY
F&M BANK CORP.
!
2007
ANNUAL REPORT
Filings Services
April 8, 2008
SNL Financial, LC
1-800-969-4121
f V l f ' ^t
^•-' F'
'".
> Ip'i.*^ ae^.y^'^s^j*. '
^.j^spis^-^^-gr^Sf^
Dear Stoclenolcler:
We liave now entered our 100 year for Farmers & Mercfiants Bank and I tkink it is
appropriate to taise a moment to reriect on now signiricant an acnievement tnis is. in 1908
tnere were no computers, ceil pnones, televisions or radios tnat are now an aEtertiiougnt in
today's world. Automotiles and planes were just starting to te built and used. Yet a group
oE farmers and mercnants in tne Timterville area liad tne vision and drive to start a Dank
wnicli would grow and prosper for more tnan 100 years. We snould all ne proud of our
accomplisfiments and also tkankful for tne guidance provided by not only our founding fathers,
nut for tne very loyal employees, management, directors and sfiarenolders tnrougnout tne years.
Managements' goal is to continue tnis guidance and vision so tnat Farmers & Mercnants will be
celebrating its 2 00 anniversary in tne year 2 1 0 8.
With that thought in mind, 1 am pleased to present the financial results for Farmers &
Merchants Bank and F &M Bank Corp.
Net inconie for 2 0 07 was $ 4 , 4 53 million or a decrease slightly of $76,000 (1.68%) over the prior year 2 0 0 6. Earnings per share
decreased from $1.90 to $1.89. Both our Return on Average Assets and Return on Average Equity at 1.17% and 11.53% were
down, but still in line with our Peer Group. Loans Held for Investment increased by $7,719 million (2.5%) to $ 3 1 7 , 1 80 million.
Deposits increased by $9,038 million (3.1%) to $298,560 million.
Credit quality remained good with charge offs at . 1 1% of Loans Held for Investment in 2007; however this was an increase from
.04% in 2 0 0 6. Charge-offs in 2 0 06 were the lowest in a number of years. The increase for 2 0 07 was primarily related to one
account in the medical field. Toward the end of last year and early 2 0 08 the economy slowed, especially in the housing sector.
Therefore, we have increased our monthly Allowance for Loan Loss contribution to help offset any potential increase in charge-offs
because of the slowing economy.
Nonperforming assets increased to f . 1 1% of total assets, which is higher than it has been in the last few years. This increase is
primarily related to two accounts, both of which are secured with real estate and are in the process of collection. I anticipate that
both will be collected in the second quarter of 2 0 0 8. Management has reviewed the balance of the nonperforming loans, and
determined that they are primarily secured with real estate with little potential for losses. The Allowance for Loan Losses remained
relatively steady at .o4% oi Loans Held ior Investment, which is below our bank peer group; however, we ieel it is adequate to cover
any potential losses.
Dividends increased from $.82 to $.86 per share, an increase of 4.88%. In 2 0 07 we paid out 4 5 . 6 0% of our earnings in
dividends. This was a slight increase over 2 0 06 and was the highest payout over the previous five years. Over the past few months
we have seen financial stocks in general well below their highs in 2007, however F &M Bank Corp's stock price has held up well.
We closed on December 3 1, 2 0 07 at $31.05 with a high in 2 0 07 of $ 3 3 . 9 5.
The new branches opened in 2 0 06 showed significant growth in 2 0 0 7. The Crossroads branch had an increase in loans of over
$20 million and all three showed good deposit growth. As these branches continue to mature they will contribute significantly to
the bottom line.
For 2 0 08 we have a number of new products and services, two of which have already been launched. Platinum Rewards is a new
checking account which pays a CD like rate to our customers and should also increase both our deposits and non interest income.
We have also added ID Saie Choice to our Platinum checking accounts. This product helps to prevent identiiy theit ior our
customers, which uniortunately has become a large problem in today's society. Internally we are installing Branch Capture for
processing oi checks. leather than having a courier pick up the daily work from a branch, it will be sent electronically to Timberville
for processing. Later in the year we will also have Remote Capture, which will allow primarily business customers to process
their deposit at their location and electronically send it to the bank. Both of these products have significant efficiency savings.
Document Imaging is another product we are considering.
As I mentioned before, this is our 100 ' year and we have a number of events planned, along with some items to commemorate this
occasion. Our history book is now available and can be picked up at any of our branches. Be on the lookout for various events, etc.
throughout the year.
I want to thank everyone for your support not only for the last year, but for your support over the last 100 years. Many of our
current shareholders are descendants oi shareholders irom our earlier years, and I think that is the cornerstone oi what sets us
apart irom many oi our competitors today. The philosophy oi our iounding lathers to help our local communities grow is still very
important to us today. Farmers & Merchants truly has "Stood the Test oi Time ".
^Xl^ee^ U i -^ ^f"^^^"^^
Dean W Withers
President/CEO
•t»»^wA««)«»i{fateiiii"i
}
Dividends Per Sn are
Earnings Per Snare
Financial Ratios:
Return on Average Assets
Financial Ratios:
Return on Average Equity
1
A ^ j^
: ^ ^ s m s ^^
iNSIDt €*UR FlR.ST 100 YiAII$
•
1 9 08
Model T is marketed
Farmers & Mercnants Bank opened tor kusiness on August 24
.
1 9 09
Peary and H e n s on reack tke N o r tk Pole
P' Ajinual Meeting-45 stockkolders attended
•
•
•
•
•
1 9 1 7 - 1 9 19
World War I is fougkt
1 9 29
1 9 35
1 9 41
1 9 53
Beginning or Great Depression
Bank remained open & never registered a yearly loss
Social Security Act
Japanese attack Pearl Harkor
Color television approved ky F CC
Present Timfcerville location opened
•
1 9 56
Dow Jones Industrial closes akove 5 00 lor first time
Bank @ $5 million
1 9 6 1 - 1 9 63
Vietnam ^(^r
1 9 63
1 9 65
1 9 69
1 9 73
Jokn F. Kennedy assassinated
Medicare and Medicaid enacted
Neil Armstrong walks on moon
Price of a karrel or oil increased irom $ 1 . 50 to $ 1 1 . 56
•
•
•
.
•
Elkton Branck opened
•
1 9 79
E S PN kas first kroadcast
Broadway Branck opened
•
1 9 84
Macintosk personal computer released
Holding Company formed
•
1 9 90
Germany is re-united
•
•
1 9 91
1 9 92
Elkton Plaza Branck opened
First Gulf War
World wide wek used in komes ror first time
Bank reacked $ 1 00 million in assets
•
1 9 95
First planet outside our own solar system is found
Bridgewater Branck opened
»
1 9 99
Y2K scare
First female kank director
•
2 0 01
Terrorist attacks on World Trade Center and Pentagon
Purckased Edinkurg & Woodstock Branckes, Bank reacked $ 2 50 mikion in assets
•
•
2 0 05
2 0 06
Hurricanes strike US including Katrina
P l u to loses its status as planet
Port Road Luray & Crossroads Branckes opened
The world and the United States kave experienced turmoil, catastropke, keartkreak and accompliskments in tke past
100 years. Wken Farmers & Merckants Bank kegan in 1908, most people still traveled ky true korsepower. Since
tken automokiles and air planes kave carried us to any place on Eartk and rockets kave carried us to tke moon.
w k en tke kank was ckartered, women didn't yet kave tke rigkt to vote in all states and at tke federal level, people
suffered from polio, tk e radio and television kadn't keen invented and tkere were only 46 states in tke LInion. We
kave truly stood tke test of time.
: ^ F s ^ s ^^
FIRST MEETING OF THE
JOARD OF DIRECTORS
li\RCH t t, 1908
"J;*"^!
•
^
^
^
^
^
^
^
^
^
^
^
^^
SERVICE ANNIVERSARIES
L a r ry C a p l i n ^ er
35 ^ a rs
Ralpli (Ckuck) Foltz
25 l(ears
Lynette Wine
20 Years
RiTiRiD EMPLOYEES
J e an B. C o rf m an
M a r go S. M i l l er
Jean Coftman graduated from Broadway Higk and
Dunsmore Business School. Prior tcj coming to work
for tke Bank, Jean worked at Aileen, Inc. Ske joined
Farmers & Merckants Bank in June of 1 9 86 as a part
time teller, kriefly working in tke Broadway Office
kef ore transferring to Timkerville. In Fekruary 1 9 8 8,
she changed to a full time teller in Timkerville wkere
she remained until ker retirement tke end of Decemker
2 0 0 7. Jean loves to travel and is very active in tke
Timkerville Fire Department Auxiliary. Jean's family
incluaes twc5 sons and tkeir families.
Margo started ker hanking career in 1 9 71
in tke
proof department and wc^rked in tke operations
area of tke kank tmtil 1 9 76 wken ske left to spend
time witk ker family. Ske rejoined tke kank from
1 9 80 until 1 9 84 as a part time teller. In April of
1 9 9 2, Margo again returned as a full time teller. Ske
continued in tke teller area ot tke 1 imkerville Office
until ker retirement in Septemker, 2 0 0 7. As senior
teller, Margo was instrumental in training new tellers
tkat joined tke Bank.
: ^ ® ^ s ^^
IN MEMORY
We lost a well-loved coworker wken Skeila Denise Fulk Owen passed away
Fekruary 9, 2 0 0 8. Ske was Assistant Vice President and kad made many
contrikutions to our kank during ker 31-year career kere. After many
years as tke assistant manager in tke Bookkeeping Department, ske kad
most recently keen tke Branck Specialist at our new Port Repuklic Road
office in Harrisonkurg working directly witk customers. Her kusband,
Greg Owen ot Harrisonkurg, survives.
Peggy Ann Wakeman passed away January 7, 2 0 0 8. Ske was tke
in Edinkurg, and
muck-loved drive-tkrougk
kad been serving kank customers tkere since 1 9 74 wken tke kank
tkat kranck
was Farmers Bank. Farmers & Merckants purckased
join our kank
oftice
family tken. Peggy is survived ky two sons and eigkt grandchildren.
in 2 0 01 and was fortunate
teller at our kranck
to kave Peggy
Wken our bank first expanded to Elkton in 1 9 7 3, Welty H. Hensley
joined our Board of Directors; ke passed away on January 3, 2 0 0 8. He was
an Elkton native, and atter serving in tke U.S. Navy kecame a successful
automobile dealer in Elkton and later a Realtor. He was very active in tke
community, serving as Mayor tor four years and leading many community
initiatives in Elkton and Rockingham County. He also authored the book
"A History ot Elkton" in 2 0 0 4. He retired from our Board in 1 9 9 5. He
is survived ky kis wife Alice, kis son and grandckildren.
Mary Sue Fakrney, retired Assistant Vice President, passed away on Dec.
2, 2 0 0 7. Ske kegan ker career witk tke kank in 1 9 71 and worked full
time for 35 years in various capacities in tke Timberville and Broadway
offices. Earlier in ker career ske kad taugkt school. Her huskand, Merlin
Fakrney, survives.
:^?^sms^K
DIRECTORS AND OFFIC^RSI
DIRECTORS
T H O M AS L. C L I NE
R I C H A RD S. M Y E RS
President, Truck & Equipment Corp.
President, Mac Lease, Inc.
President, Dick Myers Automotive, Inc.
J O HN N. C R I ST
Partner, Hoover Penrod, PLC-Attomeys
President, Old Dominion Realty, Inc.
President, Colonial Appraisal Service, Inc.
M I C H A EL W. P U GH
J U L I AN D. F I S H ER
Chairman of tke Board,
Farmers & Merckants Bank and
F &M Bank Corp.
R O N A LD E. W A M P L ER
Outside sales-Dick Myers Automotive, Inc.
Partner, Dove Okio Farms, LLC. and
W W TD Okio Farms, LLC
Retired Farmer
E L L EN R. F I T Z W A T ER
Partner, Financial Manager, F & R Leasing, LLC D E AN W. W I T H E RS
DANIEL J. HARSHMAN
Manager, Town of Edinkurg
President, Farmers & Merckants Bank and
F &M Bank Corp.
Julian D. Fisker
Ckairman ot tke Board
Tkomas L. Cline
Vice Lkairman of tke Board
Dean W. Witkers
President and Chief Executive Officer
Larry A. Caplinger
Executive Vice President and
Secretary of tke Board
Neil W. Hayslett
Executive Vice President and
Ckiet Financial Otticer
Ellen C. Branner
Sr. Vice President/Human Resources
Stepkanie E. Skillingkurg
Sr. Vice President/Retail Services
Ralpk C. Fokz, Jr.
Sr. Vice President/Operations
OFFICERS
Curtis M. Arey
Sylvia T Bowman
Carolyn J. Dove
Sally H. Erickson
Henry E. Hawkins
Jeffrey L. Lam
Susan K. Olson
Mary Sue Propket
Kitty H. Purcell
Rokert R. Reedy, Jr
Edward A. Strunk
Vice Presidents
Dekorak A. Andes
Carrie A. Comer
Katky L. Grubbs
Joskua P. Hale
Mary Ellen Harrison
Teresa D. Helmick
Catky M. Lindamood
Cyntkia A. Skerman
Jacqueline M. Skifflett
Darlene K. Sites
Dekorak D. Vance
Assistant Vice Presidents
!^