F & M Bank Corp.
Annual Report 2010

Plain-text annual report

^ T 2010 A UAL PORT OUR FUTURE TOGETHER PRESIDENT'S LETTER Dear Stockholder: For 2010 we showed significant earnings improvement over 2009. This was in spite of a continued difficult time period due to the weak economy. The real estate market, which is a large driver of our economy, continued to be sluggish with foreclosures dominating the market, which in turn depressed prices and hurt consumer confidence. Unemployment stabilized locally but still remained higher than normal. The weak economy was also reflected in our Nonperforming Loans ratio which increased to 3.06% of Total Assets. We continue to work with our problem accounts to lessen the risk to the Bank and at the same time give our customers a chance to work through their problems. Net Charge offs for the year were .53%, which are slightly less than 2009. Our charge offs continue to run at approximately one half of our national peer group over the course of 2009 and 2010. As stated above. Net Income for 2010 was $ 3 . 7 4 lM which was an increase of $1.787M. This increase was attributed to a significant improvement in our Securities Portfolio, which reflected a Security Gain of $349,000 versus a loss (OTTI) of $1,754 million in 2009. Bank Only eamings also increased due to an improvement in our Net Interest Margin and a $10.7M increase in Loans Held for Investment. Our F D IC Assessments stabilized somewhat; however, there was still some increase over 2009. We continued to beef up our contribution to the Allowance for Loan Losses, which ended the year at 1.30% of Loans versus .88% at 2009 year end. We felt this was prudent in light ofthe increase in Nonperforming Loans and the continued weakness in the economy. Hopefully, in the future with some economic improvement, we can reduce our Allowance contributions which will improve earnings further. Total Assets actually dropped slightly; however. Shareholder Equity increased to S42M, which was an increase of $3.227M over year end 2009. Book Value per share increased to $18.31 compared to $16.99 at the end of 2009. All o f o ur Capital Ratios remain well above the levels to be considered Well Capitalized by our Regulators. The issuance of our Subordinated Notes throughout late 2009 and 2010 improved our Total Risk Based Capital Ratio to 13.51% (10% is considered Well Capitalized) at year end and the funds received from our recent Rights Offering will further improve both our Tier 1 ratio and also our Total Risk Based Ratio. This puts us in an excellent position to take advantage of growth potential going forward as we come out of the economic recession. For more detail regarding our financial performance in 2010,1 encourage you to review the enclosed lOK. Last year was not a time for significant growth in Assets, as reflected above with Total Assets remaining level. It was a time to continue expanding relationships with our existing customers by providing products they needed with excellent customer service. We have stayed up to date with new technology, such as Online Banking, Facebook, etc. We are in the process of replacing a few ofour older ATMs, which will have more up to date features. This helps us to attract the younger generations, who are our future; however, we are finding more and more of the mature generations using this technology as well. We also have not forgotten the individuals who prefer a more face to face approach. We have also taken advantage of new technology available on the operational side, which makes us more efficient. Our Efficiency Ratio of 57.23% remained under our goal of 6 0% and is significantly lower than our national peer group. Even though the last couple of years have been tough for financial institutions, F &M Bank Corp. has fared pretty well, especially compared to most ofour peers. I attribute this to the hard work and dedication ofour staff who are the backbone of our organization. I also want to thank you the shareholders for your confidence in us. I realize your stock price has dropped off in the last year; however, the future is bright. Nothing in life is guaranteed, but with our stock trading at historic lows, I feel F &M Bank Corp. is a good investment for long term gain. I hope everyone can attend the shareholder meeting in May where we can fellowship and answer any questions you may have. Dean W. Withers President/CEO THREE YEAR SUMMARY OF SELECTED FINANCL\L CHARTS Net Income (As a % of total assets) Net Interest Inconie (As a % of total assets) 0.80% 0.70% 0.60% 0.50% 040% 0.30% Overhead Expense (As a % of total assets) Net Loan Losses (As a % of average loans held for investment) Allowance For Loan Losses (As a % of total loans) Non-Performing Assets (As a % of total assets) RETIRED On September 23, 2010, Julian D. Fisher retired as Chairman ofthe Board ofDirectors of Farmers & Merchants Bank and F&M Bank Corp. upon reaching the bank's mandatory retirement age. Julian had been with the bank since 1973 and joined the Board of Directors in 1990. He served as President ofthe bank for 13 years and Chairman of the Board for six years. During those years he has been both a friend and counselor to the customers and staff and has been instrumental in the growth of the bank. Julian has been a vital member of the Broadway-Timberville community, being involved in the Timberville Lions Club and the Shriners organization, and is an active member of the First United Methodist Church. A native of Wythe County, VA, he graduated from Virginia Polytechnic Institute. Julian resides in Broadway with his wife JoAnn, and after a busy career, they now enjoy traveling. fulian D. Fisher NEW CHAIRMAN NAMED Thomas L. Cline, who has served on the bank's board since 1991 and as Vice Chairman since 2005, was elected Chairman at the board's September 23, 2010 meeting. Tom, a Timberville native, is President of Truck & Equipment Corp. and Mac Lease, Inc. in Harrisonburg. He graduated from Broadway High School and National Business College. As an active member of Timberville Church ofthe Brethren, he serves on the church board and is a deacon. He also belongs to the Timberville Lions Club where he has served in a variety of offices including President. He and his wife Elaine live near Timberville. They have two children, Candee and Jason. Thomas L. Cline RUNION JOINS BOARD OF DIRECTORS On May 8, 2010 the Board of Directors of F&M Bank Corp appointed Christopher (Chris) S. Runion to the board of directors as a new member. Chris is the owner and President of Eddie Edwards Signs, Inc. of Harrisonburg. He is an active community member, and serves on the Rockingham County Planning Commission, the Bridgewater Home Foundation board, and the Rockingham County Fair board. In the past he has served as President of the Harrisonburg Rotary Club and the Harrisonburg-Rockingham Chamber of Commerce and has been active in the Boy Scouts. A native of Shenandoah County, Chris currently lives near Bridgewater with his wife Jennifer. They have two grown children and are members of the Bridgewater United Methodist Church. IN MEMORY Janet Ware, an employee of our bank for seven years, passed away on January 1, 2011. She had retired from our bank on August 31, 2009 and was a New Market resident. Christopher (Chris) S. Runion Janet Ware EMPLOYEE SERVICE ANNIVERSARIES Carolyn J. Dove Vice President Manager - Timberville 35 Years Betty T. Bare Loan Operations Timberville 20 Years Donna O'Byrne Investment Support Crossroads 20 Years ^ ^ ^ ^^ ^ ^ ^ ^ ^^ DIRECTORS AND OFFICERS DIRECTORS THOMAS L. CLINE Chairman of the Board, Farmers & Merchants Bank and F &M Bank Corp. President, Truck & Equipment Corp. President, Mac Lease, Inc. MICHAEL W. PUGH President, Old Dominion Realty, Inc. President, Colonial Appraisal Service, Inc. CHRISTOPHER S. RUNION Owner & President, Eddie Edwards Signs, Inc. J O HN N. CRIST Partner, Hoover Penrod, PLC-Attorneys RONALD E. WAMPLER ELLEN R. FITZWATER Partner, Financial Manager, F & R Leasing, LLC DANIEL J. HARSHMAN Manager, Town of Edinburg RICHARD S. MYERS President, Dick Myers Automotive, Inc. Outside sales-Dick Myers Automotive, Inc. Partner, Dove Ohio Farms, LLC. and WWTTD Ohio Farms, LLC DEAN W. WITHERS President, Farmers & Merchants Bank and F & M Bank Corp. Dean W. Withers President and CEO Larry A. Caplinger EVP CLO & Secretary of Board NeilW. Hayslett EVP & CFO Ellen C. Branner SVP/Human Resources Ralph C. Foltz, Jr. SVP/Operations Jeffrey L. Lam SVP/Retail Loan Administrator Stephanie E. Shillingburg SVP/Branch Administration / Retail Services OFFICERS V I CE P R E S I D E N TS Curtis M. Arey Anita C. Beckman Sylvia T. Bowman Carrie A. Comer Carolyn J. Dove Sally H. Erickson Joshua P Hale Charles P. Harder Henry E. Hawkins Susan K. Olson Mary S. Prophet Kitty H. Purcell Robert R. Reedy, Jr. Karen B. Rose Kevin A. Russell & President VBS Mortgage Cynthia A. Sherman Gregory B. Spitler Edward A. Strunk Deborah D. Vance A S S I S T A NT V I CE P R E S I D E N TS Deborah A. Andes Aaron S. Green Kathy L. Grubbs Mary Ellen Harrison Teresa D. Helmick Cathy M. Lindamood Darlene K. Sites Krista L. Surer Robert E. Wimer II Barbara W Bartley, Branch Officer Chris A. Gunter, Branch Officer W Brent Meadows, Branch Officer BRIDGEWATER 100 PLAZA DRIVE 8 2 8 - 6 3 00 BROADWAY 126 NORTH TIMBER WAY 8 9 6 - 7 0 71 EDINBURG 120 SOUTH MAIN S T R E ET 9 8 4 - 4 1 28 E L K T ON 1 27 W E ST R O C K I N G H AM S T R E ET 2 9 8 - 1 2 51 HARRISONBURG PORT ROAD 1085 PORT REPUBLIC ROAD 4 3 3 - 0 1 12 LURAY 700 EAST MAIN STREET 7 4 3 - 1 1 30 TIMBERVILLE 2 05 SOUTH MAIN STREET 8 9 6 - 8 9 41 W O O D S T O CK 161 SOUTH MAIN STREET 4 5 9 - 3 7 07 HARRISONBURG CROSSROADS 80 CROSS KEYS ROAD 4 3 3 - 7 5 75 VBS MORTGAGE 2 0 40 D E Y E R LE AVENUE. STE 102 HARRISONBURG 4 4 2 - 8 5 83 WWW.FARMERSANDMERCHANTS.BIZ to SS MIX Paper from responsible sources FSC* 0101857 

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